Household Products

P&G is in a 'much better place' to withstand the next recession, CFO Jon Moeller says

Key Points
  • Procter & Gamble posts another quarter of exceptional results on Tuesday, beating analysts' expectations on the top and bottom line.
  • Analysts ask CFO Jon Moeller if its growth is sustainable should there be an economic downturn.
  • Moeller points to the categories it's in, product innovation and cheaper options for some of its products as reasons it will be able to withstand a slowdown.
P&G CFO Jon Moeller weighs in on quarterly earnings beat
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P&G CFO Jon Moeller weighs in on quarterly earnings beat

Procter & Gamble CFO Jon Moeller doesn't see any signs the U.S. consumer is slowing, but that can change "pretty quickly," he acknowledged in the company's fiscal first-quarter earnings call.

If it does, the company is ready.

"We are better positioned for several reasons to deal with [an economic] downturn than we were in 2007," he said.

The company posted another quarter of exceptional results on Tuesday, beating analysts' expectations on the top and bottom line. But with the talk of a potential economic slowdown growing louder, Moeller defended the sustainability of its recent momentum in the event of a U.S. recession. P&G does more than 40% of its sales in the U.S., according to FactSet.

Geopolitical tension, including President Donald Trump's trade war with China, led the International Monetary Fund to lower its forecast of global growth to the lowest since the 2008-2009 financial crisis. Recently, Mark Zandi, chief economist of Moody's Analytics, said the risk of a global recession in the next 12-18 months was "awfully high."

Moeller pointed to the categories that the owner of Tide, Pantene and Tampax has chosen to focus on, which he said are essential no matter what the economic landscape.

"We don't see consumers stopping laundry or shampooing or conditioning or feminine protection during a recession," he said.

He acknowledged the company does risk consumers trading in its products for cheaper options, particularly as retailers including Kroger and Costco put their might behind investing in cheaper store-branded products.

To manage that risk, P&G has focused on innovation, in hopes of creating a superior product worth the investment, said Moeller. While the stated superiority of P&G's products such as its Tide detergent is "no guarantee" the consumer won't trade down to cheaper options, it does increase the company's "resilience," he said.

P&G has also been working on creating more affordable packaging of its products.

"We'll use tools like value messaging, pack sizes, performance messaging to ensure that if there is a downturn, we are in the best position for a consumer in a pinch," he said.

Shares of P&G are up nearly 30% year to date, giving it a market capitalization of $298 billion. On Tuesday, shares were trading up more than 3% in the wake of the upbeat earnings report and financial outlook.

Correction: This article has been corrected to reflect that Procter & Gamble CFO Jon Moeller, not CEO David Taylor, spoke in the company's earnings call.