‘A rough patch to grow through’: P&G Q1 2023 net profit dips amidst slight net sales rise

This week, P&G reported net sales of €21.2bn ($20.6bn) for the first quarter of fiscal 2023 (Q1), up 1% on the previous year, with net profit down 4% at €4.04bn ($3.93bn). Net sales for the quarter stayed steady in beauty, dipped 4% in grooming, but rose 1% in fabric and home care and baby, feminine and family care. P&G’s strongest net sales rise came from health care, up 3%.

P&G issued a full-year guidance of 3-4% growth.

Tackling the ‘near-term challenges’​

Jon Moeller, chairman of the board, president and CEO of P&G, said the results were solid given the “very difficult cost and operating environment”.​

“We remain committed to our integrated strategies of a focused product portfolio, superiority, productivity, constructive disruption and an agile and accountable organisation structure. These strategies have enabled us to build and sustain strong momentum. They remain the right strategies to navigate through the near-term challenges we’re facing and continue to deliver balanced growth and value creation,” ​Moeller said.

Adding to this during the company’s earnings call, Andre Schulten, CFO of P&G, told analysts the company’s integrated strategies had continued to yield good results, despite “continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets”.​

Looking ahead, Schulten said volatility in costs, currencies and consumer dynamics would continue, but P&G would sharpen its focus on four areas to position the company well and “manage through this volatility over time”​.

Providing European consumers ‘value tier offerings’​

Europe especially, he said, would be “tough from a consumer environment standpoint”​ over the next year. “We see high pressure on the European consumer, with high inflation. And, certainly, as the energy costs will hit the consumer over the winter period, depending on how much support from the European governments is provided and when, we need to be extra careful, in terms of ensuring that consumers have appropriate access to our portfolio.”​

Making sure European consumers could choose from a range of the “right value tier offerings”​ would be key, he said.

Moeller added: “…Value is found at the intersection of price, product and performance (…) and usage experience. It’s not just price. Price is an important component, but those other components are equally important.​

“…To cut through this, you have to think about the totality of the value proposition to make sense of what’s happening.”​

Supply chain, digitalisation, environment and people​

Schulten said building on existing strategies around portfolios, superiority, productivity, constructive disruption and organisation, the company would sharpen focus on supply chain 3.0, digital acumen, environmental sustainability, and employee value equation – “not new or separate strategies” ​but necessary elements towards growth.

“We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners,” ​he said.

“…The macroeconomic and market level consumer challenges we’re facing are not unique to P&G, and we won’t be immune to the impact (…) As we’ve said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business.”​