Procter & Gamble Co’s quarterly sales and profit best market estimates, as price increases on everything from Head & Shoulders shampoo to Tide detergent helped offset the impact of higher raw material costs and a stronger dollar. Shares of the Cincinnati, Ohio-based consumer goods conglomerate rose nearly 3% in morning trading, as the company maintained its full-year organic sales growth forecast despite rising inflationary pressures on consumer spending.
Household consumer goods demand has fallen at a slower rate than discretionary products such as apparel and electronics, as shoppers prioritize spending on necessities.
However, with inflation remaining stubbornly high at a 40-year high, some retailers, concerned about their ability to clear overstocked shelves, are beginning to push back on price increases from P&G and other companies. P&G stated that it is working to ensure that retailers carry products at a variety of price points from across its portfolio.
The maker of Pampers diapers said average prices across its product lines rose 9% in the first quarter ended Sept. 30, while sales volumes fell 3%, with lower shipments in Russia accounting for much of the decline.
“We’ve priced in the last fiscal year on all 10 of our product categories,” Chief Financial Officer Andre Schulten said on a call with media.
In an analyst call, Schulten stated that many price increases will be implemented this month. P&G’s mid-tier brands, such as Gain and Tide, are growing, according to Schulten. Simply put, customers are looking for cheaper products from the company.
“We are seeing deterioration of volume,” said Andrew Choi, a portfolio manager at Parnassus Investments in San Francisco. “But the reality is that wage gains and (employment) are still strong.”
P&G’s share of the US consumer products market, according to Schulten, is flat, with volume decreasing as shoppers reduce the amount of goods they keep in their pantry, spread out how frequently they purchase items, and use smaller doses of soaps and detergents.
“We expect Europe to be tough from a consumer environment standpoint,” Schulten said, adding that the company has to be “extra careful” to make sure shoppers can buy P&G’s lower-cost goods.
Nestle has benefited from price increases as well as a slower-than-expected slowdown in demand, with the world’s largest packaged food company reporting its strongest nine-month sales growth in 14 years and raising its full-year forecast earlier on Wednesday.
P&G, which derives more than half of its revenue from international markets, said a stronger dollar would reduce annual sales by 6 percentage points, up from a 3 percentage point hit previously forecast.
The company said it expected sales to fall 1 per cent to 3 per cent in fiscal 2023, compared to its previous forecast of flat to 2 per cent growth.
P&G earned $1.57 per share on net sales of $20.61 billion, adjusted. According to Refinitiv IBES data, analysts expected earnings per share of $1.54 on sales of $20.28 billion.
(Adapted from Bloomberg.com)