P&G CEO weighs in on shrinkflation debate, better-than-expected earnings #NewsUnitedStates

A mixture of higher prices, a resilient US shopper, and a little shrinkflation drove a solid quarter from Procter & Gamble (PG).

The maker of Tide Pods and Dawn Powerwash reported better-than-expected fiscal first quarter earnings today, powered in large part by demand in the US. P&G chairman and CEO Jon Moeller told Yahoo Finance he sees enough consumer resilience that reiterating sales and profit guidance for the full year was the correct course of action.

Moeller also pushed back against the criticism the packaged goods industry has received this election season. Vice President Kamala Harris has vowed to crack down on shrinkflation — the practice of shrinking package sizes but maintaining prices — if she wins the White House.

Senator Elizabeth Warren has called for a new federal price gouging ban.

“Speaking specific to P&G, our whole model depends on delighting a number of constituents: delighting consumers, delighting customers, delighting employees, delighting society, and delighting shareholders. And I firmly believe that if we fail to do one of those, we will fail to do all of them,” Moeller said on the shrinkflation topic.

Continued Moeller, “It’s actually interesting. Smaller sizes in general are more costly to produce. So it’s not intuitive that you grow margin by doing that. But there are times where we will reduce the size of an offer simply because that at times increases affordability.”

• Net sales: $21.7 billion, -1% from the prior year vs. $21.96 billion estimate

• Organic sales growth: +2% vs. +2% estimate

  • Beauty segment organic revenue growth: -2% vs. +2.75% estimate

  • Grooming segment organic revenue growth: +3% vs. +4.6% estimate

  • Healthcare segment organic revenue growth: +4% vs. +3.5% estimate

  • Fabric & home care segment organic revenue growth: +3% vs. +1.9% estimate

  • Baby, feminine, & family care segment organic revenue growth: Unchanged vs. +1.05% estimate

• Gross margin: 52% vs. 52.4% estimate

• Adjusted EPS: $1.93, +5% from the prior year vs. $1.90 estimate

• Full-year organic sales growth: +3% to +5% (reiterated)

• Full-year EPS growth: $6.91 to $7.05 (reiterated)

• CEO Jon Moeller’s comments to Yahoo Finance on the health of the US consumer:

  • A tale of high-income and low-income shoppers: “We do see, of course, as you would expect, some dichotomy between different groups of consumers. First of all, we try to ensure that we have offerings that are available across the price ladder for consumers who have different outlay needs. We also ensure that in channels where incomes tend to be a little bit more stretched, that we offer a pack size that is friendly from a cash layout standpoint, which ends up being important to a group of consumers week on week.”

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