What P&G price hikes tell about basic consumer goods inflation

The article notes that inflation for basic goods remains elevated, according to a recent Procter & Gamble Company (P&G) financial report. 

The global leader in branded basic consumer goods delivered another solid quarter of financial results. Thanks to generous price hikes across all its product groups. Grooming (9% increase), Beauty (8% increase), Health Care (6% increase), Fabric & Home Care (6% increase), and Baby, Feminine & Family Care (8% increase).

These price hikes are well above the recent headline and core inflation numbers. For instance, the Consumer Price Index (CPI) rose at an annual rate of 3% in June of 2023, while “core inflation,” which takes food and energy out of the consumer budget, rose at an annual rate of 4.8%.

P&G's price hikes may continue as the company faces cost pressures on several fronts.

“The April-June quarter provided a very strong finish to fiscal year 2023 – topline growth, bottom-line growth, and cash generation,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer, in a statement following the release of the financial results. “The team met or exceeded our going-in plans for sales, earnings, and cash in a difficult operating environment and despite significant cost headwinds.”

P&G reported net sales of $20.6 billion for the fourth quarter of the fiscal year 2023, a 5% annual increase. On an organic basis, which excludes the impacts of foreign exchange and acquisitions and divestitures, sales rose at a more robust rate of 8%. In addition, diluted EPS came at $5.90 – 11% higher than the prior year when adjusted for currency fluctuations.

A strong EPS helped the company generate a solid operating cash flow of $16.8 billion and net earnings of $14.7 billion for the quarter. Adjusted free cash flow productivity was 95%, allowing the company to return $16 billions of cash to shareholders – $9 billion in dividend payouts and $7.4 billion in share purchases.

P&G’s solid financial results were music to traders and investors, who sent its shares close to 3% higher on Friday’s regular trading session.

But it was a reminder to consumers on the main street that inflation for basic branded goods is still a problem that must face anytime they visit the local supermarket.

Jeremy said that “P&G noted a solid finish to their fiscal year with top and bottom-line growth, despite significant cost headwinds. We know that a large part of P&G’s strategy is maintaining a portfolio that brings customer value through innovation. This has enabled them to consistently use price to help drive top line growth over the past ten years.”

Still, P&G’s price hikes led to lower sales volume for the consumer products giant, suggesting that inflation continues to take its toll on consumers.