Reuters: P&G—Earnings & Outlook

July 28, 2023

Higher prices and earnings, but less customers!

Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by Reuters in an article — by Ananya Mariam Rajesh and Kailyn Rhone, “P&G tops estimates on higher prices but signals slowing China demand” — regarding Procter & Gamble’s just reported fiscal fourth quarter earnings, consumer pricing strategy, and 2024 outlook.

The article was also picked up by U.S. News & World Report,, Yahoo!, The Globe and Mail (Canada), European Supermarket Magazine, Handelszeitung (Switzerland), and Milenio, Lado and El Economista (Mexico), amongst others.

P&G’s net sales are growing but at the expense of less units, which means they are losing customers to substitutes and will one day have to fight to get those customers back.

Prices up, volumes down, but for how much longer?

Procter & Gamble’s earnings didn’t disappoint most market participants, but there is cause for concern. The company released positive quarterly numbers as investors and analysts over the last couple quarters have come to expect established consumer product goods (CPG) companies to issue similar messages of higher product prices (i.e., a positive price-mix) with declining volumes and margin improvement as supply chains continue to ease and commodity input costs decline. But this story can’t last forever because there are limits to consumer price inelasticity and transportation efficiencies. Costs-of-living are pressuring purchasing decisions around the globe.

Management’s fiscal 2024 earnings forecasts of between $6.25 and $6.43 a share versus analysts’ average expectations of $6.36 may create doubt as to how much more improvement to expect from the consumer giant next year.

Different segments, same message

Across P&G’s beauty, grooming, health care, fabric and home care, and baby, feminine, and family care segments the message of higher prices, positive product mix, and declining volumes was largely the same. This is disappoinitng. The company needs to be sensitive to consumer spending patterns and create excitement around new business lines.

Private label and other substitutes

P&G is not the marketing powerhouse they used to be. There are fundamental changes in the market like the extreme increase in private label options, off brand substitutes, and a penchant to discover newer niche, sustaibable, bargain, or local brands. Consumers got a taste of this during the last recession and were mostly satisfied, and there are even more options available today. Target, Costco, and Amazon provide great examples of the private label trend. Brands like P&G need to work even harder to make consumers insist on their namesakes but haven’t been doing this the way they used to for a number of reasons. We might never go back to those days where shoppers insist on their regular known brands to the same extent: consumers have more options. As household budgets get squeezed, we’ll see the trend continue. Additional price raises on the brand side will only further this.

Article excerpt is below:

“Net sales are growing but at the expense of less units, which means they are losing customers to substitutes and will one day have to fight to get those customers back,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

In German: Experten warnten, dass die Konsumgüterkonzerne nicht immer weiter an der Preisschraube drehen könnten. Der Umsatz steige durch die höheren Preise, doch geschehe dies auf Kosten der verkauften Einheiten, warnte etwa Michael Ashley Schulman von Running Point Capital Advisors. Dies bedeute, dass Kunden verloren gingen.

In Spanish: “Las ventas netas están creciendo, pero a costa de menos unidades, lo que significa que están perdiendo clientes en favor de sustitutos y que algún día tendrán que luchar para recuperarlos”, afirmó Michael Ashley Schulman, director de inversiones de Running Point Capital Advisors.

P&G — Graphics by

The night rinses what the day has soaped.

Swiss Proverb

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