Procter & Gamble Organic Sales Rise, Driven by Volume Increase
Procter & Gamble Co. (P&G) reported organic sales growth that exceeded estimates in the three months ended December 31, a shift from recent quarters where price hikes had primarily fueled the company's expansion.
Organic sales increased by 3%, marking the largest quarterly gain in three quarters. The primary contributor to this growth was higher volume, indicating that retailers have increased their purchases of essential items such as Dawn dish soap and Gillette razors to replenish inventories. Notably, prices remained unchanged compared to the same period last year, the first time they have not risen since 2019.
The company's shares responded favorably, rising as much as 2.6% by 12:10 p.m. in New York. These results suggest a potential slowdown in the era of continuous price hikes.
Consumer package goods companies have historically relied on price increases to drive revenue growth. However, other major players are also signaling a shift in this strategy. Coca-Cola Co. has announced plans to moderate price increases on its beverages this year.
External pressures are also influencing this transition. In an executive order, U.S. President Donald Trump expressed concerns about the cost-of-living crisis and emphasized the need to restore purchasing power for American families.
P&G has responded to these concerns by focusing on innovation in value-tier products, such as the upgraded Luvs baby diapers that debuted last year. The company is also expanding its product offerings in higher-priced categories, including all-over body deodorant and specialized razors.
Strategic placement of products at end caps in retail stores has also contributed to sales growth by encouraging impulse purchases. Analysts maintain a positive outlook for P&G, citing the company's strong position in the face of ongoing market volatility.
P&G's fabric and home care segment, anchored by brands like Tide and Swiffer, as well as the segment producing Bounty paper towels and Charmin toilet paper, further bolstered sales.
However, the beauty division experienced volume declines in Greater China, where reduced consumer confidence has impacted the business. Organic sales in China declined by 3% for the quarter, and the company anticipates that it may take time for the region to return to sustained growth.
Despite these challenges, P&G reaffirmed its guidance for sales and profit for the current fiscal year, ending in June. The company is closely watched as one of the first consumer entities to report earnings in the U.S., with approximately half of its revenue generated in North America.