P&G Q4 Profit Falls 15% as Organic Sales Growth Hits 0%

Sales rose 2%. None of it came from selling more.

Procter & Gamble’s April-June net sales rose 2% to $21.2 billion and its diluted earnings per share fell 15% to $1.26, according to the Form 8-K exhibit it furnished at 7:03 am Wednesday. The driver table underneath is the part worth reading. Volume, pricing and mix each contributed nothing. One point came from foreign exchange and one point, the filing says, came from rounding. Organic sales, which strip out currency and acquisitions, were unchanged.

Below the top line the quarter gave ground everywhere. Net earnings attributable to P&G were $3.04 billion, down 16%. Operating income fell 9% to $3.95 billion. Gross margin slipped to 48.5% from 49.1%, selling, general and administrative expense took 29.9% of every sales dollar against 28.3%, and the effective tax rate rose to 21.7% from 19.8%. Core earnings per share, the measure P&G judges itself by, fell 3% to $1.43, and 5% with currency held still. The gap between the two numbers is the same one Philip Morris put in its own filing this month, where a charge separated the reported result from the adjusted one.

Four segments grew sales. All five earned less.

The segment table is where the quarter stops being abstract. Beauty sold $3.98 billion, up 6%, the fastest growth in the company, and earned $450 million, down 19%, the steepest decline in the company. Grooming sold $1.70 billion, up 1%, and earned $317 million, down 15%. Health Care sold $2.76 billion, up 1%, and earned $336 million, down 10%. Fabric & Home Care, the largest unit, sold $7.43 billion, up 1%, and earned $1.23 billion, down 10%. Baby, Feminine & Family Care sold $5.05 billion, down 1%, and earned $825 million, down 13%. Corporate swung from $4 million of net earnings to an $80 million loss.

Inside Beauty the growth was specific: Hair Care organic sales up mid-single digits on volume in Asia Pacific and Europe, Personal Care up mid-single digits on volume in every region, and Skin Care flat as the super-premium SK-II brand offset a volume decline in Greater China. Health Care ran the other way, with Oral Care down mid-single digits on lower volume in North America and Greater China. A quarter where the top line grows and the profit does not is not unusual this season. Verizon filed the same shape a week ago, guiding higher while profit fell 23%.

The margin went into marketing, and $15.3 billion went to shareholders

P&G says where the margin went. Core operating margin fell 130 basis points despite 460 basis points of gross productivity savings. On the SG&A line, 410 basis points of reinvestment, primarily marketing, sat against 300 basis points of productivity savings. Core gross margin was unchanged, with 160 basis points of productivity savings and a 40 basis point net tariff benefit offset by 120 basis points of unfavorable product mix and 70 basis points of product and package reinvestment. The June 2025 portfolio and productivity plan, budgeted at $1 billion to $1.6 billion before tax over two years, took more than half its cost in fiscal 2026 and leaves the rest for fiscal 2027.

The full year reads steadier. Net sales rose 3% to $87.0 billion, diluted earnings per share rose 2% to $6.62 and core earnings per share rose 1% to $6.89, though currency-neutral core earnings per share did not move at all. Net earnings were $16.1 billion, flat. Operating cash flow was $19.6 billion, capital spending $4.4 billion and adjusted free cash flow $15.8 billion at 100% productivity. Dividends took $10.2 billion and buybacks $5.0 billion, $15.3 billion returned in all. With April’s increase, that is the 70th consecutive year P&G has raised the dividend and the 136th consecutive year it has paid one since incorporating in 1890.

Fiscal 2027 opens with a $0.56 headwind and a new chairman

Guidance is modest and unusually specific about why. All-in and organic sales are each guided to 1% to 3% growth, inside which 30 to 50 basis points of headwind comes from discontinuing brands, product forms and routes to market. Core earnings per share are guided flat to up 3% off $6.89, a range of $6.89 to $7.11 with a midpoint of $7.00, and diluted earnings per share up 1% to 5% off $6.62. P&G itemizes the drag: about $1 billion after tax from raw materials, energy and transportation, $150 million from higher net interest, $150 million from lower non-operating income and $50 million from currency. Together, $0.56 a share, eight points of core earnings growth. Capital spending is set at 4.5% to 5.5% of sales, and the company plans about $10 billion of dividends and $5 billion of buybacks.

Two minutes after the results, P&G filed a second 8-K under Item 5.02. Jon R. Moeller retires as Executive Chairman and leaves the board on Friday, July 31, and the company on August 14. Shailesh G. Jejurikar, already President and Chief Executive Officer and a director, becomes Chairman on August 1. The non-employee directors reappointed Joseph Jimenez as independent Lead Director. The transition began 366 days earlier, when P&G filed the 8-K naming Jejurikar chief executive. This one closes it, the same way Cracker Barrel documented its own new chief executive this month.

What to watch

1. The September-quarter 8-K, P&G’s first of fiscal 2027. It is the first read on how much of the $1 billion after-tax commodity, energy and transportation figure lands early, and on whether the $0.13 to $0.17 a share of restructuring inside the GAAP guidance arrives on schedule.

2. Organic volume. It was zero for the quarter and unchanged for the year, against 410 basis points of marketing reinvestment. The next driver table says whether the spending moved units or only held them.

3. Beauty. It is the segment growing fastest and earning least, with the growth credited to Hair Care and Personal Care volume. The September quarter shows whether profit follows the volume or the gap widens.