Consumer products behemoth Proctor & Gamble (NYSE: PG) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 2.1% year on year to $19.78 billion. Its non-GAAP profit of $1.54 per share was 0.9% above analysts’ consensus estimates.
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Procter & Gamble (PG) Q1 CY2025 Highlights:
- Revenue: $19.78 billion vs analyst estimates of $20.15 billion (2.1% year-on-year decline, 1.9% miss)
- Adjusted EPS: $1.54 vs analyst estimates of $1.53 (0.9% beat)
- Adjusted EBITDA: $5.49 billion vs analyst estimates of $5.4 billion (27.8% margin, 1.6% beat)
- Management lowered its full-year Adjusted EPS guidance to $6.77 at the midpoint, a 3% decrease
- Operating Margin: 24.1%, up from 22.6% in the same quarter last year
- Free Cash Flow Margin: 14.4%, down from 16.3% in the same quarter last year
- Organic Revenue was flat year on year (3% in the same quarter last year)
- Sales Volumes fell 1% year on year (0% in the same quarter last year)
- Market Capitalization: $369.6 billion
StockStory’s Take
Procter & Gamble’s latest quarter was shaped by shifting consumer behaviors and ongoing retail volatility, particularly in the United States and Europe. Management attributed the revenue shortfall to weaker consumer demand, inventory reductions at retailers, and increased value-seeking behavior among shoppers. CFO Andre Schulten noted, “The consumer has been hit with a lot, and that’s a lot to process. What we’re seeing is a logical response from the consumer to pause,” highlighting softness in retail traffic and a shift to value-oriented channels like big box and club stores.
Turning to the company’s forward outlook, executives cited persistent uncertainty from input costs, currency fluctuations, and the evolving tariff landscape as key factors behind the reduced full-year profit guidance. Schulten explained that productivity initiatives, innovation, and selective pricing would be crucial levers to offset higher costs, but cautioned, “It’s unclear how long this period of consumer softness will last.” Management emphasized a commitment to continued investment in brands and innovation, even as short-term headwinds remain.
Key Insights from Management’s Remarks
Procter & Gamble’s management emphasized the impact of consumer and retail volatility on near-term results, while doubling down on brand investment and innovation as long-term growth drivers.
• Consumer demand slowdown: Management observed lower consumption levels in both the U.S. and Europe, attributing this to economic uncertainty, weaker consumer confidence, and market volatility affecting shoppers’ willingness to spend.
• Retail inventory reductions: Executives noted that retailers reduced inventories during the quarter, particularly in the U.S., which compounded the revenue impact. The company returned to shipment levels more aligned with consumer offtake by March, but does not expect the lost inventory to recover in the near term.
• Channel and value shifts: There was a continued shift in consumer purchasing toward large-format retailers, online channels, and club stores, as shoppers sought better value. Management reported that Procter & Gamble’s broad product portfolio and range of price points helped maintain or grow market share despite this trend.
• Innovation pipeline maintained: The company launched new products across oral care, fabric care, grooming, and home care. Notable launches included Crest 3D White Deep Stain Remover, Oral-B iO2 toothbrush, and Tide Evo’s recyclable packaging. Management stressed that innovation remains a strategic priority, supporting both premium and value tiers.
• Tariff and cost headwinds: Executives highlighted tariffs as a significant new cost pressure, estimating a $1 to $1.5 billion annualized impact before tax. Management expects to use productivity gains, sourcing changes, and pricing actions to mitigate some of these effects, but noted the complexity of implementation across brands and regions.
Drivers of Future Performance
Looking ahead, Procter & Gamble’s management expects volatile consumer demand, global cost pressures, and new tariffs to weigh on near-term results, while emphasizing continued investment in brand superiority and operational efficiency as essential for long-term growth.
• Mitigating tariff costs: Management plans to address tariff impacts through increased productivity, supply chain adjustments, and selective price increases—though the impact will vary by brand and region depending on exposure.
• Consumer value focus: With persistent consumer caution and channel shifting, the company is prioritizing innovation at all value tiers and tailoring pack sizes and offerings to meet evolving shopper needs, aiming to protect or grow market share.
• Productivity and innovation investment: Executives reiterated their intent to sustain advertising, media, and R&D spending to support innovation, even as near-term consumption remains under pressure, positioning the company to benefit when market growth rebounds.
Top Analyst Questions
• Lauren Lieberman (Barclays): Asked about consumer behavior shifts and how management plans to support revenue and market share amid weaker confidence; Schulten cited continued investment in innovation and adapting to value-seeking behavior.
• Bryan Spillane (Bank of America): Inquired about category growth rates and levers to offset tariffs in 2026; Schulten discussed reliance on productivity, innovation, and pricing, with expectations for a gradual return to historical growth rates over several years.
• Steve Powers (Deutsche Bank): Questioned whether investment behind innovation and demand creation would change; management said investment levels in media and advertising remain steady, with continued focus on communication for new launches.
• Olivia Tong (Raymond James): Asked about the mechanics and timing of tariff impacts and related pricing actions; Schulten clarified that Q4 impact is limited to one month, with mitigation efforts tailored by brand and market.
• Mark Astrachan (Stifel): Probed on the acceleration of consumer channel shifts and implications for the company’s go-to-market strategy; management indicated that Procter & Gamble’s portfolio is well-positioned across channels and does not anticipate significant changes to its approach.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) signs of stabilization or improvement in consumer demand and retail inventory levels, (2) the effectiveness of pricing and productivity measures in offsetting tariff and input cost pressures, and (3) the market response to recent product innovations across major categories. The pace of recovery in key international markets and ongoing shifts in consumer channels will also be important indicators of future performance.
Procter & Gamble currently trades at a forward P/E ratio of 22.1×. Should you load up, cash out, or stay put? The answer lies in our free research report.
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