(Bloomberg) -- Procter & Gamble Co. reported sales and profit that surpassed analysts’ estimates as higher prices bolstered the business despite a lower volume of products sold.

Organic sales rose 7% in the quarter ended Sept. 30, the maker of Tide detergent and Pampers diapers said Wednesday. Analysts had projected growth of 5.8%, according to data compiled by Bloomberg. Profit also beat estimates. In the company’s statement, Chief Executive Officer Jon Moeller said P&G is on track for the higher end of its organic sales and adjusted earnings guidance in the current fiscal year.

P&G’s results underscore shoppers’ willingness to continue spending in the face of persistent inflation and economic uncertainty. A 7% increase in prices bolstered sales, offsetting global shipment volumes that dropped 1%. In the US, volume rose by about 3%, according to Chief Financial Officer Andre Schulten. 

“The consumer continues to be remarkably resilient,” Schulten said in an interview. “The consumer continues to choose P&G brands. We are growing volume share in the US.”

P&G’s portfolio, with various prices, gives shoppers a choice “depending on their ability and willingness to spend,” he said. “We do not see broad trade down.”

On the Wednesday earnings call, Schulten said that the company’s global shipment volumes will improve through this fiscal year.

The shares rose 2.8% at 9:38 a.m. on Wednesday in New York. Through Tuesday’s close, P&G stock has dropped 3.5% this year, trailing the S&P 500 Index.

The report backs up data from the latest retail sales report, which showed robust US consumer spending in September. The labor market remains relatively strong, fueling demand, which may prompt the Federal Reserve to raise interest rates again before the end of the year. Schulten said P&G continues to see labor inflation: “Ensuring that we are competitive in the market requires us to increase pay, so we’re doing that.”

P&G, which owns the Crest toothpaste brand, was helped by strength in its oral care and health-care categories. P&G reiterated its forecast for earnings per share of between $6.25 and $6.43 this fiscal year. Analysts project $6.38.

What Bloomberg Intelligence Says:

Procter & Gamble’s consensus-beating 1Q confirms strength across most categories, with margin and earnings progress, and raises our confidence in an unchanged profit-target range for fiscal 2024 as an $800 million commodity cost tailwind helps offset consumers’ growing sensitivity to higher pricing. The company’s forex headwind is lighter than its European peers, enabling it to lower fiscal 2024 sales-growth guidance by just 100 bps.

Deborah Aitken, BI consumer and luxury analyst

Foreign-currency translation will hurt results for the Charmin toilet paper maker, with the impact this year expected to be about $1 billion after taxes. In July, the company predicted about a $400 million impact.

While the company is seeing broad sales strength across Europe, “we’re watching the European consumer a little bit more closely,” Schulten said. “Especially savings on the balance sheet of the consumer might be dwindling,” he added.  

While P&G is one of the best-positioned companies to deal with macro-economic volatility, it’s not immune from these pressures, RBC Capital Markets analyst Nik Modi said in a note. “We expect the company’s topline will come under incremental pressure due to macro dynamics in Europe and the US.”

Gross margin was 52% in the quarter, while analysts projected 49.3%. The company forecast a benefit of about $800 million this fiscal year from more favorable commodity costs. While energy costs are rising, resins and pulp are helping to offset that, Schulten said, adding that the company is watching to see if the oil markets react to the Israel-Hamas war. 

In the Middle East, P&G is focused on employee safety and providing essential products for customers and communities, he said. “Our supply chain in the Middle East and in the area generally is stable,” Schulten said. “But it really is a question of: ‘Are stores open?’” he said. “For us, there’s no disruption in ability to supply.”

Weakness prevailed for P&G in China during the quarter, with negative shipment volumes. “General outlook of the economy is certainly weighing on consumer sentiment there,” Schulten said. 

The company is predicting a return to mid-single digit growth in China, but the timing is uncertain, Schulten said during the earnings call. “When exactly that’s going to happen is really hard to predict.”

(Updates with analyst comments, shares, earnings call commentary throughout.)

©2023 Bloomberg L.P.