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The cost of Pampers diapers, Bounty paper towels, Charmin toilet paper and Puffs tissues are going up as parent company Procter & Gamble's profit margins get squeezed between rising competition and increased costs.
U.S. families can thank higher commodity prices, shipping expenses and foreign exchange rates for the price hikes. The cost of Pampers is going up by an average of 4 percent, the company said when it reported quarterly earnings Tuesday, raising the price of a 128-count pack of swaddlers for newborns from $34.99 at Target to about $36.39.
Bounty, Charmin and Puffs will be an average of 5 percent more expensive, the company said. It's raising prices to help offset disappointing earnings results and a 15 percent slide in profits — to $1.89 billion during the three months ended June 30 from $2.22 billion during the same quarter last year.
"These [price hikes] are aimed to address commodity costs the entire industry is experiencing," CEO David Taylor told analysts on a conference call Tuesday.
Sales in its baby business, which includes Pampers and other brands, dropped 2 percent, which the company blamed in part on market pullback in the Middle-East, Africa and Latin America. The business was also hurt by deep discounts by other retailers — a constant sore point for the consumer giant over the past few quarters.
P&G's sales for the three months ended June 30 fell short of Wall Street's expectations. Though sales for the quarter were up 3 percent compared with last year, its earnings results showed that it's continuing to lose market share on several key products and its profit margins have fallen over the last 12 months. Organic sales growth, which strips out the impact of currency and other adjustments, rose by just 1 percent when stock analysts projected a 2.3 percent gain.
Shrinking market share, though, has already forced it to cut prices on some its namesake products, like Gillette razors. Net sales of the company's shaving business dropped in the low-single digits this quarter, amid continued competition from brands like Harry's.
P&G therefore faced push-back from analysts Tuesday morning who questioned whether it even has the marketplace clout to raise prices on products like paper towels and toilet paper, as those businesses continue to battle cheaper private label options.
"I do not think that the new normal is we don't have pricing power at all," Taylor said. "...I believe superior products at competitive prices will win and I believe in time, the industry has to address input costs," he added.
The Cincinnati company's shares were shifting back and forth from positive to negative territory during early morning trading.