Procter & Gamble Co. blew through analyst expectations for the just-ended fiscal first quarter, with organic sales up 9% to $19.3 billion, net earnings up 19% and no signs that the dwindling effects of this spring’s U.S. stimulus is making people trade down to cheaper products.
P&G increased marketing spending at least $100 million last quarter, Vice Chairman and Chief Financial Officer Jon Moeller said on an earnings briefing call with media. That came as P&G continues to wring savings out of overhead, media, agency and production costs—at a pace of more than $200 million last quarter—but spent those savings back on marketing.
“We view this as a time to spend forward in terms of our advertising levels, not to spend back,” Moeller said. “First, there’s never been more media consumed than there is currently, as we all try to entertain ourselves and our families and survive. And two there’s a heightened need to spend on hygiene and health.”
P&G allayed any fears that U.S. consumers would pull back or trade down on its premium-priced brands, including Tide, Olay, Bounty and Charmin, as the effect of stimulus checks dwindles and enhanced unemployment benefits either ran out or were pared back, depending on the state, at the end of the second quarter. The company raised its full-year guidance for organic sales growth from 2%-4% to 4%-5%.
“We have not seen down trading to this point,” Moeller said, adding that private label shares in P&G categories have been falling, and at an accelerated pace of 1 percentage point in the most recent four-week period, with private-label shares in Europe also down.
“There seems to be continued interest in brands I know and trust to do the job for me and my family in a heightened time of need,” Moeller said, adding that people appear to have extra money to spend on packaged goods even without government stimulus.
“There are large parts of many consumers’ budgets that aren’t being spent—the money they would typically spend on entertainment, travel, meals out at restaurants, apparel,” Moeller said.
Men, working at home more, still aren’t spending as much on Gillette razors, but that was offset by increased sales of Venus women’s razors and successful new Braun electric shavers, sending even P&G’s grooming segment up 6%. Almost every other part of P&G’s business fared well too, except for diapers, with sales up in the U.S. but down elsewhere in the world. P&G also boosted sales with the pandemic-fueled launch of Safeguard hand sanitizers and soap.