P&G's Q4 Earnings Disappoint Amid Weak Demand and Rising Costs; Full-Year Outlook Also Gloomy

U.S. consumer goods giant Procter & Gamble (P&G) (PG-US) released its fiscal 2026 fourth-quarter results (ended June 30) on Wednesday (29th), before U.S. market open. The company's quarterly profit declined year-on-year, and revenue missed market expectations, weighed down by rising costs and weak consumer demand. Persistently high food and gasoline prices, along with ongoing inflationary pressures, have forced low-income consumers to cut spending and shift toward lower-priced alternatives.

P&G also delivered a cautious financial outlook for fiscal 2027, dragging its stock down approximately 3% in pre-market trading.

P&G's Q4 revenue rose 1.5% year-on-year to $21.2 billion, falling short of analysts' forecast of $21.38 billion. Currency fluctuations contributed to the growth. Excluding the impact of currency, acquisitions, and divestitures, revenue was flat year-on-year, with overall unit volume also unchanged. Three of the company's five core business segments reported volume declines.

The beauty segment emerged as one of the few bright spots. Despite largely stable pricing in Q4, demand for premium hair and personal care products remained strong, driving a 3% increase in beauty segment volume. In contrast, healthcare and baby, feminine, and family care segments saw revenue declines when excluding currency and business adjustments. Demand for shaving and oral care products also remained uneven.

P&G's net income dropped from $3.62 billion in the year-ago quarter to $3.04 billion, with earnings per share (EPS) falling from $1.48 to $1.26. The decline was primarily due to higher selling, general, and administrative expenses, which offset modest revenue growth. Adjusted EPS came in at $1.43, slightly above the market expectation of $1.41.

Profitability continued to face pressure. P&G's core operating margin declined by 130 basis points, marking the third consecutive quarter of decline. This reflects increased marketing investments and rising raw material, energy, and transportation costs driven by the Middle East conflict. P&G maintained its previous estimate that these cost increases could reduce fiscal 2027 earnings by approximately $1 billion. The company stated it remains difficult to determine how long high costs will persist or the future volatility of prices.

For fiscal 2027, P&G forecasts net revenue growth of 1% to 3%, below the 3.3% growth in fiscal 2026 and slightly below the market's midpoint expectation of 2.7%. Full-year adjusted EPS is projected between $6.89 and $7.11, implying flat to 3% growth, with a midpoint of around $7.00, slightly below market expectations.

Shailesh Jejurikar, who took over as CEO in January this year, said fiscal 2026 was a 'foundation-building year,' noting that geopolitical and economic conditions have been highly challenging and are expected to remain volatile. P&G also announced that Jejurikar will assume the role of Chairman starting August 1, while current Executive Chairman and former CEO Jon Moeller will retire on August 14.