Procter & Gamble Co – TheNewsHub https://thenewshub.in Fri, 18 Oct 2024 16:12:57 +0000 en-US hourly 1 https://wordpress.org/?v=6.6.2 Procter & Gamble earnings beat estimates, but weak demand in China hurts sales https://thenewshub.in/2024/10/18/procter-gamble-earnings-beat-estimates-but-weak-demand-in-china-hurts-sales/ https://thenewshub.in/2024/10/18/procter-gamble-earnings-beat-estimates-but-weak-demand-in-china-hurts-sales/?noamp=mobile#respond Fri, 18 Oct 2024 16:12:57 +0000 https://thenewshub.in/2024/10/18/procter-gamble-earnings-beat-estimates-but-weak-demand-in-china-hurts-sales/

Procter & Gamble on Friday reported weaker-than-expected revenue as lower demand in China again weighed on its sales.

The company’s organic sales in Greater China, its second-largest market, fell 15% in the fiscal first quarter. As home prices drop and jobless rates rise in the country, shoppers have pulled back their spending, hurting P&G’s sales for shampoo, diapers and other consumer staples.

While executives maintained their confidence in China long term, demand isn’t expected to recover for at least several more quarters.

“The market continues to be weak and will be weak, we believe, for a number of quarters to come,” CFO Andre Schulten said on a call with the press.

P&G’s outlook for China didn’t take into account the Chinese government’s recently announced plans to boost the country’s economy.

Shares of the company fell roughly 1% in morning trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

  • Earnings per share: $1.93 adjusted vs. $1.90 expected
  • Revenue: $21.74 billion vs. $21.91 billion expected

P&G’s net sales dropped 1% to $21.74 billion. Organic revenue, which strips out foreign exchange, acquisitions and divestitures, rose 2%, helped by higher prices.

The company reported flat volume for the quarter. The metric excludes pricing, which makes it a more accurate reflection of demand than sales. Like many consumer companies, P&G has seen demand for its products fall after several years of price hikes. Last quarter was the first time in more than two years that its volume increased.

In the U.S., P&G’s volume grew in eight of its 10 categories, and the company isn’t seeing any trade down to private-label products, Schulten said.

But it’s a different story in Greater China, which saw its organic sales worsen compared with the prior quarter. The company called out volume declines in China for both its hair care and oral care segments. Still, Greater China accounts for less than 10% of P&G’s revenue.

“The issues around Asia and execution are pretty minimal compared to some of the other rough spots that the company’s gone through in the past,” said Charles Rinehart, chief investment officer of Johnson Investment Counsel, a longtime shareholder in Procter & Gamble.

P&G’s beauty business, which includes brands like Pantene and Olay, saw volume fall 2% in the quarter. In particular, its skin care segment struggled, with organic sales tumbling more than 20%. P&G blamed the steep decline on lower volume and decreased sales of its pricey SK-II brand, which has struggled ever since pandemic lockdowns. Anti-Japanese sentiment in China has been the latest challenge for the brand; last year, SK-II sales took a hit as Chinese consumers boycotted the brand, fearing that Japan’s release of treated radioactive waste would contaminate the products.

Both P&G’s health care and baby, feminine and family care divisions reported 1% declines in volume for the quarter. But its baby care segment, which includes Pampers diapers, had an even worse quarter, with its organic sales falling by mid-single digits. As the global birth rate continues to drop, P&G has turned to pushing consumers to buy more expensive baby care items, like its Pampers Premium diapers, to grow sales. But that strategy can’t always make up for declining volume.

P&G’s grooming division, which includes Gillette and Venus, reported 4% volume growth. The company credited innovation for its strong performance.

The company’s fabric and home care business saw volume rise 1% in the quarter. The division includes Swiffer, Febreze and Tide products.

P&G reported fiscal first-quarter net income attributable to the company of $3.96 billion, or $1.61 per share, down from $4.52 billion, or $1.83 per share, a year earlier.

Excluding restructuring charges and other items, the company earned $1.93 per share.

P&G reiterated its fiscal 2025 forecast. It anticipates core net earnings per share in a range of $6.91 to $7.05 and revenue growth of 2% to 4%.

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Kamala Harris wants to take on price gouging. It's hard to find agreement on what it even is https://thenewshub.in/2024/09/29/kamala-harris-wants-to-take-on-price-gouging-its-hard-to-find-agreement-on-what-it-even-is/ https://thenewshub.in/2024/09/29/kamala-harris-wants-to-take-on-price-gouging-its-hard-to-find-agreement-on-what-it-even-is/?noamp=mobile#respond Sun, 29 Sep 2024 12:00:01 +0000 https://thenewshub.in/2024/09/29/kamala-harris-wants-to-take-on-price-gouging-its-hard-to-find-agreement-on-what-it-even-is/

Democratic presidential candidate Vice President Kamala Harris and her husband, Doug Emhoff, stop at a Sheetz gas station in Coraopolis, Pennsylvania, on Aug. 18, 2024.

Angela Weiss | AFP | Getty Images

As she unveiled her most detailed economic plan yet this week, Democratic presidential nominee Kamala Harris pledged to fight price gouging in order to rein in voters’ grocery costs.

The vice president first teased the federal ban in mid-August, prompting former President Donald Trump to attack the plan as “Soviet-style” price controls. Although Harris released more detail Wednesday as part of her 82-page economic plan, it’s still unclear what price hikes her administration would see as illegal “price gouging.”

“The bill will set rules of the road to make clear that big corporations can’t unfairly exploit consumers during times of crisis to run up excessive corporate profits on food and groceries,” the Harris-Walz campaign wrote in the policy pitch, released about six weeks before Election Day.

Higher prices — and who or what is to blame for them — have become a central theme in the presidential race, as steep grocery bills frustrate Americans and retailers anticipate a holiday season marked by deal-hunting. Harris and Trump have each proposed their own solutions to combat inflation, as Americans continue to pay more for groceries, energy, housing and other everyday expenses.

In the last year, prices for food at home have risen just 1%, according to the Bureau of Labor Statistics. But groceries are still 25% more expensive than they were in August 2019, before supply chain snarls and inflation sent prices soaring.

Voters will ultimately weigh in on what role government leaders should play in companies’ pricing. Generally, Republicans support fewer economic regulations, although Trump has suggested limiting food imports as a way to lower grocery prices. Economists have warned that the strategy would likely backfire.

Halting price hikes is a popular idea with voters. Sixty percent of adult U.S. citizens support capping increases on food and grocery prices, according to a poll by The Economist/YouGov conducted from Aug. 25-27.

Still, Harris would face a tough road to passing any price-gouging legislation in Congress, and it’s still not clear how cracking down on price increases would work in practice.

Federal Reserve Bank of Kansas City, which found that markups contributed “substantially” to inflation.

But many economists — and Fed Chair Jerome Powell — don’t think that corporate profits are to blame for inflation. Instead, they attribute the sharp rise in prices to a variety of other factors, such as the tight labor market and supply chain issues.

And regardless of what the term means, the companies involved have argued they are not to blame for higher grocery prices.

“It’s critical that we get the economic facts right and avoid political rhetoric,” Sarah Gallo, senior vice president of product policy and federal affairs for the Consumer Brands Association, said in a statement in August. “The reality is that there are complex economic factors at play … The industry is supportive of the Federal Trade Commission’s consumer protection mission as well as the Department of Justice’s already established laws that prohibit price gouging and unfair trade practices.”

Some retail leaders, including Target CEO Brian Cornell, have also pushed back against price gouging accusations waged against the industry. In an interview on CNBC’s “Squawk Box” in August, he said retailers lose customers to competitors if they hike prices too high.

Yet Jharonne Martis, director of consumer research at LSEG, said there are some “red flags” catching politicians’ attention. She analyzed gross profit margins for a cross-section of companies, including grocers, consumer packaged goods companies and restaurants during the years before, during and after the Covid pandemic. The metric measures the percentage of net sales that a company makes compared with its costs.

Some of those companies, including Kroger, Procter & Gamble and Domino’s Pizza, have higher gross profit margins than they did prior to the pandemic. She said that can reflect company-specific moves, such as Domino’s selling more pizza or Kroger customers gravitating to its more profitable private label brands.

A customer shops in a Kroger grocery store on July 15, 2022 in Houston, Texas. 

Brandon Bell | Getty Images

An antitrust challenge to Kroger’s $24.6 billion acquisition of supermarket chain Albertsons has also increased scrutiny of companies’ pricing practices. The Federal Trade Commission is trying to stop the merger in court, and during the trial, Kroger’s top pricing executive testified that the retailer raised prices on milk and eggs more than required to account for higher costs. 

In a company statement, Kroger described accusations of price gouging as “misleading” and said that nearly all costs of running a grocery store, including labor and transportation, have risen significantly since 2020.

“We work relentlessly to keep prices as low as possible for customers in our highly competitive industry,” the statement said.

On the other hand, Arun Sundaram, an equity research analyst at CFRA Research who covers grocers and consumer packaged goods companies, said he sees no evidence of price gouging in the grocery industry. He said price hikes are coming from companies passing on some of their higher production costs to customers.

Higher margins can come from a variety of factors and aren’t necessarily a sign of corporate greed or price gouging, he said. They can rise because companies are operating more efficiently or because the mix of merchandise they sell has changed.

Margins also can reflect the power of a brand and consumers’ willingness to tolerate large markups on fashionable or popular items, such as a unique pair of sneakers or a designer dress.

But Sundaram said there may be some merit to the debate in the meatpacking industry, which has faced some price-fixing lawsuits. For instance, JBS’ Pilgrim’s Pride Corporation, one of the country’s largest chicken producers, pleaded guilty in 2021 to conspiring to fix chicken prices and pass on costs to consumers.

A sign saying “Low price!” hangs from a shelf at a Target store in Miami, Florida, on May 20, 2024.

Joe Raedle | Getty Images

PepsiCo and Campbell Soup have seen their sales volumes shrink as consumers opt for cheaper alternatives or snack less. And as inflation slows, most have raised their prices less — and less frequently.

“You’ve got a shopper who has seen seven or eight [price hikes] in a year, and you know that they’re frustrated with it,” said Steve Zurek, vice president of thought leadership at market research firm NielsenIQ.

Walmart, the nation’s top retailer and grocer by annual revenue, said it’s cracking down on price hikes by vendors that it carries. On an earnings call last month, CEO Doug McMillon said inflation has been stickier in aisles that carry dry groceries and processed foods. He said the big-box retailer is calling on its suppliers to keep prices stable or cut them.

“We have less upward pressure, but there are some that are still talking about cost increases, and we’re fighting back on that aggressively because we think prices need to come down,” he said on the call.

To address consumers’ frustration and slower sales, many food companies are bringing back discounts, according to Zurek.

During the pandemic, many manufacturers stopped offering deals because they were struggling to keep shelves stocked. They didn’t need to boost demand because customers were already loading their pantries and stockpiling hand sanitizer and toilet paper. Supply chain issues exacerbated the problem, and inflation lifted sales without them needing people to buy more items.

That dynamic has now flipped for many companies. And it isn’t just food companies offering deals.

Target cut prices on thousands of items. Walmart has increased short-term deals on certain products, especially in the grocery department. And this week, Party City announced lower prices on more than 2,000 items such as balloons and candy as shoppers gear up for Halloween.

Even so, shoppers are unlikely to see grocery store prices slashed across the board, Zurek said.

“From an economic standpoint, you never want to be talking about deflation ­­— that’s almost as bad as inflation,” he told CNBC.

But there have been a few examples of companies reversing price hikes. Robert Crane, J.M. Smucker’s vice president of sales and sales commercialization, said the food company has passed on “commodity relief” to consumers when possible, such as with its coffee brands, which include Folgers and Cafe Bustelo. In fiscal 2024, Smucker’s profit margins for its coffee division were 28.1%, down from 31.9% in fiscal 2019.

But in early October, Smucker plans to hike its coffee prices for the second time this year, responding to rising commodity prices.

As it justifies those decisions to top retailers, the company brings in professionals who can explain the green coffee commodity market, according to Crane.

“We would review charts, we would talk about outlooks, and we would talk about what’s driving it — is it weather? Is it speculation driven?” Crane said.

But that doesn’t mean stopping or slowing price increases is simple, said CFRA’s Sundaram.

He said a long list of factors led to inflation, including a spike in supply-chain costs, wage increases stemming from labor shortages and poor weather in regions of the world that produce food such as corn, soybeans and cocoa. He’s skeptical that either administration can bring about a quick fix.

“Because it was a complicated set of factors that led to this, it’s going to be a complicated set of factors that probably gets rid of this as well,” he said.

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