The Procter & Gamble Company (P&G) reported net sales of $23.3 billion in the first quarter of fiscal year 2027, a 4% increase compared with the same period a year earlier. Organic sales, which exclude the effects of foreign exchange and acquisitions and divestitures, also grew 4%, supported by higher sales volumes and a favorable product mix.
Diluted net earnings per share reached $1.97, up 1% year over year, while core earnings per share increased 1% to $2.00. The company said the growth in net sales was partially offset by higher operating costs.
Operating cash flow totaled $5.8 billion, while net earnings reached $4.8 billion during the quarter. Free cash flow productivity was 93%, a measure calculated by dividing operating cash flow less capital spending by net earnings.
P&G returned $3.9 billion to shareholders during the period, comprising $2.6 billion in dividend payments and $1.3 billion in share repurchases.
“Our solid sales, earnings and cash results in the first quarter reflect sharpened execution of our integrated strategy,” said Shailesh Jejurikar, Chairman of the Board, President and Chief Executive Officer. “While we expect there will continue to be geopolitical and economic challenges, this strong start keeps us on track to deliver within our guidance ranges for organic sales growth, core EPS growth and free cash flow productivity for the fiscal year. We remain committed to our strategy to delight consumers with superior products at a superior value by putting the consumer first in everything we do. We are confident in the near term and excited about the future.”
SALES PERFORMANCE AND OPERATING MARGINS
Organic sales growth was driven by a 2% increase in volume and a 1% contribution from favorable mix. Pricing had a minor positive impact on sales during the quarter.
Reported gross margin declined 160 basis points compared with the prior-year period. Core gross margin, excluding the impact of incremental restructuring charges, decreased 150 basis points. On a currency-neutral basis, core gross margin also fell 150 basis points.
The decline reflected a 140-basis-point impact from higher commodity costs, a 140-basis-point impact from product reinvestments, a 50-basis-point impact from unfavorable mix and 10 basis points from rounding and other items. These factors were partially offset by 120 basis points in gross productivity savings, 50 basis points from tariff-related benefits associated with lower costs and recognized recoveries, and 20 basis points from increased pricing.
Reported selling, general and administrative expenses (SG&A) as a percentage of sales declined 90 basis points year over year. Core SG&A as a percentage of sales decreased 80 basis points, or 70 basis points on a currency-neutral basis, excluding incremental restructuring charges.
The reduction in core SG&A as a percentage of sales was driven by 130 basis points in productivity savings and 100 basis points from the leverage provided by net sales growth. These benefits were partially offset by 120 basis points from reinvestments and 40 basis points from rounding and other items.
Reported operating margin declined 70 basis points compared with the same quarter last year. Core operating margin, excluding non-core restructuring charges, decreased 80 basis points year over year and 90 basis points on a currency-neutral basis. Core operating margin included gross productivity savings of 250 basis points.
FISCAL 2027 SALES AND EARNINGS OUTLOOK
P&G updated its guidance for total sales growth in fiscal 2027 to a range of 2% to 4% compared with the previous fiscal year, reflecting the acquisition of Thorne effective October 1, 2026.
The company maintained its forecast for organic sales growth of 1% to 3% for the full fiscal year. This outlook includes an estimated headwind of 30 to 50 basis points from discontinuations involving brands, product forms and go-to-market approaches.
The company also maintained its forecast for fiscal 2027 diluted net earnings per share growth of 1% to 5%, compared with fiscal 2026 diluted net EPS of $6.62.
For core earnings per share, P&G continues to expect results to range from in line with the previous fiscal year to growth of 3%, based on fiscal 2026 core EPS of $6.89. This corresponds to a range of $6.89 to $7.11 per share, with a midpoint of $7.00, representing an increase of approximately 1.5%.
COST PRESSURES AND TAX EXPECTATIONS
P&G now expects commodity costs to create an after-tax headwind of approximately $1.4 billion in fiscal 2027, driven by higher raw material, energy and transportation costs.
The company also anticipates an after-tax impact of $300 million from higher net interest expense, $150 million from lower non-operating income and $50 million from unfavorable foreign exchange rates.
Combined, these factors are expected to reduce fiscal 2027 core earnings per share by $0.79, representing an 11% drag on core EPS growth.
P&G now expects its core effective tax rate to range from 20% to 21% in fiscal 2027. Capital spending is projected to represent 4.5% to 5.5% of net sales for the year.
The company noted that it cannot reconcile certain forward-looking non-GAAP cash flow and tax rate measures with their corresponding GAAP measures without unreasonable efforts, citing the unpredictability of the timing and amounts of discrete items, including acquisitions, divestitures and impairments, which could significantly affect GAAP results.
CASH FLOW AND SHAREHOLDER RETURNS
P&G maintained its expectation for free cash flow productivity of 85% to 90% in fiscal 2027.
The company also continues to expect to pay more than $10 billion in dividends and repurchase approximately $5 billion of common shares during the fiscal year.
