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Procter & Gamble (PG, Financials) on Thursday reported third-quarter earnings that narrowly topped analyst estimates but missed on revenue, prompting the company to revise its full-year outlook downward amid rising costs tied to tariffs and shifting consumer behavior.
The maker of household brands like Tide, Gillette and Pampers said net income for the quarter was $3.77 billion, or $1.54 per share, compared to $3.75 billion, or $1.52 per share, a year earlier. Analysts surveyed by LSEG expected earnings of $1.53 per share. Revenue declined 2% year over year to $19.78 billion, falling short of the $20.11 billion expected.
Company executives said the results reflect a softening demand environment, particularly in the last two months of the quarter, as consumers became more cautious and gravitated toward discount retailers and larger pack sizes. Volume, which excludes the impact of pricing, fell 1% across the board.
In a CNBC interview, Chief Executive Jon Moeller said the company would likely raise prices starting in the next fiscal year, citing the inflationary impact of the Trump administration's new reciprocal tariffs. These duties are expected to rise in July following a temporary suspension. Chief Financial Officer Andre Schulten estimated the annual cost impact of tariffs would range between $1 billion and $1.5 billion.
In response, the company plans to adjust its sourcing strategies and product formulations while continuing to invest in brand development. The updated full-year guidance now calls for flat revenue growth, down from a prior forecast of 2% to 4%. Core earnings per share are expected to come in between $6.72 and $6.82, compared to a previously forecast range of $6.91 to $7.05.
By segment, baby, feminine and family care saw the steepest drop in volume at 2%, while health-care and fabric and home-care segments each declined by 1%. The company's grooming division, which includes Gillette and Venus products, was the only unit to post volume growth, increasing 1%.
Organic sales in Greater China declined 2%, largely due to weakened demand despite double-digit growth in its SK-II skincare brand. The company said China represents just over 10% of its imports and remains exposed to ongoing trade tensions with the United States.
P&G shares fell more than 4% following the announcement.
This article first appeared on GuruFocus.