Procter & Gamble Co posted an 18 percent drop in fourth-quarter profit as sales fell more than expected, and the company's shares slipped 2 percent even though it stood by its 2010 profit forecast.

The maker of Tide laundry detergent and Pampers diapers said sales could fall more this quarter and profit may not meet Wall Street's expectations.

Still, pressure from foreign currency fluctuations will not be as great this year as previously anticipated, which allowed P&G to maintain its profit forecast for the year.

P&G, which in recent months has touted itself as recession-resistant but not recession-proof, has seen some loss of market share as consumers buy cheaper or private-label brands.

For some time, we needed a quarter to kind of round out some weakness that they're seeing in the top line from foreign currency and from consumer trade-down, and it's just kind of all stacked up here, said Morningstar analyst Lauren DeSanto.

Sales fell in each one of the company's categories. The biggest percentage decline was a 17 percent drop in grooming, which includes Gillette razors.

The results contrasted an upbeat report from German rival Henkel , which said its business would not get any worse this quarter after a decline in raw material prices and cost-cutting helped it beat estimates.

PROFIT AND SALES FALL

P&G earned $2.47 billion, or 80 cents per share, in its fiscal fourth quarter, down from $3.02 billion, or 92 cents per share, a year earlier. Analysts, on average, expected P&G to earn 78 cents per share, according to Reuters Estimates.

Sales fell 11 percent to $18.66 billion, falling short of analysts' average forecast of $19.27 billion.

P&G expected sales to fall in the quarter as consumers cut back and it felt the impact of the stronger U.S. dollar.

On an organic basis, which excludes the impact of currency fluctuations, acquisitions and divestitures, sales fell 1 percent and volume fell 4 percent. Sales fell less than volume as the company had raised prices. Volume was much weaker than some analysts' projections.

P&G said it expects to earn 95 cents to $1 per share from continuing operations in the first quarter, which ends in September. Analysts had called for a profit of 99 cents per share. It said organic sales should be flat to down 3 percent.

The company still forecast earnings of $3.65 to $3.80 per share from continuing operations this year, with organic sales growth of 1 percent to 3 percent. It now expects currency fluctuations to reduce net sales zero to 1 percent, versus its prior expectation of a 2 percent to 3 percent hit.

P&G said it would reinvest the benefit of improved currency rates into growing its business.

Shares of P&G, which have fallen 10.3 percent since the beginning of the year, fell 1.9 percent to $54.40 in premarket trading.

(Reporting by Jessica Wohl, editing by Maureen Bavdek)

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