Price increases for household products such as Gillette razors, Dawn dish soap and Swiffer dusters helped boost Procter & Gamble’s earnings last quarter, the company said Friday.
Consumer goods pioneer Procter & Gamble says profits have increased in the first three months of the year after raising prices across its brands by 10%. The rise was his second straight quarter of double-digit gains for the company. The company’s profit margins expanded in the fourth quarter, and higher prices didn’t offset higher prices paid for raw materials.
Sales were up 4% from the previous quarter, but volumes (Rolls of Charmin toilet paper and boxes of Tide detergent) were down as consumers switched to cheaper alternatives or bought less. decreased by 3%. In other words, Procter & Gamble made more profit even though it sold fewer products. The company’s sales volume has declined in the last four quarters.
“Consumer goods companies make a relatively small contribution to overall inflation,” said Sucharita Kodari, a retail trends analyst at research and advisory firm Forrester. But they “contribute significantly to perceptions of inflation,” she added. Customers don’t buy cars or homes every day, but they often notice price increases when they go to the grocery store often.
John Moeller, CEO of Procter & Gamble, said: said in a statement The company delivered strong results “in a continued very challenging cost and business environment.”
The consumer packaged goods giant also raised its earnings forecast for the current fiscal year to 1% growth year over year. Previous forecasts ranged from flat to a 1% decline. It also said it plans to buy back up to $8 billion of its stock in the current fiscal year, which ends in June.
Procter & Gamble shares closed more than 3% higher on Friday.
American continued to spend Companies have been raising prices in recent months, but there are signs that consumers are starting to pull back: U.S. retail sales 1% drop in March from the previous month.
Inflation is generally moderate, up 5% a year through March, from a peak of nearly 9% during the summer. The slowdown is protracted and uneven. One reason for this is that companies have realized that they can sustain higher prices, especially by touting their products. Premium product.
Procter & Gamble used its own term “attractive advantage” to describe the high value of its products on numerous conference calls with analysts.
The company’s chief financial officer, André Schulten, said in a phone call that consumers are becoming more cautious about spending. “That means we need to double down on our view of what some dominance of the lower value tier means,” he added. and quality to consumers.
Other consumer goods makers have had similar results. price increaseFebruary, PepsiCo I said I wouldn’t raise the price. In addition, multiple price increases allowed us to achieve better-than-expected results in the fourth quarter.and Unilever said it will continue to raise prices on its products this year, but will ease them in the second half of the year.
Forrester analyst Kodari said higher prices could frustrate consumers. Brand loyalists, or “inelastic customers,” are likely to continue to buy branded products at higher prices, while others have already changed their shopping habits.Procter & Gamble sales A decrease in volume proves it.
For example, customers offended by the increased price of Pampers disposable diapers may start using cloth alternatives instead. It will be difficult for Procter & Gamble to win back its customers.
Rising prices may be good for corporate profits, but they are complicating the Federal Reserve’s efforts to cool the economy and keep inflation under control with a series of rate hikes that began last year. At the end of last month, the Fed raised the base interest rate It has risen from almost zero just one year ago to a range of 4.75-5%.
In Europe, policymakers warn that firms may raise prices beyond what they need to absorb rising costs. accelerate inflationPolicymakers have long been concerned about wage-price spirals, in which as wages rise, firms raise prices to offset pay increases.
Well, the so-called profit price spiral There may be risks. European Central Bank board members warned last month that half of the Eurozone’s domestic price pressure in the fourth quarter of last year was due to corporate profits.
Procter & Gamble executives acknowledged on a conference call with analysts that there are still challenges, including rising operating costs and rising wages.
“There are many headwinds that we are working through and will continue to work on as we move forward,” Mueller said.
