P&G beats profit, sales estimates with price hikes

Higher prices and greater demand for beauty products helped Procter & Gamble Co’s exceed analyst estimates for quarterly revenue and profit on Tuesday, even as grooming product sales were hurt by a stronger U.S. dollar.

P&G, which makes Olay skincare products, had raised prices on many products to make up for higher commodity and transportation costs that have rocked the consumer goods industry over the past year.

The higher prices have also helped P&G ease the impact of a stronger U.S. dollar, with the world’s no.1 personal care goods company getting more than half its sales from outside North America.

P&G reported a 5 percent rise in third-quarter organic sales, a keenly watched metric that excludes the impact of currency changes and mergers and acquisitions. Price hikes contributed 2 percentage points to organic sales growth.

“We’re seeing strength in consumption as we’re taking modest price increases, coupled with innovation,” Chief Financial Officer Jon Moeller said on a call to discuss earnings.

Higher prices are often met with resistance from retailers, but Moeller said the rises had stuck so far.

The beauty business saw a 9 percent rise in organic sales, helped by the premium SK-II brand.

Still, the impact of foreign exchange fluctuations dragged organic sales down by 2 percent at P&G’s grooming business, which makes Gillette razors, gels and foams, some of the company’s most internationally distributed products.

Wells Fargo analyst Bonnie Herzog said that while she approved of the price hikes and sales growth in beauty, she was concerned about weak sales at P&G’s grooming and baby care businesses.

Shares in P&G were down 1.9 percent in premarket trading.

Net income attributable to the company rose to $2.75 billion (£2.11 billion), or $1.04 per share, in the quarter ended March 31. Excluding items, the company earned $1.06 per share, beating the average analyst estimate of $1.03 per share.

Net sales rose 1.1 percent to $16.46 billion, beating analysts’ average estimate of $16.37 billion, according to IBES data from Refinitiv.