Procter & Gamble (P&G), the company that makes Tide detergent and Pantene shampoo, warned on Thursday that rising raw material, energy and transportation costs could reduce its annual profit by more than expected. However, strong demand for its beauty and home-care products helped the company report better-than-expected sales for the first quarter.
P&G now expects higher costs to reduce its fiscal 2027 profit by around $1.4 billion, up from its earlier estimate of $1 billion. The company raised its cost estimate as higher oil prices and other rising expenses put pressure on its business, according to Reuters.
P&G faces higher costs in 2027
P&G Chief Financial Officer Andre Schulten said during a media call that pressure from high commodity prices is expected to increase over the next two quarters. This means the company could face even higher costs in the coming months.
P&G’s results will help show whether strong spending by US consumers can continue despite another period of rising prices. Higher fuel and food costs are putting pressure on household budgets and encouraging some shoppers to choose cheaper products, according to Reuters.
Oil prices push up business costs
Rising commodity prices have become a growing concern for companies across different industries. Consumer goods companies and airlines are also facing higher expenses as oil price changes following the US war on Iran push up fuel and transportation costs.
Despite the higher cost pressure, P&G kept its fiscal 2027 financial forecasts unchanged. The company expects organic sales growth of 1% to 3% and core earnings of around $7 per share, according to Reuters.
P&G profit margins face pressure
Art Hogan, chief market strategist at B. Riley Wealth, said rising commodity prices are making it harder for companies to pass higher costs on to customers. As a result, companies may have to absorb more of these expenses themselves, reducing their profit margins.
P&G’s core operating margin fell by 80 basis points in the quarter ended September 30. This happened despite the company saving 250 basis points through productivity improvements, including efforts to make its supply chain more efficient under new CEO Shailesh Jejurikar.
Higher fuel costs raise transport expenses
Higher fuel prices have increased transportation and freight costs for companies that sell packaged consumer goods. A shortage of truck drivers on some routes has added to the pressure, a P&G spokesperson told Reuters.
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US retail diesel prices reached a record $6 per gallon in September after the US war in Iran and have remained high. These elevated prices have added to the cost of moving goods, increasing pressure on companies such as P&G.
P&G is negotiating with suppliers and improving its transportation routes to control expenses. The company also plans to continue investing in new products and product innovation while trying to manage rising costs, a company spokesperson told Reuters.
P&G sales beat market estimates
Despite these challenges, P&G reported a 4% increase in first-quarter net sales to $23.28 billion, beating analysts’ estimate of $22.80 billion. The figures were compiled by LSEG. P&G shares rose about 2% in premarket trading on Thursday following the company’s quarterly results, according to Reuters.
The company’s beauty business recorded higher sales volumes, supported by demand for more expensive hair-care products. Consumers continued spending on personal care even as higher fuel and food costs put pressure on their household budgets.
P&G’s overall sales volume increased by 2.4% in the three months through September, while prices rose by around 0.4%. This indicates that the company sold more products, while the average increase in prices remained relatively small.
Swiss consumer goods company Nestle also reported better-than-expected organic sales growth on Thursday, supported by stronger sales volumes. Its results showed that demand for products from major consumer goods companies remained steady despite cost pressures, according to Reuters.
P&G reported first-quarter core earnings of $2 per share, beating analysts’ expectations of $1.88 per share, according to Reuters. In August, P&G announced plans to buy supplements maker Thorne. The move was aimed at tapping into growing demand for health and wellness products as the company looks to expand its business in this market.