Investors saw the stock market begin to cycle out of high-flying tech stocks into more consumer-defensive positions last November as the likelihood of a recession grew. Rampant inflation, rising gas prices, and interest rates poised to rise made stocks that had done especially well now seem as if they would retrench.
That movement away from the tech sector actually played out with individual consumers as well, who apparently stopped paying for Netflix (NFLX 1.62%) subscriptions in greater numbers and began stocking up on consumer goods once more. This led consumer products giant Procter & Gamble (PG 1.98%) to post the biggest growth in organic sales in 20 years.
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A resilient consumer shines through
The owner of well-known brands like Crest, Charmin, Febreeze, and Pampers reported that fiscal 2022 third-quarter GAAP revenue rose 7% year over year to $19.4 billion. However, once the impact of foreign exchange rates, acquisitions, and divestitures were accounted for, P&G's organic sales actually jumped 10%.
While Netflix suffered the first decline in subscribers in over 10 years, P&G's organic sales increase was the largest since it began tracking them two decades ago.
The greatest gains came from its healthcare division, where organic sales surged 16% from last year as the cold and flu season had consumers reaching for such brands as Metamucil, Pepto-Bismol, and Vicks. Organic sales in personal healthcare products unit alone rocketed 30% higher, driven in part by higher pricing.
NYSE: PG
Key Data Points
P&G CFO Andre Schulten told The Wall Street Journal, "So far, the consumer is holding up, and they clearly see the value in the superiority of our brands."
Like consumers, Procter & Gamble got hit by inflation and the rising expense of labor, transportation, and raw materials. Yet, where analysts had forecast profits of $1.29 per share on revenue of $18.7 billion, core earnings actually increased 6% to $1.33 per share.
Russia's invasion of Ukraine also hurt results as the consumer goods company ended all new capital investments in Russia and limited its sales to just basic hygiene, healthcare, and personal care items. P&G said the war took a penny per share from the current quarter's earnings, and it expects it will swipe an additional $0.04 per share in the fiscal fourth quarter.
A tailwind at its back
Management raised its full-year organic sales growth guidance to a range of 6% to 7% while reiterating its outlook for earnings to come in 6% to 9% over the $5.50 per share it posted in fiscal 2021.
Look for more stock buybacks too as it now says it will buy back over $10 billion worth of stock this year, along with $8 billion to be paid out in dividends. Procter & Gamble has raised its dividend annually for more than 60 years, making it a Dividend King.
In short, Procter & Gamble is riding high as both consumers and the markets take a more defensive position.
