Procter & Gamble (PG), a leading consumer goods giant, has released its first-quarter earnings report for fiscal 2025, revealing a mixed bag of results amidst a challenging global economic landscape. While the company exceeded adjusted profit estimates, net sales dipped by 1% to $21.74 billion for the quarter ending September 30th.
Despite the sales decline, P&G reported a 2% organic revenue growth fueled by price increases. However, the volume of products sold remained flat, indicating a softening demand environment. This trend is particularly evident in the US, where P&G saw volume growth in only eight out of its ten categories. The story in Greater China was even more concerning, with both hair care and oral care segments experiencing volume declines.
Across its divisions, health care and baby, feminine and family care all reported a 1% decline in volume. The beauty business saw a 2% volume dip, while organic sales of the skin care segment plummeted by over 20%. However, the grooming division emerged as a bright spot, recording a 4% volume increase driven by innovation. Fabric and home care saw a modest volume growth of 1%.
P&G’s bottom line reflects these mixed trends. Net income attributable to the company reached $3.96 billion, or $1.61 per share, while adjusted earnings per share amounted to $1.93.
The company has implemented several price hikes in recent years, leading to a decline in demand for its products. The last quarter marked the first time in over two years that P&G saw an increase in volume, but this uptick appears to have been short-lived. With the global birth rate continuing to decline, P&G has been pushing consumers towards more expensive baby care items. However, this strategy has not been able to fully offset the volume decline, resulting in mid-single-digit organic sales drops in the baby care segment.
Despite the challenges, P&G remains committed to its full-year guidance, projecting revenue growth between 2% and 4% and net earnings per share ranging from $6.91 to $7.05. However, the company’s CFO, Andre Schulten, cautioned that the Chinese market is expected to remain weak for several quarters to come.
The US market, which accounts for almost half of P&G’s total sales, continues to present a challenging environment. Economic uncertainty is prompting consumers to shift towards discount-offering rivals and cheaper brands.
This trend is not unique to P&G. Its rival in packaged foods manufacturing, Nestle S.A., recently lowered its annual sales outlook, citing weak demand. Nestle also announced corporate structure changes to streamline its operations.
The packaged foods industry is grappling with the combined impact of the pandemic, the war in Ukraine, and soaring costs for raw materials and packaging. This challenging environment has led to a significant weakening of consumer purchasing power and increased uncertainty. Even global giants like P&G and Nestle are facing a painful reset, navigating a slowdown in demand and a significantly weakened consumer base.