The degree of difficulty is increasing to get to those ranges.
In a market rattled by the Federal Reserve's aggressive rate hike, Procter & Gamble offered investors a rare moment of calm — its shares edging upward as fear of recession sent money flowing toward the makers of soap, razors, and dish detergent. Yet beneath that reassuring stability, the company's own executives were candid: inflation is not retreating, and the cost of making and moving everyday goods is rising faster than anticipated. P&G stands at a familiar crossroads in economic history — the trusted provider of necessities, resilient but not invincible, holding its guidance steady even as the ground beneath it shifts.
- The Federal Reserve's 75-basis-point rate hike sent markets into a recession panic, and P&G briefly became a safe harbor as investors fled toward companies selling products people cannot stop buying.
- Beneath the stock's modest gain, finance chief Andre Schulten disclosed that inflation is hitting harder than expected — upstream labor and energy costs at suppliers are accelerating, and the company now projects more than $2.5 billion in additional after-tax headwinds for fiscal 2023.
- P&G has raised prices across its portfolio and reports little consumer resistance so far, while leaning on product innovation — like a reformulated Dawn dish soap and a new Gillette razor — to justify higher price tags and hold market share.
- CEO Jon Moeller held the line on guidance, promising both sales and earnings growth in fiscal 2023, even as Schulten acknowledged the 'degree of difficulty is increasing' with each passing quarter.
- Wildcards remain: China's Covid lockdowns and a sharply slowed Russian market are creating demand disruptions that pricing strategy and product innovation cannot fully absorb.
- The company's full reckoning arrives in late July, when official annual guidance will reveal whether P&G's confidence is a well-earned fortress or a carefully managed facade.
On a Thursday when the broader stock market was reeling from the Federal Reserve's 75-basis-point rate hike, Procter & Gamble's shares rose a quiet 0.6 percent. It was a small number with a clear meaning: when recession fear grips investors, money moves toward companies selling toothpaste, soap, and dish detergent. P&G is the textbook example of that kind of resilience.
But the company's executives, speaking at a Deutsche Bank conference that same morning, were careful not to let that narrative run unchecked. Finance chief Andre Schulten acknowledged that inflation is still grinding away at the business — and worsening. This marked the third consecutive quarter P&G has raised its inflation cost estimate. The company now anticipates more than $2.5 billion in additional after-tax costs from freight, commodities, and foreign exchange in fiscal 2023. Labor and energy costs at suppliers are climbing faster than expected, and the current quarter has proven harder than the company had prepared for.
Despite this, P&G is not retreating from its targets. CEO Jon Moeller stated plainly that the company intends to grow both sales and earnings in fiscal 2023. The strategy rests on two pillars: pricing and innovation. P&G has raised prices across its brands and reports little consumer resistance. On the innovation side, Moeller pointed to products like a reformulated Dawn dish soap with an EZ-Squeeze design — launched alongside a high single-digit price increase — that earned prominent retail placement and strengthened margins for both the company and its retail partners.
Still, the picture is not without complications. China's Covid lockdowns have softened demand in ways the company did not anticipate. In Russia, a streamlined portfolio and higher prices have led to a more significant sales slowdown than expected. Schulten will deliver official full-year guidance in late July, and by then, the question P&G has been carefully managing will finally have a clearer answer: whether its confidence in navigating inflation is built on solid ground, or whether the pressure has quietly grown beyond what strategy alone can contain.
On a Thursday when most of the stock market was collapsing, Procter & Gamble's shares ticked up 0.6 percent. It was a small gain in an otherwise brutal session, but it mattered. The company that makes Gillette razors, Dawn dish soap, and Arm & Hammer baking soda was among the handful of winners in the S&P 500 that day, a beneficiary of a sudden shift in investor thinking. The Federal Reserve had just raised interest rates by 75 basis points, and Jerome Powell's comments afterward spooked the market. People were suddenly afraid of recession. When that fear takes hold, money flows toward companies whose products people buy no matter what—toothpaste, soap, detergent, breakfast cereal. These are the stocks that hold up when the economy weakens. P&G is the textbook example.
But there is a problem underneath this reassuring narrative, and P&G's own executives were not shy about naming it on Thursday morning at a Deutsche Bank conference. Inflation is still eating the company alive. Finance chief Andre Schulten laid it out plainly: yes, P&G's products continue to sell. Yes, consumers are buying. But the cost to make those products and move them to store shelves has become a grinding, relentless pressure. This is the third consecutive quarter the company has raised its estimate of how much inflation will cost it. Back in April, when P&G reported its third-quarter results, it had already lifted its full-year inflation impact forecast to $3.2 billion. Now, in June, the company was signaling that even that number might not capture the full damage.
Schulten's language was careful but unmistakable. Some raw material costs and commodity prices had begun to stabilize, he said. But labor costs at suppliers were climbing. Energy costs were climbing. The company's own direct costs were climbing. All of this was hitting harder in the current quarter than expected, and would hit even harder in fiscal 2023. The company now estimates more than $2.5 billion in additional after-tax costs from freight, commodities, and foreign exchange in the year ahead. These are not small numbers. They represent real constraints on what the company can do.
Yet P&G is not backing down from its guidance. The company still expects core earnings per share to grow between 3 and 6 percent for the full fiscal year, compared with $5.66 in the prior year. Schulten acknowledged Thursday that hitting those targets is becoming harder—the "degree of difficulty is increasing," he said, particularly on the earnings side. But the company is not lowering the bar. CEO Jon Moeller went further, saying P&G plans to grow both sales and earnings in fiscal 2023, even as inflation drags on. When an analyst asked directly if that was the plan, Moeller answered simply: "Yes."
The company believes it can pull this off through two levers. The first is pricing. P&G has raised prices on its products and plans to raise them further. Schulten said the company has "not seen broad pushback on pricing, and we don't expect that going forward." Consumers, it seems, are accepting higher prices for familiar brands. The second lever is innovation. Moeller pointed to examples like a new Gillette razor with a built-in exfoliating bar, and a reformulated Dawn dish soap called EZ-Squeeze. These innovations, Moeller argued, create a perception of superiority that makes consumers sticky and allows the company to grow market share. When P&G launched EZ-Squeeze, it upgraded formulas across the entire Dawn lineup while taking a high single-digit price increase. Retailers, seeing the strength of the product, chose to display it prominently and at full price. The innovation worked both ways: it justified the price increase to consumers and improved the retailer's margins.
But even this strategy has limits, and Schulten hinted at them. Beyond inflation, other factors are weighing on sales. China's strict Covid lockdowns have created softer market conditions than the company anticipated. In Russia, where P&G has streamlined its portfolio and raised prices, sales have slowed more significantly than expected. Some retailers even pulled orders forward into March, worried that products might not be available later. These are the kinds of disruptions that no amount of product innovation can fully offset.
So P&G sits in an uncomfortable middle ground. It is recession-resistant enough that investors are buying its stock when they get scared. But it is not immune to the pressures that are squeezing corporate America. The company can raise prices, and consumers will pay them—for now. It can innovate, and that helps. But the underlying math is getting harder. Schulten will provide official guidance in late July when the company reports its full-year results. By then, we will know whether the company's confidence in its ability to navigate inflation is justified, or whether the pressure has finally become too much.
Citas Notables
While some feedstock costs and spot rate prices have begun to stabilize, upstream labor and energy cost inflation hitting our suppliers and service providers, along with inflation in our own direct costs, are affecting us more this quarter and will have a larger impact next fiscal year.— Andre Schulten, P&G Finance Chief
We've not seen broad pushback on pricing, and we don't expect that going forward.— Andre Schulten, P&G Finance Chief
La Conversación del Hearth Otra perspectiva de la historia
Why does P&G's stock go up when the market is falling? Is it just luck?
It's not luck. When people get scared about recession, they move money into companies that sell things people need regardless of the economy. Soap, toothpaste, detergent—people buy these in good times and bad. P&G is the biggest player in that space.
But the company is being crushed by inflation. Why would that make investors feel safe?
Because P&G has something most companies don't: pricing power. When costs go up, P&G can raise prices and consumers will pay them. That's the real shield. The question is how long that lasts.
The CFO said inflation will cost them $2.5 billion next year. How does a company absorb that?
Through a combination of things. Price increases, yes. But also product innovation—making things better so people feel the price is justified. And operational efficiency. But Schulten was being honest: the difficulty is increasing. They're not sure they can keep hitting their targets.
So why didn't they lower guidance?
Because they still believe they can do it. And because lowering guidance would spook investors. But listen to what Schulten actually said: the degree of difficulty is increasing. That's a warning wrapped in confidence.
What happens if consumers start pushing back on prices?
That's the real risk. Right now, people are accepting higher prices for brands they trust. But there's a limit. If inflation keeps accelerating and wages don't keep up, people will start switching to cheaper alternatives. That's when P&G's recession shield becomes less effective.
Is the company going to be okay?
Probably, in the near term. But this is a company managing a tightrope. They're raising prices, innovating, and hoping external shocks like China's lockdowns don't get worse. If they do, all the product innovation in the world won't save them.