Procter & Gamble Reports Strong Earnings Despite Lower Demand in Europe

Procter & Gamble (P&G) has reported earnings and revenue for the quarter ending March 31 that exceeded analysts’ expectations. While demand for its products, particularly in Europe, has fallen, P&G’s higher prices have helped to offset this. The company, which owns household brands such as Charmin, Febreze, and Tide, has also raised its forecast for organic sales growth for fiscal 2023 to 6% from its previous range of 4% to 5%. This has resulted in a rise of more than 4% in P&G’s shares in morning trading.

Volume Falls, but Prices Rise

P&G reported net income of $3.4 billion, or $1.37 per share, up from $3.36 billion, or $1.33 per share, a year earlier. Net sales rose 4% to $20.07 billion. While the company’s volume, which excludes price and currency changes, fell 3% as consumers opted for cheaper alternatives, P&G’s prices increased by 10% YoY across its portfolio. The company has raised prices in both the US and Europe during the fiscal third quarter, and CFO Andre Schulten has said that P&G will continue to raise prices in Europe due to the pain point caused by consumers trading down to private-label goods.

Outlook for P&G

P&G’s volume has shrunk for four consecutive quarters, but Schulten has stated that consumption trends have stabilized globally, and that quarterly volume has fallen just 2% from last year when excluding P&G’s business in Russia. Europe is still a pain point for P&G, but there are bright spots in the US and China. Volume increased in the US, and China is finally recovering from Covid lockdowns, with consumer confidence improving. P&G is also waiting for Chinese travel shopping to pick up again, as travel retail is an important source of sales for SK-II, a luxury skincare brand owned by P&G.

All of P&G’s divisions reported declining volume for the quarter, except for its health and beauty units, which both saw volume increase by just 1%. The fabric and home care segment saw the steepest drop in volume, falling 5%, while the baby, feminine, and family care segment reported a 4% volume decline. Finally, P&G’s grooming business, which includes Gillette and Venus razors, reported a 1% drop in volume.