P&G hikes some prices as weak grooming shaves profits
New York, United States | AFP | Procter & Gamble announced price hikes on toilet paper, diapers and some other staples on Tuesday as it reported a dip in earnings, due in part to cutthroat competition in the shaving business.
P&G announced price hikes on Charmin toilet paper, Bounty paper towels, Pampers diapers and Puff tissues, with some of the increases taking effect in October and others in February 2019.
Executives also signaled they would roll back promotions on some additional consumer goods and that they were weighing other tactics to offset higher costs, such as shrinking package size.
Chief Executive David Taylor said that as long as costs were justified or products improved, "I believe retailers will work with us" to boost prices.
"I think generally the industry has to recover rising input costs," he said.
The company pointed to higher prices for key materials such as pulp and petroleum-linked commodities, as well as increased shipping costs.
The price hikes are the latest to affect household items, with producers of goods as varied as soft drinks, household paints and power tools disclosing similar price hike plans during earnings releases in recent weeks.
The adjustments follow a rise in commodity prices, in some cases due to trade tariffs.
– Mixed earnings –
P&G, which makes Crest toothpaste, Tide detergent and other goods, reported a 14.6 percent fall in net income in its fiscal fourth-quarter to $1.9 billion.
Revenues rose 2.6 percent to $16.5 billion, slightly below analyst expectations.
P&G enjoyed higher organic sales — which exclude the effect of currency changes — in its beauty segment, thanks in part to a good performance of the SK-II skin product and a premium Oil of Olay product.
Another bright spot was strong overall sales growth in some key emerging markets, including China, India and Turkey.
But P&G encountered another quarter of organic sales slippage in grooming care, where its Gillette line has struggled from the rise of online competitors and as more men grow beards.
P&G enacted price cuts last year to try to raise US grooming sales, a move which has boosted volume and market share growth of its products in the region.
But P&G said those measures only go so far, given fashion trends.
"What offsets that is the continual shift to less shaving," Chief Financial Officer Jon Moeller said in a briefing with reporters.
The arrival of newer shaving players in online markets in Europe promises further challenges. One of the newer companies, Harry’s, has spread beyond its online origins and is now selling in Walmart and other retailers, further cutting into the market of conventional players.
"We expect the competitive environment to stay very heavy for a while," Taylor said of grooming.
– Pricing power? –
Questions about P&G’s pricing plans dominated an analyst conference call, with Taylor signalling the company had "many tools" to address price, including shrinking packages, introducing new package sizes at new price points and deescalating promotions.
P&G has also shifted more pricing decisions to local business chiefs so they can be more "agile" in responding to market shifts, Taylor said.
Some analysts have questioned the extent that P&G will be able to make price increases stick given intensifying competition from newer entrants and older rivals like Unilever and Kimberly-Clark, further intensified by Amazon and other e-commerce sites.
"I do not think that the new normal is we don’t have pricing power at all," Taylor said. "What I do believe is it varies by category when you take pricing and how much you take pricing."
"It’s not unusual for the industry to wait until the commodity costs build up to a certain level," he said. "Then there’s a threshold, you take it and you do recover."
Shares rose 0.8 percent to $80.88.