What P&G Said about Soaring Costs, Supply Chain Woes, Inflation, and Trying to Keep Shelves Stocked
Procter & Gamble [PG], which makes a broad range of consumer and health-care products, released its quarterly earnings today. Let me give you the short form: Sales up some, costs up a whole bunch, profits down.
The company said that in addition to the price increases announced since April, it would implement more price increases to deal with rising costs. In its outlook, it upped the hit to earnings per share from surging commodities costs and transportation woes.
CFO Andre Schulten explained how the company had to jump through hoops, trying to keep the shelves stocked, including by limiting how much some retailers can buy to prevent hoarding. He complained about driver shortages. “We do not anticipate any easing of costs,” he said.
In April, P&G announced the first batch of price increases “in the range of mid to high single-digits,” on baby care, feminine care, and adult incontinence products, to respond to surging commodity costs and transportation costs. Later, it announced price increases on its family care, home care, and fabric care products. Over the past few weeks, it announced to US retailers price increases on its grooming, skin care, and oral care products. It has been a flow of price increases.
“The degree of timing of these moves are very specific to the category, brand, and sometimes the product form within a brand,” Schulten told analysts at the conference call this morning.
The first price increases started to show up on the shelves in September, and were barely reflected in Q1 ended September 30.
So, for the quarter ended September 30 (Q1 of its fiscal year 2022), P&G reported this morning, compared to Q1 a year ago, in a demonstration of how inflation bites (bold):
- Sales: +5%
- Costs of products sold: +13%
- So, gross profit: -2%
- Selling and admin expenses: +1%
- Operating income: -5%
- But interest expenses fell and income taxes fell
- Net earnings: -4%.
That 5% sales increase was a result of, well, mostly unrelated to selling more:
- Actual increase in volume: +2%
- Foreign exchange: +1%
- Price increases, which just started taking effect in September: +1%
- Change in mix to costlier and premium products and to the Health Care business: +1%.
