P&G CEO talks earnings, inflation, product pricing, and supply chains

Procter & Gamble CEO Jon Moeller joins Yahoo Finance Live to discuss company earnings, product pricing, inflation, supply chain restrictions, and the outlook for the economy.

Video transcript

BRIAN SOZZI: Consumer products giant Procter & Gamble is out with better than expected earnings, but the company is again issuing a dire warning on inflation. I caught up with P&G CEO John Moeller earlier on this morning.

JON MOELLER: Nor do I. It was a great quarter, 10% top-line growth, the highest growth rate in at least the last 20 years. And importantly, that growth is very broad-based. Our personal health care business grew over 30%, fabric care in the low teens, baby and feminine care double-digits, home care and grooming, high singles, on and on.

And if you look at it geographically, our focus markets, we grew 9%, in our enterprise markets, we grew 12%. We built share in 36 of our 50 top category country combinations. And that carried through to the bottom line, enabling us to raise our dividend by 5%.

All of those results allowed us to maintain, despite a very significant inflationary environment from a cost standpoint, our bottom line guidance and to raise our top-line guidance from a range of 4 to 5 to a range of 6 to 7. So things are going well with the consumers that we serve.

BRIAN SOZZI: Just given-- and I want to talk about inflation in just a second-- but they do appear to be going well. Does that surprise you just given everything coming, really, to attack the wallets of consumers-- gas inflation, home price inflation, you name it-- consumers are dealing with a lot of headwinds right now.

JON MOELLER: Yeah. That's definitely true and will be increasingly true as we go through the summer. We're much better positioned to deal with that in this cycle, though, than we were last cycle. We have a deeper ladder of offerings, meaning we have more offerings at lower price points than we did last cycle.

Tide Simply, for example, was created and commercialized since the last cycle. We have dramatically-- we've invested and dramatically improved the performance of products, what we refer to as superiority in categories where performance drives brand choice. And we've focused our portfolio significantly on those categories-- daily use categories where performance drives brand choice. So there will be some challenges for ourselves, for consumers. But we're prepared to step up to that.

BRIAN SOZZI: Is there anything you're seeing in your numbers, John, that would suggest we are nearing some form of slowdown or recession over the next 12 to 24 months?

JON MOELLER: No. Within the industry sector that we serve, we don't see that.

BRIAN SOZZI: Have you been able to-- I know you've pushed through some recent price increases, is there a new-- a next level of price increases coming just given the inflation you guys are seeing?

JON MOELLER: So we've taken pricing on the range of mid-single digits across the world. We've coupled that pricing with innovation so that the total value proposition that we're offering to consumers is a better one, a stronger one. There will likely be some more pricing to come just based on further commodity cost increases that have occurred in the last couple of months.

BRIAN SOZZI: Yeah, the street has given you high marks, Jon, for starting to move into lower price point products. I know the team has been focused on real premium products over the past year. Do you see consumers trading down now from those premium products to the lower priced ones because of higher prices?

JON MOELLER: We don't yet. So a couple of examples-- if you look at private label market shares as a proxy for trade down, they're down in the US past three, six, 12 months. They're down in Europe past three, six, 12 months. If we look at it from a channel standpoint, our biggest share gains from a customer standpoint in the US are at Family Dollar, where we're up 4.5 share points.

So there's nothing in aggregate that points to significant trade-down. But as you mentioned, if it were to occur, we're much better positioned. We have products at lower price points and lower pack sizes from an affordability standpoint that allow consumers to continue to benefit from our products even in a tough time.

BRIAN SOZZI: P&G is out, Jon, raising its outlook again for higher inflation. Is this the peak-- is this the worst you see it getting in terms of inflation?

JON MOELLER: I sure hope so. If you look year-to-year across commodities, transportation, and then throw in the impacts of foreign exchange, that's a $3.2 billion after tax--

BRIAN SOZZI: That's huge. I mean, that's a massive hit. That is a huge headwind.

JON MOELLER: Indeed. But through the top-line strength, which we're committed to continue, and through our strong productivity efforts, we've been able to more than offset that headwind and still grow earnings year-on-year.

BRIAN SOZZI: I'm still dealing, Jon-- I go to a lot of the big box stores, not so much the dollar stores anymore-- but I still see out of stocks on the shelves. Are their products you still can't get on the shelves to meet consumer demand due to various supply chain issues?

JON MOELLER: We are still not fully supplying demand, particularly in the US, which is a big opportunity that we should be able to take advantage of over the next six months as we correct that situation. We're investing heavily in additional capacity and also restructuring the way that we distribute products that allows us to do it more efficiently and effectively, and hopefully can equalize supply and demand over the next little bit here.

BRIAN SOZZI: John, I have to ask you about the decision to, I guess, switch focus on Russia. Now, my understanding is that this was made very quickly. Can you take us inside your management team's thinking? Because I would say the old P&G maybe would have not moved as quickly as it has. But under your leadership, this was a pretty swift decision.

JON MOELLER: Under David Taylor's leadership, we changed our organization structure to make it much more efficient, agile, and accountable. And that's allowed us to make faster decisions across the board. If there's an important decision that needs to be made, that can be done anywhere around the world in 24 hours.

BRIAN SOZZI: So do you see yourself eventually getting back into Russia? And what do you need to see for that to become a market of focus for you again?

JON MOELLER: So I apologize. We don't comment on individual markets. We'd love to be able to continue to serve Russian consumers. We care deeply about our employees in Russia and we're doing everything we can to optimize a restructured situation.

We dramatically reduced our portfolio of product offerings to focus on daily essentials-- health, hygiene, personal cleansing. We've discontinued all capital spending. And we've suspended marketing, advertising, and promotion spending. We're dealing with on a daily basis an evolving set of realities on the ground that will inform future actions and choices.