Johnson & Johnson's (JNJ) first-quarter profit declined 2.5%, with sales hurt by the stronger U.S. dollar, a slowdown in consumer health-care product sales and generic competition for prescription drugs.

The weak economy continues to hurt the health-care giant's results, with sales coming in lower than Wall Street expectations for the second quarter in a row. J&J's consumer unit, which had posted strong sales growth for much of last year, is now seeing sluggish sales.

J&J Chief Financial Officer Dominic Caruso said the economic slowdown hurt sales of some consumer products, due to overall market growth slowdown and increased competition from private-label products. Also, tighter consumer spending hurt sales in J&J's device unit, including contact lenses and diabetes test strips.

To bolster profits, the New Brunswick, N.J., maker of Band-Aid bandages and Tylenol pain reliever has offset some of the pressure on the top line by cutting costs, including last week's disclosure of the elimination of about 900 positions, or 6% of its U.S. pharmaceuticals work force.

Credit Suisse analyst Catherine Arnold said J&J had "strong expense control" during the quarter. She also said J&J's pharmaceutical unit benefited from "aggressive price increases that are not sustainable," but the unit's results could be a positive signal for the forthcoming earnings reports from other large drug makers.

Currency exchange rates could hurt 2009 earnings more than J&J expected at the beginning of the year, Caruso said. However, despite the recession and currency headwinds, the company reiterated its prior forecast for 2009 earnings of $4.45 to $4.55 a share, excluding one-time items.

"We kept our overall sales guidance for year the same as it was in January, largely because we do think the business is playing out as we expected it would," Caruso said in an interview.

J&J shares rose 81 cents, or nearly 1.6%, to $51.96.

J&J said net income for the first three months of the year was $3.5 billion, or $1.26 a share, compared with $3.6 billion, or $1.26 a share, a year earlier.

The per-share earnings in the latest quarter exceeded the mean estimate of analysts surveyed by Thomson Reuters of $1.22 a share.

Sales dropped 7.2% to $15 billion for the quarter from $16.2 billion a year earlier, falling short of the Thomson estimate of $15.4 billion. Unfavorable currency-exchange rates accounted for six percentage points of the decline.

J&J's biggest unit, pharmaceuticals, had sales of $5.8 billion for the quarter, down 10.1% from a year earlier. While sales rose for Concerta for attention deficit hyperactivity disorder and the Remicade anti-inflammatory drug, sales of the Risperdal antipsychotic nosedived due to last year's expiration of U.S. patent protection. Also, anemia drugs Procrit and Eprex posted a combined sales decline, continuing a two-year trend.

The company's medical-device and diagnostics unit had sales of $5.5 billion, down 2.9% from a year earlier. Surgical-care products and joint reconstruction products contributed to operational growth - excluding the currency impact - but J&J had lower sales of drug-eluting stent devices partly due to a new competing stent from Abbott Laboratories (ABT).

Consumer sales dropped 8.7% to $3.7 billion. Sales of over-the-counter version of allergy drug Zyrtec, which had been strong for much of 2008, suffered from comparisons to a year-earlier period in which inventory was built up in connection with the product launch.

J&J hasn't yet followed some other large drug makers such as Pfizer Inc. (PFE) and Merck & Co. (MRK) in making a large acquisition. CFO Caruso said J&J wouldn't rule out anything, but he noted that in recent years J&J has opted to invest internally in drug research, or license drugs from other companies.

He did say J&J would continue to explore getting into health-care information-technology, which would represent a new line of business for J&J.

"That's an area we're still exploring because we believe it'll have a significant impact on healthcare," Caruso said.

Caruso declined to comment on whether J&J believed Merck's agreement to buy Schering-Plough Corp. (SGP) triggered a "change-of-control" provision that would terminate J&J's co-marketing deal with Schering for Remicade and a follow-up drug. Merck and Schering have said they structured their deal so that the combined entity would retain its rights to the drugs.

-By Peter Loftus, Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com

(Mike Barris contributed to this article.)