Shop Talk

Retailers, consumers and prices

Check Out Line: P&G fights costs with price hikes

August 5, 2008

pgproducts.jpgCheck out Procter & Gamble — the maker of Crest toothpaste, Iams pet food, Pampers diapers, and Zest soap — offsetting soaring costs for oil and other commodities by raising its prices and clamping down on costs.

On Tuesday, the world’s largest consumer products maker said its fiscal fourth quarter profit jumped 33 percent to $3.02 billion, or 92 cents per share. Excluding benefits from the adjustment of tax reserves, earnings were 80 cents a share — beating analysts’ average forecast of 78 cents a share, according to Reuters Estimates.

Sales jumped 10 percent to $21.27 billion, helped by demand from emerging markets, price increases and the impact of the weaker dollar, which boosts the value of sales from countries outside the United States.

Like most consumer products makers, P&G has raised prices and cut costs to cope with rising costs for energy, resin and other raw materials. Analysts have been watching closely for signs that those price increases will drive consumers to trade down to lower-priced items — and that may not be occurring.

The company said  it is seeing some signs that consumers are shifting to lower-priced products.
 
“We do see some evidence of trade-downs,” Clayton Daley, P&G’s chief financial officer, said during a conference call with analysts.
 
He cited laundry detergent as an example of a category where consumers are trading down, but Daley also said there are still categories in which consumers will spend more for new or improved products.

P&G will likely be keeping a close eye on shopper behavior headed into its new fiscal year. The company expects commodity and energy costs to rise by $3 billion in the fiscal year begun July 1 — and said it has been increasing prices in amounts that will offset the higher costs.

Also in the basket:

Molson Coors profit tumbles on charges

ADM profit misses Street view; revenue up 78 pct
(Photo: Procter & Gamble website)

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