Procter & Gamble Company (PG) shares slipped Thursday after the consumer goods behemoth posted what its CFO candidly called the "softest quarter of the year." It's not every day you hear a Fortune 100 company admit things are rough, but here we are.
The company reported second-quarter adjusted earnings of $1.88 per share, slightly above the $1.86 analyst consensus. That's the good news. The bad news? Revenue came in at $22.208 billion, missing the Street's $22.282 billion target. Net sales inched up just 1% year over year, while organic sales went absolutely nowhere, posting a flat 0% growth.
A Mixed Bag Across Business Lines
The results weren't uniformly terrible. Beauty actually showed some life, with organic sales rising thanks to strength in Hair, Personal, and Skin Care. Innovation-led pricing, volume gains, and premium product mix helped offset geographic pressures and some volume weakness.
Grooming came in flat, as pricing gains in North America and Europe couldn't overcome volume declines. Health Care posted modest organic growth, driven by Oral and Personal Health Care products benefiting from pricing and premium mix, though volume and mix headwinds took some shine off.
Things got dicier in other segments. Fabric and Home Care were flat overall, while Baby, Feminine and Family Care actually declined, weighed down by volume weakness and tough year-over-year comparisons.
Margin Squeeze
The profit picture wasn't pretty either. The company's reported gross margin contracted by 120 basis points compared to last year. Core gross margin fell 50 basis points, or 30 basis points on a currency-neutral basis.
Operating margins took an even bigger hit. Reported operating margin dropped 200 basis points versus the prior year, while core operating margin decreased 70 basis points (80 basis points currency-neutral).
On the balance sheet front, Procter & Gamble ended the quarter with $10.825 billion in cash and equivalents, up from $9.556 billion as of June 30, 2025. Long-term debt ticked up to $25.577 billion from $24.995 billion at the end of the prior fiscal year.
The Turnaround Story
CFO Andre Schulten isn't panicking. He told analysts the company expects sales to bounce back over the next six months after this particularly weak quarter. The culprit? Some truly odd circumstances.
According to reports, unusually tough year-over-year comparisons played a major role. U.S. consumers had stockpiled essentials like toilet paper and detergent ahead of threatened port strikes, creating a tough comparison. Add in the U.S. government shutdown and a temporary pause in food aid programs, and you've got a perfect storm of temporary headwinds.
"People have not stopped washing their hair, they still buy diapers, they do their laundry, albeit at a little bit slower pace, so the market growth has certainly slowed over the last 18 to 24 months," Schulten explained. It's a fair point. Consumer staples are called staples for a reason.
What's Next
Procter & Gamble reaffirmed its fiscal 2026 adjusted earnings guidance of $6.83 to $7.09 per share, compared with the $6.97 consensus estimate. The company also maintained its sales outlook of $85.127 billion to $88.498 billion, versus the $86.823 billion analyst estimate.
However, the company did cut its GAAP earnings forecast, lowering the range to $6.58 to $6.90 from a prior $6.71 to $7.09, which now sits below the $6.91 consensus.
"We have confidence in our plans to deliver stronger results in the second-half of the fiscal year. We remain committed to our integrated growth strategy and are excited by the opportunity ahead to reinvent P&G and create the CPG company of the future, delivering long-term balanced top- and bottom-line growth and value creation," said CEO Shailesh Jejurikar.
PG shares were down 0.62% at $145.15 in premarket trading Thursday.
