Procter & Gamble unveiled better-than-expected earnings and revenue figures yesterday as consumers concerned about Covid-19 continued to purchase more cleaning supplies and others started buying beauty products again as pandemic-related restrictions started to ease.
For its third quarter to 31 March, the global consumer goods giant saw its operating profits climb 10% to $3.79bn on sales up 5% to $18.11bn. Organic revenue grew 4%, driven by two percentage points of increased pricing and two percentage points of positive mix impact.
Concerns about the spread of the virus has made consumers more hygiene-conscious with the likes of P&G, Unilever, and Reckitt benefitting from consumers willing to pay for more premium brands over retailer own-label lines.
P&G’s Fabric and Home Care division continued its strong run in the latest quarter with organic sales up 7%. Fabric Care sales rose by “low single digits”, but Home Care sales increased “high teens” as consumers cleaned more. P&G also highlighted returns from new product innovation and marketing investments.
Meanwhile, sales growth picked up in the company’s Beauty division, increasing 7% compared to 5% in the previous quarter. Sales of skin, personal, hair care products all increased “high single digits” as people started to return to their usual beauty habits.
Whilst still robust, growth was more subdued in its Grooming (+4%) and Health Care (+3%) divisions, whilst sales in its Baby, Feminine & Family Care unit edged down 1%.
P&G reiterated its fiscal 2021 outlook, forecasting sales growth of 5% to 6% and adjusted earnings growth of 8% to 10%.
The company also announced that it will raise prices on some products this autumn as it faces higher raw material and transportation costs. P&G expects to spend an additional $125m on commodity costs, which was previously expected to be flat for the year, and $200m on freight, up from its prior full-year outlook of $100m last quarter.
The firm is planning to implement the price hikes across its baby-care, feminine-care and adult incontinence products in the US to offset the rising costs. Price increases from September will vary by brand but are expected to be in the range of mid-to-high single digits.
“Rates continue to be up. Drivers and rigs continue to be in short supply. Sea freight continues to be at a premium. So we continue to see that pressure mounting and also impacting quarter four,” said Andre Schulten, P&G’s new Chief Financial Officer
Rival Kimberly-Clark, which makes Huggies, has already announced price hikes on some of its products.
NAM Implications:
- Right place, right time, and it shows.
- And imminent price rises will be a pointer for others…
- …but not all.
- Therefore an opportunity to explore relative competitive appeal by category…
- …and optimise the changes.
