Consumer products giant Procter & Gamble ($PG) filed its first-quarter earnings report on Friday, giving us another chance to dive into the footnote disclosures and see whether we can intuit any warning signs about the larger economy.

Total revenue for the quarter stayed essentially flat, rising a mere 0.63 percent to $20.19 billion. Thanks to Calcbench’s Export Table History feature, however, we were also able to extract revenue numbers for each of P&G’s six operating segments and compare Q1 2024 to the year-earlier period. See Figure 1, below.

So that flatless was across virtually all segments except for fabric and home care, which rose 2.18 percent. That’s a lot of Tide and Febreeze people are buying.

OK, so revenue is up; what about earnings? Total net earnings went from $3.42 billion one year ago to $3.78 billion this quarter, a jump of 10.4 percent. Figure 2, below, shows the same segment breakdown for net earnings. 

Hmmm. Three of P&G’s five segments saw net earnings decline, although the two segments that did see earnings rise were also the two largest segments by revenue, which is good. (We are ignoring that “corporate” operating segment since it’s so small and not a real operating segment anyway.) 

So one question for analysts would be how P&G plans to improve numbers in the three segments with poor earnings growth. Collectively those three segments accounted for $7.96 billion in Q1 2024, or 39.4 percent of all revenue. Will the company raise prices on those products? Can the company even raise prices, given consumers’ sensitivity to inflation these days? 

One final item. We’ve written in this blog before about “the bullwhip effect” in the retail sector, where inventory piles up and that leads to price discounts. The effect is measured as a ratio of inventory divided into net sales; the higher the ratio, the more unsold items are piling up at shelves and warehouses, and the more likely you are to cut prices. 

Just for kicks, we measured inventory to net sales for P&G, too. True, the company isn’t a retailer, but it’s still sensitive enough to consumer purchasing habits that we thought it might be worth including. See Figure 3, below.

It looks like P&G’s ratio dropped significantly at the end of 2023 — back when people collectively realized the economy was fine, inflation was conquered, and interest rate cuts would soon be coming. Alas, those halcyon days of optimism have been supplanted by decidedly more cautious times now; perhaps that is why the inventory ratio has been ticking back up.

Then again, we also blew up Figure 3 for better visualization. Those numbers actually are fluctuating in a rather narrow range of 32 to 37 percent for the last two years. 

In other words, analysts will need more data to better intuit what’s likely to happen next. Thankfully, Calcbench has all the data you need!

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