P&G starts fiscal year strong, but soaring dollar will sting
Procter & Gamble exceeded $20 billion in sales during the fiscal first quarter but citing the strong dollar, it said Wednesday that it expects to post its first annual sales decline since 2017.
U.S companies that do a lot of business overseas are getting hammered by a surge in the value of the dollar because they must convert overseas sales back into dollars before reporting their financial performances in the U.S. Not only does a strong dollar decrease the value of those sales, it also gives foreign competitors a price edge in the United States.
That story has played out repeatedly this week as earnings season kicks into high gear. Hasbro and Johnson & Johnson were among the U.S. multinationals registered some currency exchange pain.
The U.S. currency — now worth more than a euro for the first time in 20 years — is hitting U.S. companies almost every company that does lot of business overseas, whether they make toy cars or real ones. Tesla posts earnings after the bell Wednesday.
The dollar is up 18% this year and last month hit a 20-year high against a basket of key global currencies, according to the benchmark ICE U.S. Dollar Index.
Procter & Gamble Inc. expects sales for all of 2023 to fall between 1% and 3% compared with this year, with foreign exchange a six-percentage point headwind to sales growth. The company had previously projected sales to rise as much as 2%.
The company stuck to expectations for 2023 earnings per share growth of flat to up 4%, but told investors Wednesday that because of currency exchange rates, it’s likely to be at the lower end of that range.
Procter & Gamble earned $3.94 billion, or $1.57 per share, in the quarter, or about 2 cents better than expected, according to a survey of industry analysts surveyed by Zacks Investment Research.
Quarterly revenue at the Cincinnati company edged up 1% to $20.61 billion despite a 6% impact on sales due to the dollar.
Shares rose about 2% at the opening bell.
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