Procter & Gamble raises prices despite Falling sales
2023.01.19 12:07
Procter & Gamble raises prices despite Falling sales
By Kristina Sobol
Budrigannews.com – Procter & Gamble, makers of detergent Tide (NYSE:) Co. warned that high commodity costs were putting pressure on profits on Thursday, and it raised its full-year sales forecast and stated that it plans to continue raising prices despite a decrease in sales volumes.
The grooming business, which includes brands like Gillette and Braun, and the fabric & home care division, which includes brands like Tide, Ariel, and Mr. Clean, both experienced declines that contributed to the company’s 6% decline in sales volumes during the second quarter that ended on December 31.
P&G, like other companies that make consumer goods, has raised prices several times to cover rising costs for transportation, labor, and commodities, as well as the effect that a stronger US dollar has had on its revenue from overseas markets.
Customers have still purchased fewer of its products, despite the fact that the price increases have been met with less opposition than with discretionary products.
Analysts at Alliance Bernstein stated that P&G’s December quarter results may not “bode so well” for its peers. P&G is the first major consumer staples company to release results.
While consumers in China, the company’s second-largest market, have yet to recover from the COVID lockdowns, the manufacturer of Pampers diapers views the United States, which is its largest market, as relatively strong.
According to Chief Financial Officer Andre Schulten, P&G’s store brand competitors in Europe, where consumers are reeling from inflation, have also raised prices more slowly than the company, putting additional pressure on sales there.
During a call with the media, Schulten stated that inventory reductions in China and Russia were to blame for the other half of the company’s decline in sales volumes. He added that P&G has announced some price increases that will take effect in the coming months.
Schulten commented on U.S. consumers, “We don’t see significant shifts that are notable even in the private label side.” Over the next few quarters, we are confident that the customer will continue to perform well.”
“In terms of peak pricing,” Schulten added, “P&G’s large price increases were in the previous fiscal year.” We are also still experiencing some of the cost pressures due to global incremental pricing.”
P&G’s product categories’ average prices increased by 10% in the quarter compared to the previous year.
P&G reported a 7 percent decline in organic sales in China as a result of COVID lockdowns and lower consumer confidence. In addition, Schulten stated that consumption has not yet been affected by China’s reopening.
CEO Jon Moeller stated, “None of us globally really understand what the recovery rate in China is going to be.”
COVID-related declines occurred at P&G’s popular Asian high-end skincare brand, SK-II.
The company stated that it anticipates a 1% to 1% decline in total sales for fiscal 2023, as opposed to its previous forecast of a 1% to 3% decline. It maintained its forecast of a flat to 4% increase in annual earnings.
To $143.74, the company’s shares were down 1.2%.
P&G reported a quarter-over-quarter decline in net sales to $20.77 billion, beating Wall Street expectations despite the impact of a stronger dollar on overseas revenue. According to data provided by Refinitiv, this marks the company’s first decrease in quarterly net sales in just over five years.
IBES data from Refinitiv show that analysts’ average estimates for sales were $20.73 billion.
The average estimate of analysts was met by the company’s $1.59 earnings per share.
P&G does not “see much change in retailer conversations” as they attempt to push through price increases, according to Schulten.
Schulten stated, “I think everybody understands that we are still recovering costs.”
According to Schulten, a lot of P&G’s new products are also bought by consumers in the United States. One example is the high-end Dawn Power Wash, which sprays a continuous stream of detergent.
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