Procter & Gamble's first-quarter performance exceeded expectations, with strong results in the beauty and shaving business, maintaining full-year guidance while lowering the impact of tariffs

Thanks to the growing demand for beauty and shaving products, Procter & Gamble's first-quarter performance exceeded Wall Street expectations. Despite CEO Jon Moeller pointing out the "challenging consumer and geopolitical environment," the company reaffirmed its full-year sales and profit outlook.

For the quarter ending September 30, Procter & Gamble reported an adjusted earnings per share of $1.99, surpassing analysts' expectations of $1.90; revenue was $22.39 billion, higher than the expected $22.18 billion. Organic sales grew by 2%, exceeding market average expectations. Following the performance boost, the company's stock price rose by 4% in pre-market trading.

However, Procter & Gamble's sales data shows a divergence in demand. Sales in the health care and fabric and home care segments both declined by 2%, while sales in the baby, feminine, and family care segments remained flat. The beauty business was a highlight, with sales growing by 4% and overall sales increasing by 6%; shaving business sales grew by 1%, with sales increasing by 5%.

The company lowered its expected cost impact from tariffs from the previous $800 million to $400 million (after tax), but Trump stated on Thursday evening that he would terminate all trade negotiations with Canada, which could bring new cost pressures to Procter & Gamble.

Consumer Demand Shows "K-shaped" Divergence

Procter & Gamble's Chief Financial Officer Andre Schulten stated in a media conference call that the consumer environment is "not great but stable," with shopper behavior showing similar patterns over the past few quarters.

In Procter & Gamble's largest market, the United States, consumer spending across a wide range of product categories has slowed. Similar to Coca-Cola, Procter & Gamble observed that consumer shopping behavior is diverging based on income levels, often described as a "K-shaped" economy.

Cash-rich shoppers are purchasing bulk items from mass retailers and online channels. Schulten stated, "This is how they seek value." Meanwhile, American consumers living paycheck to paycheck are extending their funds by using every last drop of detergent or shampoo and only buying more products after exhausting their pantry stock.

This divergence is reflected in the performance data. The fabric and home care segment, including Tide and Swiffer, saw a 2% decline in sales, while the baby, feminine, and family care segment, including brands like Pampers and Always, remained flat.

Beauty and Shaving Business Support Growth

The beauty business was the standout performer this quarter, with the beauty segment, including Olay and SK-II, seeing a 4% increase in sales and overall sales growing by 6%.

The shaving business also performed robustly, with product lines including Gillette and Venus razors seeing a 1% increase in sales and a 5% increase in revenue. Strong demand for Gillette razors and Secret deodorants helped offset weaker performance in other categories.

These results reflect consumer resilience and indicate that Procter & Gamble's strategy of charging a premium for its products while marketing them as superior to competitors is working. For example, the company's advertising message for Tide is that this detergent does a better job of keeping clothes stain-free, ultimately saving shoppers money

Maintaining Full-Year Expectations and Lowering Tariff Impact

Procter & Gamble reaffirms its sales growth expectation of 1% to 5% and earnings per share of $6.83 to $7.09 for fiscal year 2026.

The company now expects President Trump's tariffs to result in $400 million in after-tax costs, down from the previously anticipated $800 million. When Procter & Gamble initially set its forecast, it included retaliatory tariffs on Canada, which were later canceled. Therefore, Moeller stated during an interview on CNBC's "Squawk Box" on Friday morning that the company plans to raise prices by a smaller amount than expected.

However, Trump announced on Thursday evening that he would terminate all trade negotiations with Canada due to a television advertisement, which could mean higher costs for Procter & Gamble in the future.

Excluding the baby, feminine, and family care segments, Procter & Gamble has raised prices across all business units on average. Under the pressure of rising economic costs, some consumers have begun to cut back on spending while seeking discounts and better value