CINCINNATI — It took Procter & Gamble Co. years to recover from the 2008 recession, when consumers abandoned its premium products for cheaper alternatives.
Now that the company has ended a 23-quarter streak of net sales growth, some are questioning whether P&G is ready to weather the coming storm.
“They may encounter some of the same challenges that they did during the last recession,” said James Lewis, a portfolio manager at Bartlett Wealth Management. “The question is, how deep or how hard this recession will be if it does materialize. And I guess the expectation is currently that we’re probably looking at a soft landing.”
P&G Chief Financial Officer Andre Schulten said P&G has more pricing options than it did in 2008. Products like Tide Simply and Bounty Essentials could retain value-conscious consumers trading down for lower prices.
“The consumer is holding up remarkably well,” Schulten said in a media call to discuss second-quarter earnings. “Our portfolio of daily use brands is able to grow volume share and that volume-share growth is actually accelerating. So, I do believe that even in a more difficult environment for the consumer, focusing on superiority, communicating that superiority, executing well in market is going to allow us to continue to grow.”
P&G reported a $3.9 billion profit on net sales of $20.8 billion, meeting analyst expectations with earnings per share of $1.59. The company also improved its sales outlook for the year, forecasting a decline of no more than 1% compared to a previous estimate for a decline of up to 3%.
Lewis said P&G saw reduced growth in organic sales — which exclude the impact of one-time events like currency fluctuation — and sales volume, which measures the number of items sold.
“That may be a sign that shoppers are trading down to cope with higher food and energy prices,” Lewis said. “And if that’s the case, it might put a crimp in their premiumization strategy.”
But P&G has yet to see consumers flocking to cheaper brands, as they did in the last recession.
"We don’t see any significant shifts that are notable," Schulten said. "Even on the private-label side, things are relatively steady. Private label shares are holding steady in the U.S. at 60%. So, we are quite confident consumers are going to hold up well over the next few quarters."
