Procter & Gamble Co (NYSE:PG) stock rose 0.79% (As on Apr 21, 11:31:51 AM UTC-4, Source: Google Finance) after the company raised its full-year sales forecast on Wednesday as consumer demand for cleaning and personal healthcare products remains resilient despite rising prices. P&G’s sales growth is at its strongest in at least 15 years, according to analysts, but there are concerns that consumers will start to swap branded items for cheaper own-label products, as supply chain constraints and soaring commodity prices push inflation ever higher, squeezing household budgets. The company has also announced fresh price hikes in U.S. feminine, home and oral care from this summer, even though they expect consumer demand to soften as the higher prices feed through to shop shelves. Sales in P&G’s fabric and home care unit, the company’s biggest segment, rose 7% in its third quarter, as consumers stocked up on detergents and surface cleaning products such as Tide and Mr. Clean during the coronavirus’ Omicron wave early in the year. Sales at the health care business, which includes brands like Oral-B and Pepto-Bismol, rose 13%.
Meanwhile, P&G’s China business was hit by COVID-19 lockdowns which forced the company to shut plants and kept shoppers at home, which executives said had a “significant impact” on consumer demand.
The company had reported the adjusted revenue growth of 7 percent to $19.38 billion in the first quarter of FY 22, beating the analysts’ estimates for revenue of $18.73 billion, according to Refinitiv data. Total sales volumes rose 3% despite price increases across most of P&G’s product range.
The consumer goods giant, however, warned that higher costs could dent its annual core earnings per share, which it now expects at the low-end of the 3% to 6% growth that was predicted in January. The company expects fiscal 2022 sales to rise 4% to 5%, compared with its prior forecast of a 3% to 4% increase.
Soaring commodity and freight costs, as well as a stronger dollar are expected to dent full-year profit by $3.2 billion, compared to a prior forecast of $2.8 billion. P&G also took a hit of one penny per share in the third quarter due to the Russia-Ukraine war, which will rise to four cents in the fourth quarter. The company is ending all new capital investments in Russia and “significantly reducing” its portfolio to focus on basic hygiene, health and personal care items.