Gillette Good News razors on display January 28, 2005 in San Francisco.
Justin Sullivan | Getty Images
Procter & Gamble on Thursday reported year-over-year sales and profits fell as higher prices struggled to offset falling sales volumes.
P&G shares fell about 3% in premarket trading.
Here’s how P&G performed in the second quarter of fiscal 2023 versus Wall Street expectations, based on an average of analyst estimates compiled by Refinitiv:
- Adjusted earnings per share: $1.59 vs. $1.59 expected
- Total sales: $20.77 billion versus $20.73 billion expected
For the three months ended December 31, the company reported net income of $3.9 billion, or $1.59 per share, excluding items, versus $4.22 billion, or $1.66 per share shares in the previous year.
Net sales declined 1% to $20.77 billion, down 1% from a year earlier, which beat analysts’ forecast of $20.73 billion.
The company’s organic revenue, which excludes the impact of foreign currency, acquisitions and divestitures, rose 5% during the second fiscal quarter. This increase was the result of higher prices outweighing contracting consumer demand.
All of the company’s businesses reported declining sales volumes for the quarter, although organic sales increased due to higher prices. The hair care division, which houses brands like Gillette and The Art of Shaving and has historically underperformed for the company, did not post sales growth — the decline in volume fully offset the higher prices.
Speaking to the media, P&G executives noted that consumer demand is responsible for at least half of the 6% decline in sales volume. The remainder of the volume decline was due to the containment of business in Russia as the war in Ukraine continues and inventory reductions in China, its second largest market, as the Covid lockdown disrupted the region.
As China eases its Covid restrictions, the market is poised for a rebound. Andre Schulten, P&G’s chief financial officer, expects the country’s reopening to return the market to mid-single-digit growth.
“It’s difficult to predict exactly when that will happen,” said Schulten at the media call.
The Cincinnati-based consumer goods giant, which owns brands including Crest toothpaste, Tide laundry detergent and Pampers diapers, warned in October along with its first-quarter report of a $3.9 billion fiscal 2023 loss due to “unfavorable” Exchange rates and more expensive raw materials, goods and freight. As a result, the company lowered its guidance despite a solid first quarter.
The company now expects headwinds of $3.7 billion for the remainder of its fiscal year, it said Thursday, marking a slight improvement. But it warned that those headwinds would further depress P&G’s gross margins, which fell 160 basis points year over year in the second quarter.
P&G is ramping up its pricing strategy even as shrinking consumer demand continues to erode sales volumes. Schulten said consumers have responded to price increases “generally better than expected,” particularly in non-discretionary categories like feminine hygiene and cleaning supplies.
“Consumers don’t stop washing their hands or doing their laundry,” Schulten said.
The company will continue to raise prices in the coming months.
P&G raised its guidance for 2023 revenue growth to 4% to 5% from a previous 3% to 5%. The company lowered its estimated impact of exchange rates from 6% to 5%.
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