P&G flags bigger hit to annual profit from higher commodity costs, beats revenue estimates

P&G Sees Bigger Profit Hit in 2027 from Commodity Costs Despite Sales Growth

P&G Faces Rising Costs Amidst Strong Sales Performance

By Juveria Tabassum and Alexander Marrow

Profit Impact from Commodity Costs

Oct 22 (Reuters) - Procter & Gamble on Thursday warned of a profit hit from higher commodity-related costs this year, even as first-quarter sales beat Wall Street estimates, helped by demand for its beauty and home-care products.

The Pantene shampoo maker now expects higher raw material, energy and transportation costs to reduce fiscal 2027 profit by about $1.4 billion, up from its previous estimate of $1 billion.

Operating Margins and Cost Pressures

Core operating margin fell 80 basis points in the quarter ended September 30, despite 250 basis points of productivity savings, including efforts to make its supply chain more efficient.

Higher fuel prices have pushed up transportation and freight costs for packaged-goods companies, while a shortage of truck drivers on some routes has added to the pressure, a P&G spokesperson told Reuters.

Impact of Fuel Prices

US retail diesel prices, which have risen following the U.S. war in Iran, hit a record $6 a gallon in September and have remained elevated.

Cost Management Strategies

P&G is investing in product innovation while negotiating with suppliers and optimizing transportation routes to contain costs, the spokesperson said.

Sales Growth and Market Performance

The Tide maker's first-quarter net sales, however, rose 4% to $23.28 billion, beating analysts' estimates of $22.80 billion, according to data compiled by LSEG.

It shares were up about 2% in premarket trading.

Business Segment Performance

Volumes rose in its beauty business, helped by demand for higher-priced hair-care products as consumers continued to spend on self-care despite pressure on household budgets from higher fuel and food costs.

In August, P&G said it would buy supplements maker Thorne as it sought to tap growing demand for health and wellness products.

Overall Volume and Price Changes

Overall volumes rose 2.4%, while prices increased about 0.4% in the three months through September.

Industry Context and Outlook

Swiss packaged-goods maker Nestle also topped estimates for organic sales growth on Thursday, helped by stronger volumes.

P&G maintained its fiscal 2027 forecasts for organic sales growth of 1% to 3% and core earnings of roughly $7 per share.

P&G reported first-quarter core earnings of $2 per share, above analysts' estimate of $1.88.

(Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Anil D'Silva)