Procter & Gamble (PG) reported year-over-year declines in revenue and profit on Thursday, as higher prices look to offset declining sales volumes and foreign exchange headwinds. The company’s organic revenue, which excludes the impact of foreign currency, acquisitions and divestitures, increased 5% during the fiscal second quarter. That rise was a result of higher pricing, which outweighed shrinking consumer demand.
For the three-month period that ended on Dec. 31, the company reported net income of $3.9 billion, or $1.59 per share, excluding items, down from $4.22 billion, or $1.66 per share, a year earlier. Net sales fell to $20.77 billion, a 1% decrease from the previous year, which topped analyst's projections of $20.73 billion.
All of the company’s divisions reported declining sales volume in the quarter, despite seeing increases in organic sales as a result of higher pricing. Its grooming division, which houses brands like Gillette and The Art of Shaving, and which has historically underperformed for the company, reported no sales growth — its volume declines completely canceled out its higher prices.
Why it matters
P&G executives noted on a call with the media that consumer demand is responsible for at least half the 6% sales volume decrease. The remaining volume decline was due to reining in business in Russia as the war in Ukraine persists, along with inventory reductions in China, its second-biggest market, as Covid lockdowns disrupted the region. As China loosens its Covid restrictions, the market is primed to rebound. P&G’s chief financial officer, Andre Schulten, expects that the country’s reopening will return the market to mid-single-digit growth.