P&G Sales Rise 4% To $23.3 Billion, But Commodity Costs Cut Core Gross Margin 150 Basis Points
The company held its profit outlook and added the Thorne deal to its fiscal 2027 sales guidance.
Procter & Gamble reported first-quarter net sales of $23.3 billion, up 4%, while diluted earnings per share rose only 1% to $1.97, according to an 8-K filed Thursday. Higher commodity costs ate into margins, and the company left its full-year profit guidance unchanged.
What the results show
Organic sales, which strip out currency and acquisitions and divestitures, also rose 4%. Volume added 2%, favorable mix added 1%, and pricing had a minor positive effect, the company said.
Diluted EPS was $1.97 versus $1.95 a year earlier. Core EPS, which excludes incremental restructuring charges, was $2.00 versus $1.99. The company said higher operating costs offset part of the sales gain. Currency-neutral core EPS was unchanged.
Core gross margin fell 150 basis points (1.5 percentage points). Higher commodity costs took 140 basis points, product reinvestments another 140, unfavorable mix 50, and rounding and other items 10. Gross productivity savings gave back 120, lower tariff costs and recoveries 50, and increased pricing 20. Core operating margin fell 80 basis points.
Operating cash flow was $5.8 billion and net earnings $4.8 billion, for free cash flow productivity of 93%. P&G returned $3.9 billion to shareholders, split between $2.6 billion of dividends and $1.3 billion of buybacks.
What it changes for guidance
All-in sales growth guidance for fiscal 2027 is now 2% to 4%, reflecting the Thorne acquisition as of October 1, 2026. Organic sales growth guidance stays at 1% to 3%.
Core EPS growth guidance is maintained at in-line to 3% from fiscal 2026 core EPS of $6.89, or $6.89 to $7.11 per share. P&G now expects a commodity cost headwind of about $1.4 billion after tax, driven by raw materials, energy and transportation. Added to higher interest expense, lower non-operating income and foreign exchange, the company puts the combined hit at $0.79 per share.
Chairman, President and CEO Shailesh Jejurikar said the start "keeps us on track to deliver within our guidance ranges."
What to watch
P&G continues to expect free cash flow productivity of 85% to 90%. It expects to pay over $10 billion in dividends and repurchase about $5 billion of shares in fiscal 2027, and Thorne will now flow into reported sales.
In market data, P&G shares closed at $156.84 on Wednesday, down 1.56%, before the results came out.
The company expects to incur the remainder of its roughly $2 billion restructuring plan in fiscal 2027, which it excludes from core earnings.
Sources
- 8-K Filing — PROCTER & GAMBLE Co (PG) — SEC EDGAR
- Exhibit fy2627q1jas8-kexhibit991.htm — PROCTER & GAMBLE Co 8-K exhibit — SEC EDGAR
- Procter & Gamble Gears Up For Q1 Print; Here Are The Recent Forecast Changes From Wall Street's Most Accurate Analysts — benzinga.com
- P&G Q1 earnings on deck: Eyes on sales growth (PG:NYSE) | Seeking Alpha — seekingalpha.com
- How Investors May Respond To P&G Stock Before Quarterly Results — Yahoo Finance
- P&G Announces Fiscal Year 2027 First Quarter Results — businesswire.com
