P&G Posts Strong Results, Driven By Higher Product Prices
Procter & Gamble Co. has reported better-than-expected quarterly profit and sales, saying that it was raising prices on several products around the world.
Organic sales jumped by 4% – the best growth in five years – boosted by demand for beauty and grooming products. Organic sales exclude revenue from newly acquired units and the impact of currency fluctuations.
The maker of Tide detergent and Oral-B toothpaste had told retailers during the quarter that it planned to raise prices on "several products" in US home, oral and personal care, chief financial officer Jon Moeller said on a call to discuss earnings.
Last Thursday, Nestlé and Unilever, two of the world's biggest consumer goods-makers, both reported a pickup in quarterly sales, also after raising product prices.
Beauty sales surged 5% in the quarter through September, driven by skin-care brands SK-II and Olay, particularly in China, which makes up 8% of overall sales.
"There isn't a piece of our beauty business that isn't growing right now – most of it growing at very attractive rates," Moeller said, adding that skin- and personal-care sales jumped by 22% in China during the quarter.
Volumes surged by 5% in the grooming business, boosted by price cuts and new Gillette razor products.
Grooming is a category that is too competitive for P&G to raise prices. In order to regain market share lost to upstarts such as Harry's and Dollar Shave Club, P&G cut prices of its grooming products by 3% in the prior quarter.
Sales in its fabric- and home-care division, the company's biggest unit by sales, grew by 2%.
Despite the gains in profit and sales, the company will need to address threats from rising transportation and input costs and currency fluctuations, some analysts said.
"Given the headwinds they're facing, it's very important that P&G are able to pass prices on to retailers and consumers," said Edward Jones analyst Brittany Weissman.
"Some of the retailers have really dug their feet in the ground on pricing, and that's been an ongoing dialogue [...] some of the price increases will have to come with new-product innovation," Weissman said.
P&G said that the foreign-exchange impact of a strong dollar had hurt earnings by $400 million after tax. The company gets more than half its sales from outside North America.
"We will take pricing [into account] when the degree of cost impact warrants it and competitive realities allow it," Moeller said.
The company is raising prices in many developing markets, including Argentina, Turkey and Russia, to make up for foreign-exchange headwinds, Moeller added. The sturdy dollar makes the company's products more expensive in overseas markets.
In July, P&G said that it was rolling out an average 4% increase in Pampers diaper/nappy prices and an average 5% price rise for Bounty and Charmin toilet paper and Puffs tissue products in North America.
Net income attributable to the company rose to $3.20 billion, or $1.22 per share. Excluding items, the company earned $1.12 per share, beating Wall Street estimates of $1.09 per share, according to data from Refinitiv.
Net sales inched up unexpectedly, to $16.69 billion from $16.65 billion. Analysts had forecast overall sales to fall to $16.46 billion.