Procter & Gamble Increases Advertising Budget by $453 Million, Showing Positive Outlook for Media Industry
The Reason Behind P&G’s Increased Spending
In its fiscal fourth quarter that ended on June 30, P&G witnessed a significant increase in spending compared to the previous year when it cut down on expenses due to price hikes falling behind cost inflation. While the company continued to exercise restraint in spending during the beginning of the current fiscal year, it started increasing year-over-year spending again in the fiscal third quarter that ended in March.
During a media briefing on Friday, Chief Financial Officer Andre Schulten explained that P&G’s ad spending rose by $453 million in the quarter, but for the entire fiscal year, it increased by only $123 million, which roughly stayed the same as a percentage of sales.
Fourth-quarter marketing spending is often seen as an indicator of a company’s health because it suggests that there is a surplus budget available due to better-than-expected performance. However, Schulten dismissed this notion and stated that their decision to spend on advertising and media is driven by potential return on investment and influenced by the timing of new initiatives, retail events, and promotions.
Although P&G’s unit volume has experienced negative growth over the past year due to price increases, it improved in the last quarter in the U.S. with a 3% increase in volume and a 6% rise in sales. Globally, P&G’s volume was down by 1%. Looking ahead, Schulten mentioned that P&G expects a more balanced breakdown of volume, sales, and price across its categories in the next year, with projected organic sales growth of 4%, a 1% to 1.5% increase in volume, and a 1% to 1.5% increase in price.
P&G exceeded analyst expectations with earnings of $1.37 per share, beating Zack’s Investment Research estimate of $1.32. Additionally, the company’s revenue of $20.6 billion surpassed expectations, which were under $20 billion. As a result, P&G’s stock rose by 3.2% during midday trading.
