Procter & Gamble delivered a mixed bag of results on Friday, facing challenges in enticing back consumers after implementing price hikes across its range of products over the past two years, spanning from Tide detergent to Charmin toilet paper.
The company's prices saw a 3% increase compared to the same period last year, although CFO Andre Schulten clarified during a media briefing that P&G did not implement any nationwide price increases throughout the quarter.
Despite the disappointing sales figures, the consumer behemoth revised its earnings growth outlook upward for the full year.
Shares of the company dipped more than 1% in early trading.
Here's how P&G's reported figures stack up against Wall Street's expectations, based on an analyst survey by LSEG:
Earnings per share: $1.52 vs. anticipated $1.41
Revenue: $20.2 billion compared to expected $20.41 billion
For the fiscal third quarter, P&G reported net income attributable to the company of $3.75 billion, or $1.52 per share, marking an increase from $3.4 billion, or $1.37 per share, in the previous year.
Net sales edged up by 1% to $20.2 billion. Organic sales, excluding acquisitions, divestitures, and foreign currency effects, grew by 3% during the quarter.
However, the company's quarterly volume remained stagnant for the second consecutive quarter. In October, executives expressed anticipation of returning to volume growth in fiscal 2024. Yet, after three quarters, the company has yet to entice back many of the customers it lost due to its price hikes over the past two years.
Nevertheless, three of P&G's divisions experienced volume growth in the quarter. The beauty segment, encompassing brands like Olay and Pantene, saw a 1% increase in volume driven by innovations in personal care. The grooming business, home to Gillette and Venus razors, reported a 2% volume growth. Fabric and home care, including Febreze and Swiffer, witnessed a 1% volume growth.
However, P&G's health care and baby, feminine, and family care divisions saw further declines in volume. The company attributed this to higher prices and a weaker cold and flu season.
Geographical factors also influenced the company's subdued sales. China, its second-largest market, continues to experience softer demand for products like the premium-priced
SK-II skincare line. Schulten also noted that some markets, particularly in the Middle East, have witnessed retailers scaling back promotions amid geopolitical tensions linked to the conflict in Gaza.
Schulten remarked, "The impact is visible but limited, and we expect it to lessen, obviously, hopefully as these tensions ease over time."
In the U.S., P&G's largest market, volume grew by 3%. Schulten observed that U.S. consumers aren't altering their shopping behavior or downgrading product choices.
"Consumers don't want to take a gamble when it comes to the type of performance... they know ultimately the price for trading down," he stated.
For the full year, P&G now anticipates core net earnings per share growth of 10% to 11%, up from the prior range of 8% to 9%. Additionally, the company raised its projection for unadjusted earnings growth to a range of 1% to 2%, compared to the previous forecast of a decline of 1% to flat. P&G maintained its outlook of 2% to 4% sales growth in 2024.
P&G also expects a $900 million benefit from favorable commodity costs, up from the previous outlook of $800 million. This marks a reversal from the past two fiscal years when commodity costs weighed on the company, necessitating price hikes.
Correction: P&G’s net sales rose 1% to $20.2 billion. An earlier version misstated a figure.
