Consumers continue to absorb higher prices for Pampers diapers and Tide detergent, boosting quarterly sales and profit at Procter & Gamble Co. as businesses and households battle elevated inflation.
The company raised prices by about 10% across its various brands in the March quarter from a year earlier. It was the second straight quarter with a 10% year-over-year increase as the global company passed along higher costs and widened its profit margins.
"The U.S. consumer is holding up well," Chief Financial Officer Andre Schulten said on a Friday call with analysts.
European customers, on the other hand, are trading more into private labels on the back of price increases, Mr. Schulten said. They represented a significant drag for P&G in the quarter and will continue to be a drag on the volume of products P&G sells.
P&G, whose premium brands are often the costliest on store shelves, has been raising prices and largely outpaced competitors during the pandemic. It is encountering some pushback to its premium-product strategy .
Consumers are being more careful with the usage they make of the products they buy on the back of inflation, Mr. Schulten said.
Sales volume fell 3% in the March quarter, after slipping 6% in the December quarter. The decline was less than expected, Mr. Schulten said, adding that P&G is seeing global volume consumption stabilizing.
"Volume levels will slowly improve over time, but it won't happen overnight," Chief Executive Jon Moeller said.
P&G is among the first consumer-product companies to shed light on the consumer mood at the start of the year, with U.S. inflation moderating and recession concerns looming. P&G's latest quarterly results were better than Wall Street's expectations. Shares of P&G gained 3.5% in early Friday trading.
"Developments like these highlight that there's a lot going on beneath the headline inflation data. It also highlights that the path to a lower inflation environment won't necessarily be smooth," said Oren Klachkin, lead U.S. economist at Oxford Economics.
P&G sells household staples, such as diapers, toothpaste and toilet tissue, that people must replenish. Consumers have shifted more of their discretionary spending to services, such as restaurants, travel and streaming video, and away from goods, especially higher-priced items such as cars and appliances that are affected by higher interest rates.
The U.S. consumer-price index, a closely watched inflation gauge that measures what consumers pay for goods and services, rose 5% in March from a year earlier, the smallest gain since May 2021, the Labor Department said. In the U.K., however, March consumer prices were 10.1% higher than a year earlier, driven by energy prices.
U.S. consumers are paying lower prices for gasoline and groceries, but higher prices for shelter and airline fares, according to government data. U.S. inflation remains elevated —well above the 2.1% average in the three years before the pandemic and the Fed's 2% target. The Federal Reserve has been raising interest rates to combat inflation.
The maker of Gillette razors and SK-II skin creams on Friday said it now expects overall revenue for the fiscal year ending in June to rise 1%, after previously issuing guidance for a slight decline. The company kept its profit outlook intact as the stronger dollar offset the benefits from moderating commodity and freight costs.
"Volume trends in the U.S. and China are improving, while inflation pressures in Europe are weighing more heavily on consumption," Mr. Schulten said.
Overall for the period ended March 31, P&G reported net income of $3.42 billion, or $1.37 a share, compared with $3.37 billion, or $1.33 a share, a year earlier. Analysts recently polled by FactSet expected earnings of $1.32 a share.
Sales came in at $20.1 billion, topping Wall Street estimates for $19.3 billion.
Organic sales, which strip out the effects of foreign-exchange conversion, acquisitions and divestitures, rose 7%, increasing in six out of seven regions. The metric increased across all units, led by 9% gains in the units that produce toothpaste and laundry products.
P&G reported lower sales volume in three of its five divisions for the March period, an improvement from the December quarter, when all units sold less product.