Procter & Gamble Sales Gain on Outbreak Pantry Stockpiling

(Bloomberg) -- Procter & Gamble Co. posted a 6% surge in organic sales, giving a glimpse into panic-buying of toilet paper and cleaning products as the Covid-19 pandemic spread.

Demand for Charmin bath tissue and Bounty paper towels helped drive a double-digit gain in the family care division during the fiscal third quarter, though this was partially offset by the fact that people were buying products like toilet paper in cheaper bulk sizes.

Jon Moeller, chief financial officer, told reporters on a conference call that pantry loading more than offset declining sales in China. He also said he expects habits developed during the outbreak to continue.

While P&G maintained its full-year forecast for per-share profit gains, excluding some items, of 8% to 11%, Moeller said on the investor call that “we’re closer to the bottom end of the earnings per share guidance than the top end.” This could suggest that the current intensive buying patterns won’t last.

P&G reaffirmed its forecast for organic revenue growth of 4% to 5%. Core earnings per share were up 10% and beat estimates.

Grocery store shelves around the world have been depleted of items like paper towels and cleaning wipes as people stock up to comply with stay-at-home orders. Other categories where P&G saw big gains were in home care, which include its Swiffer floor cleaners, and health care, made up of over-the-counter products like Pepto Bismol.

Production Levels

There could be months of sporadic production suspension, Moeller told reporters, but retail inventory levels should to return to normal as the company rebuilds stock. U.S. production in March was 22% higher than the average over the previous 12 months, he said. The company is also taking steps to protect the health of factory workers.

The spike in demand has also led P&G’s competitors to ramp up production, Moeller said on the investor call, and could cause the company to lose market share to manufacturers that can shift unused industrial and commercial capacity toward consumer products. He did say that P&G’s e-commerce sales grew 35% in the latest quarter.

Not every segment outperformed. Year-over-year net sales of beauty products grew just 1% and grooming was flat. While P&G is gaining market share in the razor market, people are just shaving less frequently, Moeller said.

JPMorgan analyst Andrea Teixeira said that when P&G moved up its release date from April 21, most investors expected that the quarter’s results would be strong. While the earnings were better than anticipated, “organic revenue growth came in slightly below bullish expectations.”

Shares rose as much as 1.4% to $123.23 on Friday in New York. P&G has slid 2.7% this year through Thursday, well ahead of the 13% decline in the S&P 500 Index.

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