Elevated demand for paper towels, washing-up liquid and laundry detergent has lasted into the winter, giving Procter & Gamble another bump in sales and prompting the consumer goods bellwether to increase its annual forecasts once again.
The household products group predicted that sales of brands including Ariel, Bounty, Tampax, Pampers and Head & Shoulders would remain strong even after the rollout of coronavirus vaccines.
Wall Street analysts had forecast P&G’s rate of organic sales growth in its financial second quarter to cool from 9 per cent in the previous three months to about 6 per cent, yet the US-based group’s latest batch of forecast-beating results indicate the pandemic-induced boost to the business is showing little sign of fading.
In fact, it disclosed an 8 per cent year-on-year rise in net sales to $19.7bn.
The trend for consumers to stay inside is leading them to wash and cook at home more often than usual. The phenomenon has fuelled demand for a wide range of staples, from dishwashing tablets to toilet paper.
Concern about the spread of coronavirus has also made consumers more hygiene-conscious, suggesting lasting benefits for companies in the sector including Reckitt Benckiser of the UK and Kleenex maker Kimberly-Clark, as well as Procter & Gamble.
Jon Moeller, chief operating officer and chief financial officer, noted that quarterly sales in China, the company’s second-largest market, had risen 12 per cent — the same rate as the US — despite reduced coronavirus cases.
“If that’s representative, there’s no indication that vaccine availability, more social mobility, is inherently a demand reducer.”
Not all consumer trends in the pandemic have benefited P&G, however. Lockdown restrictions on department stores have hurt sales of premium skincare products, and distribution through venues such as hotels and restaurants has also been diminished, Mr Moeller said.
P&G has also incurred higher material costs and safety-related expenses. The cost of products sold increased 4 per cent in the quarter.
“We expect some of the current tailwinds to our business will dissipate, but some very strong headwinds should abate or disappear,” he said.
Shares in P&G rallied 14 per cent in 2020, although before Wednesday they had shed 3 per cent this year as Wall Street had queried how much longer the boom could continue.
Economic weakness has also prompted some analysts to raise concerns about how long shoppers will remain prepared to pay a premium for P&G brands, which tend to be more expensive than rivals.
Government stimulus had made a “real difference” so far, Mr Moeller said, although he added that the company would have to see how future fiscal support plays out.
Despite the uncertainty, P&G said it was on track to deliver an annual increase in sales of between 5 and 6 per cent in its fiscal year — up from its previous forecast for a rise of between 3 and 4 per cent.
Net income in the financial second quarter rose 4 per cent to $3.89bn, equivalent to diluted earnings per share of $1.47.
Each of the company’s five main divisions posted increases in organic sales, led by a 12 per cent rise at its fabric and home-care division and a 9 per cent gain in healthcare. Even the grooming business, which has been hurt by men’s tendency to shave less, produced a 6 per cent increase.
P&G was able to edge up prices by 1 per cent, while volumes rose 5 per cent. A more favourable mix of business also contributed to the revenue improvement, and organic sales, which exclude the impact of foreign exchange, acquisitions and divestitures, rose 8 per cent overall.
Shares in P&G, which has a market capitalisation of $331bn, were little changed in pre-market trading.
Get alerts on Procter & Gamble Co when a new story is published