CINCINNATI, OHIO – Procter & Gamble has revised its yearly profit forecast, citing lower commodity costs and continued strong consumer demand in the United States and Europe for its premium products like Tide detergent and Dawn dish soap. Despite falling short of analyst expectations in terms of third-quarter net sales, the company has managed to increase its bottom line, benefiting from reduced raw material prices post-pandemic peaks.
In the U.S., where volumes grew by approximately 3%, P&G’s Chief Financial Officer, Andre Schulten, mentioned on a media call that consumers have shown loyalty to the brand, not shifting to nonbranded alternatives. However, some experts, like Don Nesbitt from P&G investor ZCM, believe that cost-conscious consumers are opting for more value-based options in certain markets.
P&G faced challenges with lower sales of its high-end SK-II skin care line in China due to weakened consumer spending and environmental concerns. Schulten noted a significant decline of around 30% in third-quarter sales of SK-II in Greater China, indicating a shift in consumer preferences in that region.
The company now anticipates a benefit of approximately $900 million after-tax from favorable commodity costs for fiscal year 2024, up from the earlier forecast of $800 million. P&G also projects core earnings per share to increase between 10% and 11%, surpassing the initial estimate of 8% to 9% growth. Excluding items, the company reported earnings of $1.52 per share, exceeding estimates of $1.41 per share.
While third-quarter net sales saw a slight increase from the previous year, it fell short of analysts’ expectations. This led to a 2% drop in company shares during early trading. Experts are cautious about the company’s high expectations for increased volumes in a challenging market environment, where raising prices may not be as feasible.
During a post-earnings call, Schulten highlighted soft volume trends in specific countries in the Middle East due to heightened tensions. Despite reporting flat overall volumes in the third quarter, P&G saw a 3% rise in average prices across its product categories. Schulten affirmed that the company does not plan to further increase prices, focusing instead on sequentially improving volumes moving forward.