Procter & Gamble (P&G) posted a surprise drop in fourth-quarter sales on Tuesday as demand for its products slowed despite efforts to keep prices in check.
Shares for the maker of Charmin toilet paper and Pampers nappies maker were down 5% before the bell on Tuesday as a result.
Price Hikes
Attempts to raise prices more slowly have not been enough to win back price-conscious customers for P&G and other companies such as Nestlé and Unilever.
Last week, the latter two companies reported first-half sales growth below expectations.
A senior portfolio manager at F/m Investments – which has a stake in P&G – Don Nesbitt said, “(There is) a hole in the consumer sector… it is getting more difficult to pass on price increases.
“The consumer is becoming more discerning on their purchases, especially the lower-end consumer.”
After choosing to scale back more price hikes, P&G has been spending heavily to launch new daily-use products like Tide Evo detergent tiles and lower-cost nappy brand Luvs Platinum Protection.
These product launches intended to win new customers looking for cheaper options.
The company has also been increasing promotions and offering discounts, resulting in lower prices for some of its products.
This move took a toll on its organic sales at P&G’s largest division – fabric and home care.
Chief economist at Annex Wealth Management Brian Jacobsen said, “P&G’s sales support the theme that you can only push price so far until consumers push back.
“If they use promotions and discounts to get the attention of consumers, that could help volumes, but that comes at a price.”
Volumes And Prices
P&G reported a 1% rise in overall volumes in the fourth quarter, driven by growth in grooming and healthcare segments.
Average prices also rose 1% – well below a 7% jump a year ago.
Fourth-quarter net sales slipped to $20.53 billion and missed London Stock Exchange Group expectations of $20.74 billion.
P&G’s adjust profit of $1.40 per share beat estimates of $1.37, mainly due to lower commodity costs.
The company said it expects to repurchase $6 billion to $7 billion of common shares in fiscal 2025.
The consumer goods giant expects fiscal 2025 core profit to rise between $6.91 and$7.05 per share, compared with analysts’ expectations of $6.97.
It expects annual sales growth in the range of 2% to 4%, compared with estimates of a 3.04% rise.
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