P&G Reports Unexpected Sales Decline as Demand Weakens Despite Price Restraint, According to Reuters

By Ananya Mariam Rajesh and Jessica DiNapoli

Procter & Gamble reported an unexpected decline in fourth-quarter sales as the company’s attempts to reverse years of significant price increases did not resonate with budget-conscious consumers, who avoided its higher-priced Charmin toilet paper and Pampers diapers. In response, P&G shares dropped by 4.8%.

Other industry players, such as Nestle and Unilever, also experienced disappointing sales growth in the first half of the year. Earlier in July, PepsiCo had missed sales forecasts, with leaders indicating that consumers across all income brackets are feeling financial pressure.

“There is a gap in the consumer sector… it is increasingly challenging to implement price hikes,” noted Don Nesbitt, a senior portfolio manager at F/m Investments, which holds shares in P&G. He added that consumers, especially those at the lower end of the economic spectrum, are becoming more selective in their purchases.

To attract price-sensitive customers, P&G has invested heavily in new product launches, including Tide Evo detergent and more affordable Luvs Platinum Protection diapers, targeting those seeking both cost-effective and environmentally friendly choices. However, supply constraints have delayed the rollout of the new Luvs diapers. The diaper segment faced declining sales as P&G lost market share to competitors.

The company has ramped up promotions and discounts, leading to lower prices for some items, which has affected organic sales growth in its largest division, fabric and home care, encompassing Tide detergent. Brian Jacobsen, chief economist at Annex Wealth Management, remarked that P&G’s sales figures underscore the reality that there is a limit to how much price can be increased before consumers react negatively.

While executives indicated that they have not seen substantial financial strain among consumers—pointing out that many are still opting for more expensive products—CEO Jon Moeller mentioned that P&G is enhancing core products like Dawn dish soap and Charmin. He noted that in the event of an economic downturn, consumers might gravitate towards home cooking and increased use of certain household items.

Overall volumes in P&G’s fourth quarter, ending June 30, saw a slight increase of 1%, bolstered by growth in its grooming and healthcare sectors. However, net sales fell to $20.53 billion, falling short of the anticipated $20.74 billion.

P&G is facing challenges in China, where even basic consumer spending has weakened, further exacerbated by ongoing boycotts against its premium SK-II beauty brand, which has impacted results in this crucial market. Nonetheless, the company’s more affordable beauty products, like Head & Shoulders and Pantene, are still showing growth.

During a call with investors, P&G’s executives noted that the mood in China had not improved over the past six months and that boycotts of Western brands continue in the Middle East.

P&G posted an adjusted profit of $1.40 per share, surpassing the expected $1.37 mainly due to reduced commodity costs. The company also announced plans to repurchase between $6 billion and $7 billion of its common shares in the 2025 fiscal year.

Looking ahead, P&G expects its core profit for fiscal 2025 to range between $6.91 and $7.05 per share, slightly below analysts’ predictions, and anticipates annual sales growth of 2% to 4%, compared to the 3.04% consensus estimate. Analyst Michelle Li, representing one of P&G’s investors, expressed optimism, suggesting that the company’s outlook for fiscal 2025 is promising.