Procter & Gamble PG.N on Wednesday forecast slower revenue growth in fiscal 2027 after quarterly sales fell short of estimates and margins dropped under a “very challenging geopolitical and economic environment.” Sticky inflation and higher food and gas prices have forced lower-income consumers to cut back spending, but consumer goods companies, mainly in the U.S., also face the challenge of offering products at varied price points as the divide between high and low-income shoppers widens. P&G’s core earnings per share fell 3 per cent to $1.43 in the April-June period from a year ago, but edged past estimates of $1.41, as higher commodity costs and increased marketing spend dragged operating margins lower for the third straight quarter. Results in the fourth quarter, where net sales of $21.20 billion missed estimates, were impacted by trade dynamics in the U.S., and the spike in input costs, P&G CFO Andre Schulten said on a media call. The Dow component’s shares were down 2.7 per cent and have lagged the consumer staples index over the past three years. P&G’s results were in contrast to rival Unilever’s, which posted its best quarter by volumes in over a decade as it shifts focus to beauty and wellness products. The Tide maker expects fiscal 2027 total net sales to grow in the range of 1 per cent to 3 per cent, compared with 3.3 per cent growth in 2026. At the mid-point, the forecast was slightly below analysts’ average estimate of 2.7 per cent growth, according to data compiled by LSEG. “P&G is not guiding to growth meaningfully above category growth rates,” said Joe Abbott, senior research analyst at Johnson Investment Counsel, which holds P&G shares. He said specific product success stories shared by the company still fell short of driving fundamental improvements on a consolidated basis. Investors, Abbott said, were hoping that the reorganization efforts, including cutting about 7,000 non-manufacturing roles, would translate into faster market share improvements. “We’re not seeing that yet,” Abbott said. OIL PRICES CAST A SHADOW The company stuck to its expectation of a roughly $1 billion profit impact in fiscal 2027 from higher costs as a fallout of the U.S. war in Iran, including in raw material, energy and transportation. Its annual forecasts assume the war in Iran continues and oil prices remain elevated, the company said. “The uncertainty in the guidance range in our mind entirely results from Middle East and oil and underlying consumer strength,” CFO Schulten said on a post-earnings call. Consumer-facing companies such as PepsiCo PEP.O have flagged higher input costs in the back half of the year. The cost pressures come as P&G ramps up spending on marketing and product innovation to reach more customers. It has also lowered prices for some products such as tape diapers where it faced stiff price competition, executives said. P&G expects fiscal 2027 adjusted earnings per share between $6.89 and $7.11, with a midpoint slightly below estimates of $7.04 Its overall fourth-quarter organic volumes were flat, falling in three of its five reported segments, including in grooming and health care. Its pricier hair care and personal care products were once again a bright spot, with volumes rising 3 per cent in the beauty category even as it kept prices broadly unchanged in the fourth quarter. Beauty and wellness has bucked broader spending weakness as consumers continue to buy nice-to-have self-care items, giving companies the room to raise prices for new launches for products such as shampoos and skin care products. (Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Arun Koyyur)
