Procter & Gamble (PG) earnings for the first quarter of 2023

Tide detergent packets are on the grocery store shelves.

Richard Levine | Corbis | Getty Images

Procter & Gamble Company On Wednesday, it reported quarterly earnings and revenue that beat analysts’ estimates as higher prices helped offset lower sales volumes and currency headwinds.

The maker of Tide detergent, Charmin toilet paper and Pampers diapers, said it also expects foreign currency to reach its 2023 financial results more than previously expected. The company expects a strong US dollar to hit $1.3 billion this year – $400 million more than its forecast from late July.

As a result, P&G’s expects net sales for this year to fall 1% to 3%, down from its previous forecast of 2%. It now expects earnings per share to be at the lower end of the previous fixed range of 4%.

The stock rose 3% in morning trading.

Here’s what the company reported for its fiscal first quarter compared to what Wall Street had been expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.57 vs. $1.54 expected
  • Revenue: $20.61 billion vs. $20.28 billion forecast

Net sales The quarter rose 1% to $20.61 billion, beating expectations of $20.28 billion. Unfavorable exchange rates reduced revenue by 6%.

When excluding the impact of acquisitions, divestitures and foreign exchange, the company said organic revenue rose 7%. Higher prices fueled growth and offset a 3% volume decline.

The company has been raising product prices to mitigate rising costs, but the strategy has squeezed consumer demand for its products, with volume shrinking over the last two fiscal quarters.

Executives sided with the strategy, expressing confidence that it did not bring about any major changes in consumer behavior.

“We are very comfortable with consumers’ reaction to our price increases because we are not seeing any major trade declines,” Andre Schulten, the company’s chief financial officer, said on a call with reporters.

However, he added that some categories in certain markets have seen temporary pressure on market share. In the United States, for example, Procter & Gamble has reduced marketing spending for laundry detergent due to supply restrictions, prompting some customers to buy other brands instead, according to Schulten. He said supply issues have been fixed and that P&G’s market share for this category is recovering.

Schulten also said that 2% of the volume declines during the quarter were due to its smaller Russian portfolio. Like many global companies, P&G moved to reduce its Russian exposure afterwards The Kremlin invaded Ukraine earlier this year. The company stopped marketing and new capital investments in the country and scaled back the products it sold there. Russia previously accounted for less than 2% of P&G’s global sales.

P&G’s personal care business, which includes Gillette and Venus razors, was the company’s only unit to report volume growth for the quarter. Sector volume was up 1%, although the company noted a slowdown in personal care devices.

There were a few other bright spots of Procter & Gamble’s scale. Skin and personal care, which is part of the company’s beauty segment, has seen a surge in demand, buoyed by new and improved products. A strong cold and flu season has led to a growth in the size of the personal healthcare segment, which includes brands such as Vicks and Zzzquil.

For the three months ended September 30, Procter & Gamble reported net income of $3.94 billion, or $1.57 per share, down from $4.11 billion, or $1.61 per share, a year earlier. The company’s gross margin decreased 1.6% compared to the same period last year, weighed down by higher freight and merchandise costs.

Executives told the analysts on the conference call that they saw a reduction in some commodity costs, but that their suppliers were still charging higher prices for packaging and other items.

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