Procter & Gamble Gets Shoppers to Pay Up -- Update
January 20 2021 - 12:06PM
Dow Jones News
By Sharon Terlep
Procter & Gamble Co. sales surged in the most recent
quarter, fueled in part by demand for high-end household products
from pricey dish soap to a $300 electric toothbrush.
Despite a tough economic picture and high unemployment, the
maker of Gillette razors and Pampers diapers said consumers are
increasingly willing to pay more for products.
The dynamic is playing out across the consumer-products
industry, as more-affluent consumers fare better in this recession
than those with lower income and cleaning and hygiene take on a
higher priority across all segments of society during the
coronavirus pandemic.
"Consumers are driven to products where they can say, 'I know
that will deliver for me and my family,' " P&G operating chief
Jon Moeller said.
Consumer spending on food and household products considered
either premium or super premium rose more than spending on
mainstream, value-oriented and private-label products, according to
data from market-research firm IRI, which looked at online and
grocery purchases for the 12-week period ended Oct. 4, compared
with a year earlier. Premium soap, household cleaners and paper
towels saw the most growth, according to the study.
A shift toward higher-end staples particularly benefits P&G,
which generally has among the pricier items in the grocery store.
That has hurt the company in past recessions.
Now, armed with extra cash following years of downsizing and
solid sales, P&G has been churning out a range of high-end
items including laundry-detergent pods designed for extra-large
washing machines and a special line of Gillette shaving
products.
The Cincinnati company's organic sales increased 8% to $19.75
billion in the quarter ended Dec. 31. P&G raised its estimates
for full-year organic sales growth to between 5% and 6%, up from
the previous range of 4% to 5%.
The company also warned of a potential slowdown and greater
uncertainty as dynamics around both the economy and pandemic could
change dramatically. Continued lockdowns and another round of U.S.
stimulus payments, for instance, would bode well for sales in many
of P&G's biggest categories. A return to normalcy or a
deepening recession could slow growth.
"To assume linearity of any degree is difficult," Mr. Moeller
said. "If anything, the level of certainty is less today than it
was" at the beginning of the pandemic.
The strongest growth in the latest quarter was in P&G's
fabric and home-care unit, which posted a 12% sales gain. The
unit's brands include Tide, Mr. Clean, Dawn dish soap and Cascade
dishwasher detergent. Sales in P&G's grooming unit, which
includes Gillette razors, rose 5%. Sales in P&G's health-care
unit, which includes dental care as well as over-the-counter
medications, rose 9%.
Mr. Moeller said P&G has been able to spend more on new
products and advertising while also boosting margins. The company
underwent a yearslong restructuring in which it slashed jobs, cut
billions of dollars in annual costs and overhauled its management
structure.
Sales volumes rose along with price increases, offsetting
pandemic-related sales losses. While many trends related to
Covid-19 have bolstered sales for P&G and other
household-staples makers, the pandemic has dealt some blows, from
retail closures that are hurting sales of some beauty products to
the fact that men are shaving less as they work from home, Mr.
Moeller said.
The sales gains build on momentum that started before the
pandemic, when P&G was notching sales gains higher than
peers.
For its fiscal second quarter, P&G generated net income of
$3.9 billion, or $1.47 a share, up from $1.41 a share a year
earlier.
Analysts expected net income of $1.48 a share and sales of
$19.98 billion, according to S&P Global Market
Intelligence.
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
January 20, 2021 11:51 ET (16:51 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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