Procter & Gamble Co.
bets that the world’s consumers will not be deterred by higher prices for household goods from Pampers diapers to Gillette razors.
The Cincinnati-based consumer product giant said sales increased 6% in the quarter ended December 31 compared to a year earlier, driven in part by the company’s largest average price increase since spring 2019.
Leaders on Wednesday said price increases will continue through 2022, predicting higher profitability and improved margins in the coming quarters, even as labor, shipping and commodity costs continue to rise due to the global turmoil in the supply chain.
“The consumer is very resilient and very focused on these categories of clean home and health and hygiene,”[ads1]; said P&G CFO Andre Schulten in an interview.
P&G shares rose more than 4% in morning trading, in line with the largest percentage increase in almost two years.
US inflation in 2021 hit its fastest pace in almost four decades, as pandemic imbalances between supply and demand pushed up prices on everything from used cars to household goods.
Pricing rose by an average of 3% in the last quarter, P&G said, and price increases accounted for half of the company’s revenue growth during the period. Higher volumes accounted for the other half. P&G reported revenue of $ 21 billion for the quarter.
The extra income helped offset sky-high prices for raw materials, labor and the transport of goods, as the supply chain’s problems continue to weigh on almost all industries.
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P & G’s core earnings per share rose 1%, to $ 1.66, from the same period last year. Margins fell despite increased revenues and cost cuts. The company has spent a lot on keeping factories running and products in stock as much as possible, said CEO Jon Moeller, who took over the company in November.
On Wednesday, managers said there is no relief in sight from higher costs for labor, transportation of goods and raw materials such as fuel, resin and pulp.
“The flexibility we’ve been talking about that our utilities have generated does not come for free,” said Mr. Moeller. “When we need to switch to alternative materials, when we need to switch to alternative suppliers, all our sources of materials geographically, it’s a premium.”
P&G, which has provided more consistent sales gains than its rivals through the pandemic, raised its revenue forecast for the fiscal year ending June 30, although the company said costs would be higher than previously estimated.
P&G said it expects to commit $ 2.8 billion more in commodity, freight and currency costs this fiscal year. The figure is around 500 million dollars more than predicted last quarter. Earnings estimates remained unchanged.
Mr. Schulten said that in addition to absorbing higher prices, consumers are also switching to more expensive, advanced products, such as switching to liquid detergent for more expensive single doses.
A wide range of consumer product companies, including P&G rivals Unilever PLC and Kimberly-Clark Corp.
, has implemented price increases to compensate for higher costs due to problems in the global supply chain.
The recent increase in Covid-19 cases due to the rapidly spreading Omicron variant did not spur the type of hoarding behavior that led to a shortage of toilet paper, cleaning products and other products during previous waves, he said.
Sales increased for products to treat respiratory problems, leading to a 20% increase in revenue for P & G’s personal health unit, which includes the Vicks and NyQuil brands.
P&G now expects organic sales, which remove agreements and currency movements, to grow 4% to 5% for the financial year, up from the previous forecast for a growth of 2% to 4%.
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