P&G to raise some prices despite strong quarter

CINCINNATI – Procter & Gamble said Friday that it will boost prices 5 to 10 percent on household products such as Crest toothpaste, Dawn dish soap and Old Spice deodorants to combat rising commodity prices and increased pressure from foreign exchange.

The move came as the Cincinnatibased consumer giant reported its strongest quarter in five years as consumers snapped up products from Tide detergent to Pampers diapers. P&G said organic sales rose a robust 4 percent; the closely watched metric excludes the impacts of foreign exchange, divestitures or acquisitions.

Chief Financial Officer Jon Moeller hesitated to call the quarter’s results a “breakout” but said the solid numbers were welcome after P&G’s long and continuing turnaround efforts.

P&G reported a $3.2 billion profit for the quarter ended Sept. 30 – up 12 percent from the same period a year ago.

Total sales were $16.7 billion, virtually unchanged from the same period a year ago. The results beat Wall Street forecasts.

P&G sales volume surged 3 percent, although currency rates erased the increase.

Still, Moeller cautioned investors against breaking out the champagne – he said the company would need to boost prices to recoup lost profit margin from commodities and currency woes. ❚ Big exposure to foreign exchange: A stronger U.S. dollar cut the Cincinnati-based consumer giant’s top line, prompting it to trim its fiscal year forecast Friday.

The consumer giant predicted foreign exchange rates will chop 3 to 4 percent

off total sales – that suggests a $2 billion to $2.7 billion impact.

P&G cut its sales forecast for the fiscal year ending June 30, 2019. The company said sales for the year would range from a 2 percent decline to flat, versus a previous guidance of unchanged to up 1 percent.

❚ A company under pressure: Wall Street analysts expected P&G would generate a $2.9 billion profit before one-time items on sales of $16.6 billion, according to Zacks Research. Last year, P&G reported a $2.9 billion profit on sales of $16.7 billion for the same quarter.

Squeezed by rising commodity costs, P&G said in July that it would increase North American prices for paper products: Pampers diapers, Bounty paper towels, Charmin toilet paper and Puffs tissues. The average list price will rise 4 percent for Pampers and 5 percent for Bounty, Charmin and Puffs.

The latest results come at a time when P&G is under intensified pressure to jump-start sales growth. Hedge fund investor Nelson Peltz joined the board this spring after a bitter proxy fight last year over the pace of the company’s turnaround.

Peltz won almost half of shareholder votes, campaigning to slash management layers and reduce major business units from five to three. P&G employs 10,000 workers in Greater Cincinnati.

In June, Peltz said his turnaround proposals were under “serious consideration” by his fellow board members. P&G’s disappointing results may have strengthened his hand to lobby for potential cuts. In August, P&G disclosed it has shrunk its worldwide payroll to 92,000 – the smallest since the 1990s.