Procter And Gamble Remains Confident In The Resilience Of Its Customers

On October 18th, The Procter & Gamble Company PG reported its quarterly results that topped both top and bottom-line estimates despite losing some of its consumers due to continuously raising prices with volumes dropping for the six consecutive quarter. Procter & Gamble isn’t immune to the weakened consumer spending patterns, but it is more confident in the resilience of its customers compared to some of its peers, like PepsiCo Inc PEP who opted for a more conservative outlook and moderate price hikes. On October 10th, Pepsi also topped Wall Street estimates, while also lifting its full year earnings guidance.

Fiscal First Quarter Highlights

For its fiscal first quarter, Procter & Gamble net sales expanded 6% to $21.87 billion with organic revenue increasing 7% due to higher pricing. LSEG’s consensus of analysts expected revenue of $21.58 billion. The consumer goods giant has been exceeding market expectations for more than three years now. 

The resulting net income amounted to $4.52 billion, or $1.83 per share, exceeding LSEG’s estimate of $1.72. But when excluding the impact of currency and pricing changes to evaluate demand, volume contracted 1%. More precisely, the volume of the baby, feminine and family care segment fell 3%, followed by grooming whose volume dropped 2% and fabric and home-care business whose volume decreased 1%. Although this means that some shoppers switched to other more affordable alternatives, P&G executives noted that volume declines have been narrowing down over the recent quarters, stated that they expect to report volume growth for the fiscal year. The health-care division was the only segment to experience a growth in volume owed to its respiratory products. 

A Widened 2024 Outlook

Due to anticipating that foreign exchange rates would be a larger drag than previously expected, P&G guided for revenue to grow between 2% and 4% while it previously forecasted 3% to 4%. The company’s international footprint makes it more vulnerable to foreign currency risks that have been weighing on its performance in these times shaped by geopolitical challenges. But executives maintained an optimistic outlook although CFO Andre Schulten cautioned that worsening economic conditions would harm P&G’s performance such as the energy costs that will rise with the arrival of the winter as well as the deteriorating health of the Chinese market which is the world’s second biggest economy is the only place where the company couldn’t clear up the consumer blues. 

P&G Finds Its Customers To Be In Good Financial Health

P&G remains confident of the resilience of its customers who mostly absorbed higher prices for its personal care products and cleaning supplies. On October 10th, its peer Pepsi also revealed it is planning modest price hikes next year as demand also held up. Although P&G’s volumes were dented, it stated it is stabilizing and expects things to pick up through the rest of the year. It is aiming to hit the top-end of its annual forecasts despite a potential $1 billion after-tax impact from unfavorable foreign exchange rates. All in all, the fate of consumer staple stocks which are both P&G and Pepsi, along with many others, ultimately lies in the hands of the macroeconomy as their fates are closely intertwined. Although these companies have been long categorized as the safest to bet on, even their customers are price sensitive and their business are vulnerable to disruptions during such uncertain and tension-filled times.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.