PROCTER & Gamble (P&G) said that higher prices are more than offsetting a diminished amount of goods sold, bolstering the revenue outlook for the maker of Tide detergent and Pampers diapers.

The consumer-goods giant now expects organic sales growth – which excludes factors such as currency fluctuations – to rise between 4 per cent and 5 per cent in the fiscal year ending in June, it said on Thursday (Jan 19). That narrows the company’s projection to the more optimistic half of its previous forecast, issued in October. P&G also increased the overall revenue outlook for the year. 

Another hike in prices during the three months ended in December helped P&G to offset a decline in units sold, and drove organic revenue expansion of 5 per cent. That surpassed analysts’ expectations, but was still the slowest growth rate since the quarter ended September 2021, as the pandemic boom continues to fade. Volume fell in all categories, with P&G citing a “market contraction” for most. 

The total volume of goods sold fell 6 per cent, with contractions in Russia and China driving part of the decline, chief financial officer Andre Schulten said. P&G scaled back its operations in Russia after that country invaded Ukraine, while Chinese pandemic restrictions hit retailers there.

On the demand front, he said that consumers are using up the products in their pantries before restocking, and that they are being more measured in their use of items such as paper towels. Even so, the reaction to higher prices is “much more benign than we would’ve expected based on historical data we have”, he said.

The company’s shares fell 3.7 per cent in premarket trading at 6.56 am in New York.

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P&G also trimmed the expected impact of currency fluctuations, as well as higher commodity and freight costs, for the full year. It now expects a US$3.7-billion hit, down from US$3.9 billion, thanks in part to a weaker US dollar. Still, the company maintained its earnings-per-share outlook in a range of US$5.81 to US$6.04 for the current fiscal year.

The US dollar has tumbled in recent weeks from peak levels, offering a potential boost for US companies that operate overseas. 

Investors are closely watching consumer spending amid signs of a global economic pullback. US retail sales fell in December by the most in a year, adding to a drop the prior month, as indicated by Commerce Department data released on Wednesday. Factory output also slumped, exacerbating concerns that a recession is looming.

In a statement announcing the results, chief executive officer Jon Moeller acknowledged the “very difficult cost and operating environment”, while adding that P&G’s actions have helped it to maintain growth despite the challenges.

Meanwhile, the company’s business in China slumped 7 per cent last quarter, as cash-strapped retailers reduced their inventories amid Covid-19 restrictions, Schulten said. The Cincinnati-based company still sees the potential for growth in the mid-single digits in China – the firm’s second-largest market – as mobility normalises, although the timeline for a recovery is unclear.

Europe has shown a “higher and more pronounced reaction” to elevated prices than the US, Schulten said. In Russia, P&G is operating on a reduced footprint, after cutting back on advertising and limiting its products to basic health, hygiene and personal-care items. BLOOMBERG