The power of beloved brand names is demonstrated by ‘s latest quarterly earnings report, which show the largest growth that the company has had in eight years. Even with prices on the rise, consumers continue to purchase well-known brands.
P&G is one of the industry’s largest providers of home and personal care items, featuring brands such as Tide detergent and Gillette razors.
Sales Strong Despite Rising Costs
As the cost of raw materials goes up and currency exchange rates trend unfavorably for the dollar, a number of American companies are increasing the price for their products. Despite an uncertain economy and a rise in store-brand purchases, P&G’s sales are holding strong even at a higher price point.
Kimberly-Clark Corp., maker of Cottonelle toilet paper and Huggies diapers, and Unilever PLC, maker of Dove soap and Hellman’s mayonnaise, have both also increased prices on their products. The companies have also benefited from a recent boost in sales numbers.
For years, P&G tried to retain customers by lowering prices, but the company decided to change tactics last summer. In September 2018, P&G increased prices between 4 percent and 10 percent on products on a rolling basis. By February 2019, most of the products had become more expensive for consumers. P&G keeps a close watch on organic sales metrics, which rose five percent in the third quarter.
In fact, P&G has now shown strong sales for three consecutive quarters, after several years of struggling with slow growth.
New Developments for P&G
The largest gain for P&G has been in the beauty division, with an impressive nine percent in organic sales growth. The company also saw gains in health care, fabric and home care, baby, feminine and family care.
The grooming division has seen a small decline, with a fall of one percent in organic sales. Gillette razors in particular have faced troubled sales numbers. Competition from new brands has been intense, causing Gillette to lower prices in response.
In January, Gillette also launched an ad campaign featuring the #MeToo movie. The ads received mixed reviews from consumers. Despite the flat sales numbers, P&G has no intention of giving up Gillette. The company expects that razor sales will return and continue to increase in value in the long term.
Overall, third quarter earnings were pretty good for the company. P&G posted a net income of $2.75 billion, at $1.04 in profit per share. Those numbers are up from $2.51 billion and 95 cents a share year over year. P&G’s stock price is up 40% over the past year, making it a hot commodity right now.