Procter & Gamble is raising prices on consumer staples and hiking its estimate of cost inflation.
The consumer products giant—which makes Tide detergent, Bounty paper towels, Gillette razors, and Crest toothpaste—says it is paying more for raw materials and transportation than it expected and sees no easing of inflationary pressures.
“The input cost pressures are really broad based,” P&G Chief Financial Officer Andre Schulten told reporters at a briefing, describing the current market as “a very challenging cost environment.”
Prices are rising faster than expected. In July, the company said higher costs would add an additional $1.9 billion in expenses this year. On Tuesday, the company raised this estimate to $2.3 billion
Key drivers for higher costs include lengthy delays at US ports that have prompted companies to increase inventories; and factory outages tied to Covid-19 lockdowns and tropical storms that have pinched supply.
“We do not anticipate any easing of costs,” Schulten said in an interview. “We continue to see increases week after week, though at a slower pace.”
Schulten said P&G was spending more on a variety of items, including chemical resins, pulp packaging, and, more recently, energy and diesel.
At P&G, profits for the quarter ending September 30 were $4.1 billion, down four percent, on a five percent jump in sales to $20.3 billion. The company said around one-fifth of the rise in sales was due to higher prices and the rest due to selling more product. Every segment showed more sales growth and sales in North America were particularly strong, the company said.
Gross margin came in at 49 percent, below the Wall Street estimate of 54 percent, highlighting the drag on profits from inflation. Higher inflation has become a theme of corporate earnings reports this season. Many companies say they have passed on some but not all of the costs. Supply chain disruptions have also caused problems, with some new products being delayed and high shipping costs straining profitability.
The company said it would start charging higher prices on razors, oral care products, and beauty products. It had earlier said prices would rise for diapers and paper towels.
Schulten said the company is finding backup suppliers and changing shipping routes to get products to consumers and keep store shelves stocked. It has also begun limiting how much a store can stock of some products, in an effort to cut back on stockpiling. Other products are being reformulated because ingredients are in short supply.
–AFP contributed to this report.
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