Consumption upgrade boosts Procter & Gamble Company(PG.US) performance, with organic sales growth of 3% achieving the largest increase in three quarters.

International consumer goods giant Procter & Gamble Company's organic sales exceeded market expectations due to an increase in sales volume, which is different from the previous few quarters when most of the company's growth came from inflation-driven price increases. Procter & Gamble Company's Chief Financial Officer emphasized during the earnings conference call that they saw consumers engaging in a phenomenon known as "trading up." In response to the better-than-expected performance, Procter & Gamble Company's stock price rose over 3% in pre-market trading on Wednesday. The financial report released by Procter & Gamble Company on Wednesday indicated that for the three months ending December 31 (i.e., the second quarter of the 2025 fiscal year), the company's organic sales increased by 3% year-on-year (under Non-GAAP guidelines), marking the largest increase in three quarters. This growth was mainly driven by a significant increase in sales volume, as retailers and consumers purchased more essential items like Dawn dishwashing liquid and Gillette razors to replenish shelves or meet daily needs. Prices remained unchanged compared to the same period last year. Organic sales typically refer to sales growth generated through existing business, products, or market growth, excluding sales growth from external factors such as mergers, new products, or new markets. The emphasis is on sales growth originating from the company's internal, owned businesses. Under GAAP guidelines, Procter & Gamble Company's net sales for the second quarter of the 2025 fiscal year increased by 2% year-on-year, diluted earnings per share were $1.88, a 34% increase year-on-year, and both net sales growth and earnings per share exceeded market expectations. Procter & Gamble Company reported an operating profit of $5.741 billion for the second quarter, a 30% increase year-on-year. Procter & Gamble Company's stock price rose by 14% last year, underperforming the S&P 500 index, which rose by approximately 23% in 2024. This was mainly due to inflation and inventory pressure leading to sustained weakness in sales. Investor sentiment was relatively subdued. The latest financial data from Procter & Gamble Company seems to suggest that the era of endless price increases in the US may be gradually coming to an end. As Donald Trump officially begins his "Trump 2.0 era," aiming to address the long-standing issue of sticky inflation, inflation pressures faced by businesses may further ease under the Trump government's initiatives. In an executive order issued on January 20, Trump stated that American consumers are still facing a "cost of living crisis," and fully restoring purchasing power for American families is crucial. Procter & Gamble Company's CFO, Andre Schulten, stated in an interview: "We see consumers engaging in what is known as an 'upgrade' consumer pattern. They are either buying larger-sized products or purchasing higher-value premium products." Procter & Gamble Company noted that product innovation was driving strong sales growth in its beauty and oral care business segments. The company has been developing new products that can command higher prices, including full-body deodorants and upgraded versions of razors for different body parts. Procter & Gamble Company has also been working to increase the coverage of its branded products in major retail stores to encourage consumers to make larger spontaneous purchases. Schulten remarked, "The more innovation activities we do, the more consumers can see the actual value in it. Consumers really value product performance in these categories." The fabric and home care segment under Procter & Gamble Company also drove sales growth beyond expectations. This segment is the company's largest business and includes brands like Tide and Swiffer. Additionally, the business unit producing Bounty paper towels and Charmin toilet paper achieved double-digit sales growth. Management at the company reiterated sales and profit expectations for the current fiscal year (ending June 2025). They expect overall sales to grow by 2% to 4% compared to the previous fiscal year, and organic sales to grow by 3% to 5% year-on-year. Procter & Gamble Company expects diluted net earnings per share for the 2025 fiscal year to increase by 10% to 12%. Procter & Gamble Company is one of the first consumer goods companies to report earnings in the US. Around half of the company's sales come from the North American market. Like other companies focused on essential consumer goods, market demand remains weak under inflation and inventory pressures, and Procter & Gamble Company's stock performance has lagged behind the broader market over the past year. As of January 21, the company's stock price has increased by less than 10% over the past 12 months, while the S&P 500 index has risen by 25%.