Procter & Gamble upped its full-year sales forecast yesterday as demand for its cleaning and personal care products held up despite it charging higher prices to offset cost increases.
Excluding the impacts of foreign exchange, acquisitions and divestitures, P&G’s organic sales increased 10% during the quarter to 31 March. This is its strongest performance in at least 15 years, although analysts raised concerns that consumers might soon start to swap branded items for cheaper own-label products as supply chain constraints and soaring commodity prices push inflation ever higher, squeezing household budgets.
P&G noted that for now, consumers were switching to better-value premium products such as single-dose detergents or higher-priced diapers, adding they would focus marketing efforts on such offerings.
“We certainly have our eyes wide open and (will) watch for any change in terms of consumer behaviour,” said CFO Andre Schulten.
The company also announced fresh price hikes in US feminine, home and oral care from this summer, even though it expects consumer demand to soften as the higher prices feed through to shop shelves.
After the company lifted prices in recent months, the consumer reaction so far has been “about 20 to 30% more favourable than we would have assumed based on historical data,” Schulten said.
But he noted there is no guarantee this trend will continue, saying “as more pricing flows through to the consumer, we expect that volume will have somewhat of a negative impact.”
Sales in P&G’s Fabric & Home Care division, the company’s biggest segment, rose 10% on an organic basis during the quarter as consumers stocked up on its detergents and surface cleaning products during the Omicron wave early in the year.
Sales in its Health Care business rose 16%, with the Grooming (+8%) and Beauty (3%) units seeing the slowest growth.
However, the consumer goods giant warned that higher costs could dent its earnings this year, with the recent Covid lockdowns in China and Russia-Ukraine war also having an effect.
Soaring commodity and freight costs, as well as a stronger dollar, are expected to dent full-year profit by $3.2bn, compared to a prior forecast of $2.8bn.
P&G’s net sales rose 7% to $19.4bn in the quarter, with volumes increasing 3% despite price increases across most of its product range. Operating profit rose 6.3% to $4.0bn.
The company raised its guidance for its current financial, with organic sales now expected to rise 6% to 7%, compared with its prior forecast of a 4% to 5% increase.
