Procter & Gamble (P&G) reported an unexpected drop in fourth-quarter sales, as global demand for its Charmin toilet paper and Pampers diapers declined despite efforts to stabilize prices. This news sent P&G’s shares down 5% before the bell on Tuesday.
Attempts to raise prices more slowly have not been sufficient to regain price-sensitive customers, not only for P&G but also for rivals Nestlé and Unilever, which reported first-half sales growth below expectations last week.
“There is a hole in the consumer sector...it is getting more difficult to pass on price increases,” said Don Nesbitt, senior portfolio manager at F/m Investments, which holds a stake in P&G. “The consumer is becoming more discerning on their purchases, especially the lower-end consumer.”
To counteract reduced price hikes, P&G has invested heavily in launching new daily-use products such as Tide Evo detergent tiles and the lower-cost diaper brand Luvs Platinum Protection, aiming to attract customers looking for cheaper options. The company has also increased promotions and discounts, resulting in lower prices for some products, which impacted organic sales in its largest division, fabric and home care.
“P&G’s sales support the theme that you can only push price so far until consumers push back,” said Brian Jacobsen, chief economist at Annex Wealth Management. “If they use promotions and discounts to get the attention of consumers, that could help volumes, but that comes at a price.”
P&G reported a 1% rise in overall volumes in the fourth quarter, driven by growth in grooming and health care segments. The average prices also rose 1%, compared to a 7% increase a year ago.
Fourth-quarter net sales slipped to $20.53 billion, missing LSEG expectations of $20.74 billion. Weak spending in China on daily-use items and continued sales impacts on its beauty brand SK-II due to consumer boycotts over environmental issues have also been concerns for P&G.
Despite these challenges, P&G's adjusted profit of $1.40 per share beat estimates of $1.37, primarily due to lower commodity costs. The company announced plans to repurchase $6 billion to $7 billion of common shares in fiscal 2025.
Looking ahead, P&G expects fiscal 2025 core profit to rise between $6.91 and $7.05 per share, compared with analysts' expectations of $6.97. It forecasts annual sales growth in the range of 2% to 4%, compared to estimates of a 3.04% rise.
(Source:www.reuters.com)
Attempts to raise prices more slowly have not been sufficient to regain price-sensitive customers, not only for P&G but also for rivals Nestlé and Unilever, which reported first-half sales growth below expectations last week.
“There is a hole in the consumer sector...it is getting more difficult to pass on price increases,” said Don Nesbitt, senior portfolio manager at F/m Investments, which holds a stake in P&G. “The consumer is becoming more discerning on their purchases, especially the lower-end consumer.”
To counteract reduced price hikes, P&G has invested heavily in launching new daily-use products such as Tide Evo detergent tiles and the lower-cost diaper brand Luvs Platinum Protection, aiming to attract customers looking for cheaper options. The company has also increased promotions and discounts, resulting in lower prices for some products, which impacted organic sales in its largest division, fabric and home care.
“P&G’s sales support the theme that you can only push price so far until consumers push back,” said Brian Jacobsen, chief economist at Annex Wealth Management. “If they use promotions and discounts to get the attention of consumers, that could help volumes, but that comes at a price.”
P&G reported a 1% rise in overall volumes in the fourth quarter, driven by growth in grooming and health care segments. The average prices also rose 1%, compared to a 7% increase a year ago.
Fourth-quarter net sales slipped to $20.53 billion, missing LSEG expectations of $20.74 billion. Weak spending in China on daily-use items and continued sales impacts on its beauty brand SK-II due to consumer boycotts over environmental issues have also been concerns for P&G.
Despite these challenges, P&G's adjusted profit of $1.40 per share beat estimates of $1.37, primarily due to lower commodity costs. The company announced plans to repurchase $6 billion to $7 billion of common shares in fiscal 2025.
Looking ahead, P&G expects fiscal 2025 core profit to rise between $6.91 and $7.05 per share, compared with analysts' expectations of $6.97. It forecasts annual sales growth in the range of 2% to 4%, compared to estimates of a 3.04% rise.
(Source:www.reuters.com)