P&G organic sales rise 4% in fiscal first quarter; gross margin falls 160 basis points

Procter & Gamble (NYSE: PG) said on Thursday that net sales for its fiscal 2027 first quarter rose 4% to $23.3 billion, while higher commodity costs reduced its gross margin by 160 basis points, according to its earnings release.

What happened

Organic sales, which exclude currency effects and acquisitions and divestitures, also rose 4%. P&G said volume contributed 2 percentage points and mix contributed 1 point, while pricing had a "minor positive impact." Organic sales growth by segment ranged from 2.7% in Health Care to 5.4% in Beauty, 4.5% in Grooming and 4.8% in Fabric & Home Care.

Diluted earnings per share were $1.97, up 1% from $1.95. Core EPS, which excludes certain items, was $2.00, up 1% from $1.99. Net earnings were $4.8 billion and operating cash flow was $5.8 billion. The company returned $3.9 billion to shareholders, including $2.6 billion of dividends and $1.3 billion of share repurchases.

Margins

Reported gross margin fell 160 basis points from a year earlier. Core gross margin fell 150 basis points, driven by 140 basis points of higher commodity costs, 140 basis points of product reinvestment and 50 basis points of unfavorable mix, partly offset by savings. Selling, general and administrative expense as a percentage of sales declined 90 basis points on a reported basis, which cushioned the effect on earnings.

Guidance

P&G updated its fiscal 2027 "all-in" sales growth range to 2% to 4%, reflecting the acquisition of Thorne, which it counts from October 1, 2026. It maintained its organic sales growth range of 1% to 3%. It said the organic range includes a headwind of 30 to 50 basis points from discontinued brands, product forms and go-to-market approaches.

Chairman, President and Chief Executive Officer Shailesh Jejurikar said that while the company expects "geopolitical and economic challenges," the start keeps it "on track to deliver within our guidance ranges."

What to watch

P&G's release attributes the core gross margin decline to commodity costs, product reinvestment and unfavorable mix, and it kept its full-year core EPS and cash-return guidance. The second-quarter results will show whether the commodity pressure persists.