Recent challenges in key markets, particularly China and the Middle East, have significantly impacted sales for major corporations like Procter & Gamble, which reported a 1% decline in first-quarter net sales, to $21.7 billion, reflecting the effects of a sluggish Chinese economy and ongoing geopolitical tensions in the Middle East.
Amid these external pressures, P&G reported a 2% organic sales growth, building on 7% growth from the previous year. This mixed performance reflects evolving consumer preferences, notably among lower-income shoppers in the U.S., who are gravitating toward budget-friendly household and personal care brands.
Despite this trend, the company remains committed to its pricing strategy in the U.S. and Chief Financial Officer Andre Schulten said there is no immediate pressure to lower prices in the domestic market.
“Nothing points to the consumer trading down,” Schulten told investors and analysts during the company’s first-quarter earnings call Friday (Oct. 18). “The categories we’re in we have the right value proposition, the right price levels, access to consumers, and as long as we keep innovating, I believe we will be fine.”
Procter & Gamble, which saw profits fall 12%, to $4 billion, demonstrated growth in eight of its 10 product categories. The company reported increases in grooming, fabric care and healthcare; however, the skincare and beauty categories faced challenges that tempered the firm’s overall success. The beauty segment, particularly the premium SK-II brand, reported a significant decline (20%) in sales due to reduced demand, especially in key markets like China.
“There are many changes to the Chinese consumer that need to be taken into account,” Schulten said. “We are rebuilding our distributor partnerships so we can reach the consumers in the right places with the right prices. The way media is consumed is changing so we have to reach consumers at the right frequency. The team is doing a great job adjusting to those realities. We are well positioned in China to win. SK-II continues to be very relevant. We had very strong results on SK-II outside of China.”
In light of these adjustments, CEO Jon Moeller shared his confidence in the company’s trajectory during a recent CNBC interview.
“We’re very much on track to deliver against our expectations for the year,” Moeller said. “We take a lot of encouragement away from the results this quarter, 2% organic sales growth on top of 7% year ago, so 9% on a two-year stack. The results were very much in line with the quarterly cadence we communicated. The biggest question is can you maintain unit volume growth at higher prices, which you’ve had to move to because of commodity costs, in the big developed markets? North American volume growth in the quarter we just completed was plus 4% and we had volume share growth in North American in eight out of 10 categories. The resounding answer to that question is yes, we can grow unit volume at the current price levels.”
As for China and the Middle East, “we’re somewhat behind where we expected to be,” Moeller said. “It’s a difficult environment. We’ve got a very energized team focused on the right end points in the right way.”
Moeller recently spent four days in China and said he left “more excited than when I went.”
Looking ahead, Procter & Gamble has set a sales growth forecast of 2% to 4% for fiscal 2025, with organic sales projected to grow between 3% and 5%.
“We’re doubling down on all levers to accelerate growth in the coming quarters,” Schulten said. “The best way to increase the probability we see improvement is focusing on the fundamentals. The U.S. opportunity is still huge. We look at consumers we don’t serve yet as a $5 billion growth opportunity.”
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