P&G Raises Sales Outlook, Warns of Profit Squeeze

Key Moments

Cost Pressures Weigh on Outlook

Procter & Gamble warned that its annual profit would face a $150 million drag from increased input costs attributed to the conflict in the Middle East, even as strong demand for its higher-priced hair and skin care brands enabled the company to surpass quarterly expectations.

The maker of Tide said it expects fiscal 2026 earnings per share to land at the lower bound of its previously stated range of flat to 4% growth. The anticipated impact after tax reflects a combination of commodity-linked inflation, exposure to feedstock prices, and logistics challenges tied to the regional conflict.

According to a company spokesperson, the cost pressures reflect the move in oil prices from $60 a barrel before the conflict to about $100 now, with knock-on effects on plastics and paper used in packaging, along with higher transportation costs.

The spokesperson added that the negative impact on profit would become more significant starting in the first quarter of fiscal 2027 if the conflict persists. Procter & Gamble did not issue guidance for fiscal 2027.

Other consumer goods producers such as Nestle have also cautioned about additional expenses linked to the blockade of the Strait of Hormuz, which has contributed to oil price increases.

Premium Beauty Products Support Volume Growth

For the three months ended in March, Procter & Gamble reported volume growth in three of its five operating segments. The company pointed to successful launches of higher-priced products, including Pantene shampoo and Olay skin cream in North America and Europe, as a key driver.

Higher-income customers continued to spend on discretionary beauty and personal care products, while households under greater financial strain shifted to lower-priced alternatives to manage pressures from the higher cost of living.

“We’re increasing investments to accelerate momentum with consumers despite the challenging geopolitical and economic environment,” said Shailesh Jejurikar, who assumed the role of CEO at the beginning of the year.

Margins and Tariffs: Pressure and Potential Relief

The company reported that its gross margin on a currency-neutral basis declined by 100 basis points, marking the sixth consecutive quarter of margin compression. The deterioration was partly driven by tariff costs and continued spending on product innovation.

Procter & Gamble reiterated its outlook for an almost $400 million hit to fiscal 2026 earnings from tariffs. Approximately half of this burden stems from tariffs imposed under the International Emergency Economic Powers Act, which the U.S. Supreme Court invalidated in February.

The spokesperson said the company intends to participate in the recently launched process for seeking tariff refunds, while noting that the timing of any potential reimbursements remains unclear.

Beauty Segment Leads Organic Volume Gains

Overall organic volume across the company increased 2% in the quarter, with the beauty division posting a 5% rise. Total company pricing moved 1% higher in the same period.

French competitor L’Oreal reported robust demand for premium hair care and fragrances in North America and Europe, driving its strongest quarterly growth in two years. In contrast, Beiersdorf, the owner of Nivea, indicated it would weigh potential price hikes in the second half of the year if commodity expenses continue to climb.

Quarterly Sales Performance

Procter & Gamble’s net sales for the quarter rose 7% from the prior-year period to $21.24 billion, surpassing the $20.50 billion consensus estimate compiled by LSEG.