Executive summary
Procter & Gamble reported fiscal 2026 fourth-quarter and full-year earnings on Wednesday, July 29. Quarterly results were mixed, beating consensus estimates on core earnings per share (EPS) ($1.43 vs. $1.41) but falling short on revenue ($21.2 billion vs. $21.4 billion). Reported sales increased +2% while organic sales were flat. Core EPS was down -3% versus the prior year. Full fiscal year reported sales were $87.0 billion, up +3%, with organic sales up 1%. Organic sales growth was relatively flat to negative across business segments, except for Beauty, which increased by 4%. The Baby, Feminine & Family Care segment was the largest drag on organic sales growth, declining -2%. Market reaction was moderately negative, with shares opening at $141.38 (5% below the previous day’s close), but largely recovered to close at $146.10 on a down day for all major indices. In summary, while Q4 results were less than stellar, P&G delivered full fiscal year sales and earnings results within guidance ranges and above estimates on core EPS. Management highlighted the challenging and volatile operating environment, emphasizing the emergence of progress and momentum in the second half of the fiscal year.
What we like
Management is accelerating investment in brand-building and innovation, demonstrating its confidence that its strategy of superior product performance, packaging and brand communication is the right path to long-term growth. Significant cost savings from productivity programs are being used to fund the investments. To illustrate, Q4 saw core selling, general & administrative expenses (as % of sales) increase 130 basis points, comprised of 410 basis points of reinvestments, primarily in marketing, and 20 basis points of other miscellaneous items, partially offset by 300 basis points of productivity savings.
We are also cautiously optimistic about market share trends. P&G was losing market share in the first half of fiscal 2026. That started to reverse in the second half, resulting in P&G holding global market share for the year. We also like what could be the start of a sustained turnaround for P&G’s business in Greater China, which registered +4% organic sales growth for the year. Enterprise markets also grew organic sales +4%, led by Latin America with +6% organic sales growth.
What bears watching
The conflict in the Middle East, now into its sixth month, continues to cause higher crude oil and gasoline prices, representing margin pressure for P&G and inflationary pressure in many of the world’s economies. The pressure on consumer budgets, particularly for lower- to middle-income households, may now be starting to impact P&G sales growth. During the earnings call, CFO Andre Schulten commented, “We (also) saw improvement in market share in the second half, despite some softening in underlying market growth as inflation increased.”
P&G reported that it grew or held market share in 26 of its top 50 category/country combinations. This represents the lowest figure for this metric since 2018. The previously noted second half improvement in market share trend is a new development, so it is to be seen whether this truly represents an inflection point and sustained improvement going forward.
Bottom line
Fiscal 2026 was a challenging year for P&G given the volatile operating environment. Despite the challenges, the company was able to deliver sales and earnings growth within its initial guidance ranges, increase the dividend for the 70th consecutive year, and return more than $15 billion to shareholders via dividend payments and share repurchases. Management is focused on “creating the CPG (consumer packaged goods) company of the future” and is actively deploying plans and investing resources to do this, fueled by aggressive productivity improvement programs, guided by its integrated growth strategy, and with a renewed focus on deepening connection with consumers.
In sports parlance, we could look at fiscal 2026 as a “rebuilding year” for P&G. The big question is whether investors will see the payoff on these strategic investments and when.