Reuters US Business
By Jessica DiNapoli and Juveria Tabassum
(Reuters) -Procter & Gamble beat estimates for its quarterly results on Friday, as consumers continued to pay higher prices for its beauty and hair-care products, despite a broader slowdown in spending due to economic uncertainty.
The Tide maker's shares were up about 1% after it halved its annual tariffs cost estimate to about $400 million after tax, largely due to Canada lifting retaliatory duties on U.S. goods.
However, U.S. President Donald Trump on Thursday terminated all trade talks with Canada. The Canadian government was yet to respond to the move.
P&G CFO Andre Schulten said on a media call that "beyond the headlines, we have no information that would have any impact on how we view our tariff exposure at this point in time." The company recently rescinded price hikes it had placed on Canadian goods because the retaliatory tariffs were removed.
The results from P&G, whose CEO Jon Moeller will be replaced by another company veteran Shailesh Jejurikar on January 1, echo those from rival and Dove parent Unilever, which on Thursday disclosed double-digit sales growth from beauty brands in the U.S.
"Many people deem beauty and grooming products as essential items and shoppers might feel happy paying a little extra if they think the goods are superior to cheaper competition," said Dan Coatsworth, head of markets at AJ Bell.
CONSUMERS 'NOT GREAT, BUT STABLE'
P&G has raised some prices in the U.S., its biggest market, by 2% to 2.5% to help offset tariffs, relying on demand for essential products such as Dawn dish soap and Pampers diapers.
Schulten said lower-income and higher-income U.S. consumers were both looking to save money on pantry staples. Those with higher incomes are buying bigger sizes, while those living paycheck-to-paycheck are seeking smaller pack sizes.
P&G is also facing more discounting from rivals in the U.S. and Europe in laundry detergents and diapers, and was looking to compete by enhancing its products.
"I would say the consumer environment is not great, but stable. If you want to quantify that in market growth rates, the U.S. consumption across our categories has slowed a little bit over the most recent reading," the finance chief said.
The investments to cater to value-conscious consumers and manage higher tariffs costs triggered a 50-basis-point fall in operating margins from a year earlier, despite the price hikes.
Still, P&G's operating margins continue to exceed rivals such as Colgate-Palmolive and Unilever and beat Wall Street expectations.
While not disastrous, the decline in margins puts more pressure on management to make sure it does not get any worse, Coatsworth said.
Core earnings per share topped estimates by 9 cents at $1.99, as P&G banked on its strategy of introducing improved products at higher prices such as Tide Evo detergent tiles and Olay premium body wash, with sales growing in the grooming and beauty segments.
"Some consumers are still feeling the pinch and pulling back, but it looks like the wider swath of consumer America is hanging in there," said Brian Jacobson, chief economist at Annex Wealth Management, a P&G shareholder.
CHINA SHINES ON PREMIUM PUSH
Schulten said while underlying market conditions in China were still challenging, with a low level of consumer confidence, the company still managed to report double-digit growth in baby care, helped by premium diapers.
As part of an on-going restructuring aimed at cutting costs, P&G is pulling out of certain markets such as laundry bars in India and the Philippines, and shut down manufacturing in Pakistan.
P&G is also on track to reduce about 7,000 non-manufacturing roles over the course of the next two years.
Quarterly revenue rose 3% to $22.39 billion, edging past estimates of $22.17 billion, according to data compiled by LSEG.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Sriraj Kalluvila)
NBC Southern California
WAVE 3 News
She Knows
Raw Story
CNN Politics
SpoilerTV