P&G to increase prices further as commodity, freight costs bite

Oct 19 (Reuters) - Procter & Gamble Co (PG.N) said on Tuesday it will raise prices of some of its grooming, oral and skin care products in the U.S. to counter higher commodity and freight costs that are expected to take a bigger bite out of its earnings this year.

Shares of the company, which reported lower quarterly earnings, while maintaining its full-year forecasts, were down 2.2% at $139.24.

The latest price increases are in addition to the mid to high single-digit percentage price hikes earlier this year on P&G's products including Pampers diapers and Always sanitary pads. read more

The new price hikes are not being implemented broadly, but marked for specific items such as razors and in some sub-categories, CFO Andre Schulten said on a media call. U.S. retailers are aware of the new sticker prices, he added.

Global supply chains are under strain due to factors such as a resurgence of COVID-19 cases in Asia and labor shortages in the United States, leading to a surge in raw material prices that is also squeezing profits at Unilever (ULVR.L) and Reckitt Benckiser (RKT.L).

Tide laundry detergent, a product distributed by Procter & Gamble, is pictured on sale at a Ralphs grocery store in Pasadena, California January 21, 2014. REUTERS/Mario Anzuoni

On Tuesday, P&G raised its commodity and freight costs impact for this fiscal year to $2.3 billion from $1.9 billion.

Schulten blamed the price hikes on warehousing and raw material costs, adding that diesel and energy prices were also trending higher.

"We do not anticipate any easing in these commodity cost pressures, he added.

The Gillette maker said the additional expenses will shave off 90 cents from its full-year earnings per share, compared with a previous forecast of a hit of 70 cents.

P&G kept its full-year forecast for earnings per share growth in the 3% to 6% range and net sales between 2% and 4%, banking on price hikes and higher demand for premium products to help offset the increase in costs.

"We expect pricing to be a larger contributor to sales growth in coming quarters as more of our price increases become effective," Schulten said.

Reporting by Uday Sampath and Siddharth Cavale in Bengaluru; Editing by Shounak Dasgupta

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Uday has been reporting on U.S. retail and consumer companies for over five years and has written multiple analysis pieces on the space, including about a flurry of mergers in the toy industry, how an aging population benefited the golf industry and how weak sales from retailers spooked global markets. Uday has a bachelor's degree in commerce from Christ University Bangalore, India.