(Reuters) -Tide detergent maker Procter & Gamble Co raised its full-year sales forecast on Thursday and said it plans to continue raising prices despite a drop in sales volumes, warning that high commodity costs were pressuring profits.
P&G’s sales volumes fell 6% in its second quarter ended Dec. 31, led by declines in the company’s grooming segment, which includes brands like Gillette and Braun, and its Fabric & home care segment, which includes Tide, Ariel and Mr. Clean.
P&G, like other consumer goods companies, has hiked prices multiple times to cover soaring transportation, commodity and labor costs, as well as the impact of a stronger U.S. dollar on its overseas revenue.
While the price hikes have been met with less pushback compared to discretionary products, customers have still bought fewer of its products.
P&G is the first consumer staples company to announce December-quarter results, and analysts at Alliance Bernstein said its results may not “bode so well” for its peers.
P&G chief financial officer Andre Schulten said on a media call that half of the company’s drop in sales volumes were driven by a fall in consumption, while the other half was due to inventory reductions in Russia and China. P&G has announced some price increases that go into effect in the next couple of months, he added.
“We don’t see significant shifts that are notable even in the private label side,” Schulten said, regarding U.S. consumers. “We’re confident the consumer is going to hold up well over the next few quarters.”
Average prices across P&G’s product categories rose 10% in the quarter compared to a year earlier.
P&G said organic sales in China, its second largest market, were down 7% due to COVID lockdowns and weaker consumer confidence. Schulten added that China’s re-opening has not had an impact yet on consumption.
The company said it expects fiscal 2023 total sales to range between flat to a 1% drop, compared with its previous forecast of a 1% to 3% fall, but maintained its annual earnings forecast of flat to a 4% rise.
The company’s shares fell about 3.7% to $141.05 in premarket trading.
P&G said net sales fell 1% to $20.77 billion in the quarter, hurt by the impact of a stronger dollar on overseas revenue but beating Wall Street expectations. It’s the first fall in quarterly net sales in a little over five years, according to Refinitiv data.
Analysts’ on average estimated sales of $20.73 billion, according to IBES data from Refinitiv.
The company’s earnings per share of $1.59 was in line with analysts’ average estimate.
(Reporting by Jessica DiNapoli in New York and Uday Sampath in Bengaluru; Editing by Shinjini Ganguli and Elaine Hardcastle)
