Limiting price hikes didn’t save P&G in Q4

Procter & Gamble had an advertising slogan for Luvs diapers that it could probably revisit: “Live, learn, and get Luvs,” because it looks like the conglomerate is still in the “live and learn” stage of its price-hike journey.

Holding off on some price increases on its consumer products didn’t prevent P&G from reporting lower-than-expected Q4 sales, according to Reuters. Upset investors gave P&G its stock’s worst day since March 2020, Bloomberg reported, which erased nearly half of its 16% year-to-date gain.

P&G’s 1% YoY price increase was its smallest “in nearly three years,” Bloomberg reported. But consumers have just been spending less on groceries and household goods. Organic sales growth of 2% was P&G’s “slowest in six years,” according to Bloomberg, which said analysts had expected an average of 3.4%.

“It is getting more difficult to pass on price increases,” Don Nesbitt, a senior portfolio manager at F/m investments, told Reuters. Nesbitt, whose firm has a stake in P&G, said there is “a hole in the consumer sector.”

Not alone. The same “price hikes, but slower” strategy has also failed to win back the Luv for P&G’s consumer-goods competitors like Nestlé, Unilever, and Kimberly-Clark. Last week all three reported sales that missed Wall Street forecasts in the first half of the year or the most recent quarter, according to Reuters and Bloomberg reports.

Rising Tide? There’s still a silver lining for P&G. At $1.40 per share, P&G earnings beat analyst expectations. The company also reported a gross margin increase over last year. It also appears confident in its longer-term strategy for growing volume, including promotions, discounts, and introducing new (and cheaper) products, forecasting 5% organic sales growth for the current fiscal year, compared to 3.9% among analysts Bloomberg tracks. But CEO Jon Moeller said on an earnings call, “the first couple quarters are going to look a little bit more like the one we just completed.”