Expensive Decision for Procter & Gamble Now Confirmed
Procter & Gamble (P&G) has released its outlook for the 2026 fiscal year, revealing a potential 6% drag on core earnings per share (EPS) growth due to tariffs, weak consumer sentiment, leadership change, and other factors. Despite this, the company projects a modest EPS growth and ongoing organic sales increases in a challenging macroeconomic backdrop.
In the full year 2025, P&G reported stable revenue of $84.3 billion. The company has already implemented mid-single-digit price increases on around a quarter of its portfolio in the U.S. and Canada to counteract rising costs.
Tariffs are driving U.S. price hikes, putting pressure on margins and profitability. Weak consumer sentiment, consistent with broader U.S. economic trends, is leading to cautious spending, which could limit sales growth.
P&G has announced a significant restructuring plan involving cutting 7,000 jobs (a 15% workforce reduction) and divesting certain brands/categories to focus on core, high-performing daily-use products. The company plans to continue its integrated strategy focusing on performance, productivity, and agility to deliver sustainable, balanced growth.
The new CEO, Shailesh Jejurikar, will take over amidst this challenging period. Jejurikar, who has been with the company since 1989 and is seen as the architect of the current efficiency program, is expected to lead the company without any strategic shift, according to analyst Erin Lash (Morningstar).
P&G anticipates that new U.S. tariffs, rising commodity prices, higher interest rates, and a less favorable tax rate will impact the 2026 result by around $1 billion before taxes. Consumers are more focused on discounts, shopping more selectively, and opting for smaller pack sizes.
Despite the challenges, P&G expects organic sales growth of between zero and four percent for the ongoing fiscal year, averaging two percent. The 2026 investment ratio is at the industry average of four to five percent.
P&G reported a revenue of $20.89 billion in the fourth quarter, a two percent increase. The stock market reaction to the leadership change was muted, with the stock up slightly in pre-market trading at just under $160. However, year-to-date, there is a loss of over six percent in the stock.
Analysts such as JPMorgan and Evercore have recently downgraded their recommendations due to weak online shares and a lack of catalysts. CEO Jon Moeller, who has been in office since 2021, will step down on January 1, 2026, and join the board of directors. Moeller comments on his departure, "Rarely has the headwind been so strong - but equally rare are our opportunities so promising."
In the premium segment, price sensitivity is growing, with even high-income consumers saving more. P&G is focusing on increased efficiency, targeted product innovations, and selective price increases to counter the negative effects. The company is expected to continue its efforts to navigate the challenging economic environment and deliver sustainable growth for its shareholders.
References: [1] Procter & Gamble Company (2025). Procter & Gamble Q4 Earnings Call Transcript. Seeking Alpha. Retrieved from https://seekingalpha.com/article/4427729-procter-gamble-pg-q4-2025-earnings-call-transcript [2] Procter & Gamble Company (2025). Procter & Gamble Q4 Earnings Release. Yahoo Finance. Retrieved from https://finance.yahoo.com/news/procter-gamble-pg-q4-2025-earnings-164600599.html [3] Procter & Gamble Company (2025). Procter & Gamble Q4 Earnings Preview. Yahoo Finance. Retrieved from https://finance.yahoo.com/news/procter-gamble-pg-q4-2025-earnings-201200964.html [4] Procter & Gamble Company (2025). Procter & Gamble Q4 Earnings Whisper. Yahoo Finance. Retrieved from https://finance.yahoo.com/news/procter-gamble-pg-q4-2025-earnings-whisper-201426409.html
In the process of navigating the challenging economic environment, Procter & Gamble (P&G) is aiming to focus on performance, productivity, and agility, with the objective of delivering sustainable, balanced growth. Despite the predicted 6% drag on core earnings per share (EPS) growth due to various factors, P&G plans to continue its integrated strategy in finance, investing in its business for future growth.
