Procter & Gamble is struggling for profitability.
Procter & Gamble (PG) raises prices for most of its products due to the rise in raw materials and transportation costs. As a result, Procter & Gamble has warned retailers about price increases for laundry and textile care products from February 28 and personal care products from April.
In total, the price increase will affect eight categories of goods, and this step will be made not only for the main one for Procter & Gamble of the US market, characterized by high purchasing power, but also abroad. Procter & Gamble recorded organic growth of 6% across all five major segments of its business. Half of this growth was due to higher prices even before the decision mentioned above to raise retailers’ cost of some goods.
The consensus assumed that the corporation’s sales would grow by only 3%. The rise in the price of these products potentially pushes consumers to choose cheaper analogs, but P&G, in our opinion, is confident in its pricing strategy since, according to management, its competitors face the same trends in prices for raw materials and transportation. At the same time, the impact of exchange rate differences is a more significant blow to P&G due to its broad global presence. In addition, the company believes that consumers of its products are willing to pay more for a brand they know and will not change their preferences.
In this regard, Procter management & Gamble is not afraid of damage to the business or loss of market share. P&G recorded a decrease in gross profit by four percentage points regarding materials and logistics costs, but it was leveled by optimizing costs and increasing prices. As a result, P&G has improved its forecast for sales growth this year from 2-4% to 4-5%. The cash flow forecast also has.
The corporation has many resources to invest even while maintaining large dividend payments and actively repurchasing shares. This year, the company plans to send $17-18 billion to shareholders against $15-16 billion set in previous goals. Therefore, despite the difficulties associated with rising costs, we give an optimistic forecast of P&G’s financial performance and raise the target price for its shares to $176.
