Barclays says consumer goods firms absorb rising costs, hold profit outlooks

Investing.com -- Consumer goods companies are managing to absorb increased input costs while maintaining their profit forecasts, according to a Barclays analysis of first-quarter earnings reports.

The investment bank's review of large-cap household and personal care companies and beverage makers found that most firms held their existing profit outlooks despite rising cost pressures. Few companies issued negative guidance revisions following their quarterly reports.

Many household and personal care companies said they expect to absorb incremental cost pressures now built into their forecasts. Beverage companies provided less specific cost quantification but conveyed confidence about the current year's outlook.

Barclays analysts noted that oil prices reached approximately $110 per barrel in May, similar to levels seen in 2022. However, companies may have more hedging or contractual buying arrangements in place compared to that earlier period, either due to pandemic-related timing or changed risk management approaches following the previous inflationary period.

On consumer demand, companies described the U.S. consumer as resilient among higher income groups, while emphasizing the need to deliver value for lower income consumers. The European consumer backdrop appeared more pressured, according to company reports.

Companies outlined mitigation strategies including hedging, productivity improvements and pricing adjustments as a last resort. Barclays noted that assumptions vary across companies regarding resolution timelines and future oil prices.

The investment bank cautioned that plans could change if macroeconomic conditions develop differently than companies' current base case assumptions.

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