Procter & Gamble Warns of Higher Costs and Slower Sales

The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ’s Jon Hilsenrath looks at what consumers can expect next.

Procter & Gamble Co. gave a somber outlook for the year ahead, predicting slower sales and historically high costs for raw materials and transportation as inflation picks up and the global health crisis continues.

The maker of Pampers diapers and Tide detergent posted sales gains in almost every business unit in the most recent quarter, though growth slowed and profit margins tightened as the company spent more to make and deliver its products.

The results come a day after P&G announced that David Taylor would step down in November as chief executive after a six-year run. He will be replaced by top deputy Jon Moeller, who has been P&G’s chief operating officer for the past two years and was previously its finance chief.

“Commodities and cost pressure have escalated significantly,” Mr. Taylor said in an interview. “You have a tough external environment and a pandemic that’s raging; many parts of the world are at the worst they’ve ever been.”

P&G expects to take a $1.9 billion after-tax hit on higher freight and commodity costs and predicts sales growth to slow by half for the fiscal year that began July 1. Rival Unilever PLC said last week it was grappling with higher costs for ingredients, packaging and transportation, which would likely lower its full-year profitability.