NEW YORK (AP) – Procter & Gamble Co (P&G) the maker of such iconic household products as Crest toothpaste, Tide detergent and Charmin toilet paper, is seeing shoppers cut back some of their purchases as they push back on price hikes.
The company said on Thursday that sales slipped one per cent in the latest quarter ended on December 31, the first quarterly sales decline since mid-2017.
Meanwhile, the number of products it sells globally fell six per cent in the quarter – half of that was because shoppers reduced purchases, while the rest was due to inventory productions, the company said.
Profits also fell seven per cent in the quarter.
Procter & Gamble, like many consumer product companies, enjoyed a sales surge during the height of the pandemic as shoppers stocked up on essentials.
And even as consumers faced higher prices on everything from food to rent in recent months, they have remained fairly resilient when it came to essentials like laundry and shampoo compared to discretionary items like trendy clothing.
P&G has also made sure to offer lower-priced versions in its portfolio to hold on to price-sensitive shoppers.
But Thursday’s results show that the constant barrage of higher prices on everyday essentials is wearing down its consumers. P&G said it had to hike prices by 10 per cent in the latest quarter and will keep raising prices as it seeks to offset higher costs in transportation, labour and other areas.
Economists and analysts are closely monitoring shopping behaviour amid a challenging economy. The government reported on Wednesday that retail sales fell in December, marking the second consecutive monthly decline and the biggest monthly drop for 2022.
P&G executives acknowledged that there’s a lot of uncertainty for 2023, but the American consumer is still intact, and the company upgraded its sales outlook, helped by higher prices. “The consumer is holding up remarkably well in the United States,” P&G finance chief Andre Schulten told reporters on a call Thursday. He noted that he doesn’t see any significant shifts that are notable even in private label.
P&G reported earnings of USD3.93 billion, or USD1.59 per share, for the quarter.
That compares with USD4.22 billion, or USD1.66 per share, in the year-ago period. The results were slightly above Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of USD1.58 per share.
The company said that beauty product prices increased on average by nine per cent, while fabric and home care prices were up 13 per cent.
The world’s largest consumer products maker posted revenue of USD20.77 billion in the period, down from USD20.95 billion in the year-ago period.
Eight analysts surveyed by Zacks expected USD20.61 billion.
In its key market China, which is lifting its stringent zero COVID-19 policy, P&G executives said it expects consumption to rebound to mid-single digits. But P&G said it’s hard to predict when that will happen. The company now projects total sales for the current fiscal year to a range from a one per cent drop to unchanged, better than its previous range of a decline of one per cent to three per cent.
The company maintained its full-year earnings outlook but said profits could fall at the lower end of guidance because of higher commodity and material costs.
In late afternoon trading, shares were down close to two per cent, or USD2.48, to USD143.02.
