Procter & Gamble lifted profit margins for the first time in two years after the world’s largest housewares maker hiked prices to consumers at a faster pace in recent months as its own spending increased.
But executives at the consumer goods giant disputed the notion that they were determined to boost profitability at the expense of buyers – a phenomenon known as “greedflation” – and warned there was “no broad-based relief” in input costs .
The US-based company’s results on Friday showed that prices for its entire portfolio of consumer products, including Fairy dish soap, Oral-B toothbrushes and Pampers diapers, rose about a tenth in the most recent quarter.
As a result, cash-strapped consumers bought fewer items from P&G and the company’s sales volume fell 3 percent in the three months ended March.
Nonetheless, higher prices more than offset the decline in volume, helping the Cincinnati-based company to net sales of $20.1 billion, up 4 percent from the same period last year.
Despite further raw material and material cost increases, P&G’s gross margin improved 1.5 percentage points to 48.2 percent — the first improvement since 2021.
The results pushed P&G shares, which were little changed year-to-date, up 4 percent in morning trade in New York.
While P&G’s margin increase was mostly due to higher prices, productivity savings also helped. Net income increased 2 percent to $3.42 billion.
Andre Schulten, Chief Financial Officer, said that both price increases and productivity initiatives “have been absolutely critical in enabling us to continue to operate in this environment.”
He added that the company — whose products include Head & Shoulders shampoo, Tampax tampons, and Gillette razors — “just started” to “dig our way out” after margins declined in consecutive earlier quarters.
P&G said Friday it was facing a $3.5 billion “headwind” for its fiscal year ended June due to unfavorable foreign exchange rates and higher commodity and material costs.
Expected damage was $200 million lower than the total projected in January due to lower than previously expected raw material and freight costs.
Still, Schulten said that while the cost of some raw materials, like pulp, “went down a bit,” other energy-intensive materials — including caustic soda and ammonia — went up.
“There is no broad-based input cost relief,” he said, adding that recent margin improvement has been “modest.”
The CFO wouldn’t be leaning on P&G’s pricing plans in the coming months, though he did hint the worst might be over for buyers.
The “cost environment” is still “not helpful” but has not deteriorated significantly in the past few weeks, he noted.
Based on the quarterly results, P&G said it expects full-year sales to grow 6 percent on an organic basis, compared to a prior range of 4 to 5 percent.
However, it forecast that earnings per share would come in at the “lower end” of a previously posted range. The company said it expects diluted net earnings per share to rise between flat and 4 percent.