Procter & Gamble Co beat estimates for quarterly sales and profit on Wednesday, as price hikes on everything from Head & Shoulders shampoo to Tide detergent helped blunt the impact of higher raw material costs and a stronger dollar.
The Cincinnati, Ohio-based consumer goods conglomerate also maintained its full-year organic sales growth forecast even as inflation starts to put a squeeze on consumer spending.
Demand for household consumer goods has so far fallen at a slower pace than discretionary products like apparel and electronics, as shoppers prioritize spending on essential items.
However, with inflation stubbornly stuck at a 40-year high, some retailers, worried that they may not be able to clear overstocked shelves, are starting to push back on price hikes from P&G and other companies. P&G said it is trying to make sure retailers carry products at a variety of prices from across its portfolio.
The maker of Pampers diapers said average prices across its product lines rose 9 per cent in the first quarter ended Sept. 30, while sales volumes fell 3 per cent, with much of that decline due to lower shipments in Russia.
"We've priced in the last fiscal year on all 10 of our product categories," chief financial officer Andre Schulten said on a call with media.
Schulten added in an analyst call that many price increases are hitting shelves this month. Schulten said P&G is seeing growth in its mid-tier brands such as Gain and Tide Simply as consumers look for cheaper products from the company.
"We are seeing deterioration of volume," said Andrew Choi, a portfolio manager at Parnassus Investments in San Francisco. "But the reality is that wage gains and (employment) are still strong."
Schulten said that P&G's share of the US consumer products market is flat, with volume creeping lower as shoppers decrease the amount of goods they keep in their pantry, stretch out how frequently they purchase items and use smaller doses of soaps and detergents.
"We expect Europe to be tough from a consumer environment standpoint," Schulten said, adding that the company has to be "extra careful" to make sure shoppers can buy P&G's lower-cost goods.
Nestle has also benefited from price hikes and a smaller-than-expected slowdown in demand, with the world's largest packaged food company posting its strongest nine-month sales growth in 14 years and raising its full-year forecast earlier on Wednesday.
P&G, which gets more than half of its revenue from international markets, said a strengthening greenback would eat into annual sales by 6 percentage points, compared with a previous forecast of a 3 percentage point hit.
The company said it was expecting fiscal 2023 sales to fall 1 to 3 per cent, compared with its previous forecast of flat to 2 per cent growth.
On an adjusted basis, P&G earned $1.57 per share on net sales of $20.61 billion.
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