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P&G CEO: We are well-positioned ‘to offer value to consumers’

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Procter & Gamble CEO Jon Moeller spoke with Yahoo Finance's Brian Sozzi about earnings, the shift to private label goods, and consumers seeking value.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Tide maker PG is out with a rare earnings miss as inflation in commodities and a more cautious shopper wait on results. I caught up with P&G Chairman President and CEO Jon Moeller for an inside look into the quarter and company's outlook.

JON MOELLER: We've tried very hard to combine innovation with pricing so that we improve performance in categories where performance drives brand choice and hold or build the total value proposition that we're offering to consumers. And so far that's held up very well

BRIAN SOZZI: Do you see a shift to private label goods?

JON MOELLER: On the margin, we see private label shares up about 20 basis points, while at the same time, we're building share at higher rates than that.

BRIAN SOZZI: How do you respond? With that share shift underway, how do you respond? Do you have to develop new type of more value focused products?

JON MOELLER: We're in very good shape in that regard. We've really spent a fair amount of energy on increasing the depth of our portfolio.

So for example, you can buy Tide Power Pods at 50 cents per wash load. You can buy regular Tide Pods at 30 cents per wash load. You can buy Tide Simply Pods at 20 cents per wash load.

So offering consumers who do choose to trade down the ability to stay within our brand families. Pampers is another example. Pampers Pure is about 40 cents a diaper, all the way down to Luvs which is at about 20 cents a diaper.

So we're very well positioned to be able to offer value to consumers in the way that they define it as a reflection of their personal circumstance.

BRIAN SOZZI: Yes. So I mentioned it was a rare earnings miss for P&G. John is making the case they had a good quarter for volume for organic sales.

And they did. That is a very closely watched number. I believe core organic sales, which strips out currency, is up 7%. So that was good but reflective of the price increases that are now starting to weigh on volumes.

Volumes were down in most areas of this company's business as shoppers switched to private label goods. So it's, again, just a rare day for P&G. And you're seeing the stock act accordingly.

- Yeah. Down to flat across every single category for the organic volume. Beauty, down 2%. Grooming, down 2%. You're flat in health care. Down 1% fabric and home care. And then you were flat in baby, feminine, and family care.

So all of that, as you mentioned, that rounding out to about 1% decline across the board. And then on the net sales front too, you saw declines in beauty and grooming here.

So all of that considered for a category in beauty and grooming that typically, in the times of an economic downturn, are at least a tightening in the amount of spending.

Consumers might lean into these little luxuries. Beauty is one of them. That cup of coffee might be one of them. At this point, heck, your streaming subscription might be another one of those too.

And so with all of that considered, P&G, that's perhaps two of those categories that they may be looking closely at to see when there might be a volume rebound, but a sales rebound as well.

BRIAN SOZZI: And if there's any saving grace here, this is not the same company going into an economic downturn as the last P&G. John's been at the company for a while. He's touched every layer of this company.

So they are, in fact, streamlined. And they're still at their peak innovation game. It's just a matter of if consumers are going to go out and buy those products at higher prices.

But look, he's not alone. We've talked to a lot of executives here at Yahoo Finance about recession and inflation. Here's what they've been telling us.

- These are the things that we learn, whether it was in the financial crisis or in the early stages of the COVID pandemic or whatever, the things that we need to apply. And we're just applying those quickly to make sure, as we head into any type of recessionary environment, we are well prepared.

- Where we're seeing a little softness is under $75,000. And it's really, it's understandable. Everything's more expensive. At some point, the consumer has to pull back a little bit. And it's unfortunate that we are seeing that.

- And the regulations and codes that drive the amount of visits we have to do and the tasks we need to perform under these annual maintenance contracts have to happen whether there's a recession or not.

BRIAN SOZZI: And by and large, we've been covering all day, July has been a pretty good month for the markets, despite a lot of executives warning on their conference calls of higher costs, these things persisting, in a lot of cases, getting worse.

- But so much of the move in July has been off of, as we slam the desk, relief. You know, it's been so much--

BRIAN SOZZI: My inflationary watch.

- Yeah. In the tape, there's been this move that we've seen concerted, especially in the equity markets, as a result of it being relief that the Fed was not going to be as aggressive as we thought they might, or at least as some of the murmurs were saying and calling for 100 basis points.

Now, the Fed is still going to continue forward in this path on tightening, just not as aggressively as what it could have been at their July meeting.

- Well, as I mentioned earlier, when I was talking about Apple, it's all about expectations management. Right? So two things feed into that.

One, when you say to people over and over again, things are terrible, things are terrible, things are terrible, and then they come out less terrible, or even good, forget about less terrible, even good, then you see the stock rebound.

And rebound is the key part of that because the other piece of this is that everything has performed poorly. So coming into this earnings season, as we've talked about many times, how much of all of these outlooks was already priced in to some extent?

I mean, even, we just talked to Jason Helfstein regarding Roku. When you see a stock fall 25% in a single day, unless the thing is going to die, does the valuation get more attractive at a certain point? And so that really is the judgment that investors seem to be making right now.

BRIAN SOZZI: You know it wasn't terrible. Those bagels we got delivered to the office this morning. Those were good. Those were good. I had breakfast. It was so good, like a whole wheat bagel. Oh, it was so good.

- Scallon cream cheese.

BRIAN SOZZI: Yeah, they were good, so good.

- I'm always up for a bagel. They were very tasty.