Reuters US Business
By Jessica DiNapoli and Juveria Tabassum
(Reuters) -Procter & Gamble on Friday beat Wall Street estimates for first-quarter results, helped by strong demand for its beauty and hair-care products amid higher prices and a broader slowdown in spending due to economic uncertainty.
The Tide maker's shares were up about 3% after it also halved its annual tariff cost estimate to about $400 million after tax, largely on Canada lifting retaliatory duties on U.S. goods.
However, U.S. President Donald Trump on Thursday terminated all trade talks with Canada. The Canadian government had no immediate comment.
P&G CFO Andre Schulten said on a media call that "beyond the headlines, we have no information that would have any impact on how we view our tariff exposure at this point in time."
The results from P&G, whose CEO Jon Moeller will be replaced by another company veteran Shailesh Jejurikar on January 1, echo those from rival and Dove parent Unilever, which on Thursday disclosed double-digit sales growth from beauty brands in the U.S.
CONSUMERS 'NOT GREAT, BUT STABLE'
P&G has raised some prices in the U.S. to help mitigate the impact from tariffs, with the Cincinnati-based company banking on demand for products such as Dawn dish soap and Pampers diapers amid muted discretionary spending. It lowered prices in Canada after retaliatory tariffs were canceled.
Schulten pointed to a bifurcation in consumer behavior, with more financially stable shoppers opting for larger pack sizes, while lower-income consumers sought smaller packs for basic home-care and personal-use items, as they stretched their pantries.
The company is also dealing with more discounting from rivals in the U.S. and Europe in fabric-care and baby-care products, and was looking to offer more products such as diapers at affordable price points.
"I would say the consumer environment is not great, but stable. If you want to quantify that in market growth rates, the U.S. consumption across our categories has slowed a little bit over the most recent reading," the finance chief said.
The measures to cater to value-conscious consumers and higher commodity costs due to tariffs triggered a 50-basis-points fall in operating margins from a year earlier, despite the price hikes.
Still, the company's core earnings per share of $1.99 beat estimates by 9 cents as P&G banked on its fine-tuned strategy of introducing improved products at higher prices such as Tide Evo detergent and Olay premium body wash to shield margins, with sales growing in the grooming and beauty segments.
The company's operating margins exceed peers in consumer staples such as Colgate-Palmolive and Unilever, according to data compiled by LSEG.
CHINA SHINES ON PREMIUM PUSH
A P&G spokesperson said while underlying market conditions in China were still challenging, with a low level of consumer confidence, the company still managed to report double-digit growth in categories such as baby care, helped by demand for its premium Bum Bum diapers.
The results kept the company on track to deliver within its annual targets, which it retained on Friday, "in a challenging consumer and geopolitical environment," Moeller said in a statement.
A volatile spending environment globally has also forced the company to pull out of some product segments in certain markets and slash its workforce.
Schulten reiterated P&G's plans to reduce about 7,000 non-manufacturing roles over the course of the next two years.
The company was also exiting the laundry bars business in India and the Philippines, and has closed manufacturing to shift to a distribution model in Pakistan.
Quarterly revenue rose 3% to $22.39 billion, edging past estimates of $22.17 billion.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Sriraj Kalluvila)
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