P&G Beats, but Shoppers are Getting Choosier

With input from CNBC, Business Wire, and Reuters.

Procter & Gamble kicked off its fiscal year with a clean beat, but the story behind the numbers says shoppers are getting pickier.

For the quarter ended Sept. 30, the Tide and Pampers maker posted $22.39 billion in revenue, about $200 million ahead of expectations, and core earnings of $1.99 a share versus the $1.90 consensus. GAAP EPS landed at $1.95. Organic sales grew 2% and net sales rose 3%, yet volumes were flat — an increasingly common sign that consumers are squeezing more out of what they already have rather than buying more.

Management described the backdrop as “challenging” but stable, and the spending pattern looks very K-shaped. Households with more room in their budgets are gravitating to larger pack sizes at big-box and online retailers to lock in value, while paycheck-to-paycheck shoppers are running bottles of detergent and shampoo to the last drop and waiting longer to restock. That helps explain why beauty and grooming carried the quarter: Olay and SK-II helped beauty volumes climb 4% with sales up 6%, while Gillette and Venus nudged grooming volumes 1% higher for a 5% sales gain. On the flip side, health care and the fabric-and-home-care aisle, including brands like Tide and Swiffer, each saw volumes slip 2%. Baby, feminine and family care was essentially flat.

Margins told a mixed tale. Reported operating margin slipped 50 basis points year over year, while core operating margin held steady; gross margin was pressured by tariffs, commodity costs and reinvestment, with GAAP down 70 basis points and core down 50. One relief valve: P&G cut its estimate of this year’s tariff hit to roughly $400 million after tax from about $800 million, reflecting Canada’s decision to lift retaliatory measures. The company cautioned that political noise could always change the calculus, but for now it isn’t adjusting its view. Cash generation stayed robust — $5.4 billion from operations — and free cash flow productivity ran at 102%, giving the company room to send $3.8 billion back to shareholders through $2.55 billion in dividends and $1.25 billion of buybacks.

Guidance stays intact. Management still expects full-year reported sales growth of 1% to 5%, with organic sales in line to up 4%, and core EPS between $6.83 and $7.09. The plan is to keep leaning on product superiority, pack architecture, and marketing to defend share at the high end while sharpening value for budget-constrained households. In short, P&G delivered the beat investors wanted, but the flat volumes and margin nibble show the consumer is choosy, not carefree, and the company will have to keep earning every ring at the register.