July 29 (Reuters) - Procter & Gamble on Wednesday forecast slower revenue growth in fiscal 2027 after quarterly sales fell short of estimates and margins dropped under a "very challenging geopolitical and economic environment".
Sticky inflation and higher food and gas prices have forced lower-income consumers to cut back spending, but consumer goods companies, mainly in the U.S., also face the challenge of offering products at varied price points as the divide between high and low-income shoppers widens.
Core earnings per share fell 3% to $1.43 in the April-June period from a year ago, but edged past estimates of $1.41, as higher commodity costs and increased marketing spend dragged operating margins lower for the third straight quarter.
Quarterly volumes flat as beauty remains a bright spot
"Fiscal 2026 was a year of foundation building," said P&G CEO Shailesh Jejurikar, who took charge of the consumer goods bellwether in January.
The company also named Jejurikar as chairman from August 1 and said executive chairman and former CEO Jon Moelle will retire on August 14.
P&G's overall fourth-quarter organic volumes were flat, falling in three of its five reported segments, including in grooming and health care.
Its pricier hair care and personal care products were once again a bright spot, with volumes rising 3% in the beauty category even as it kept prices broadly unchanged in the fourth quarter.
Beauty and wellness has bucked broader spending weakness with consumers continuing to buy nice-to-have self-care items and giving companies the room to raise prices for newer launches for products such as shampoos and skin care products.
Procter & Gamble's fourth-quarter adjusted earnings per share of $1.43 narrowly beat estimates of $1.41. Its net sales rose 1.5% to $21.20 billion but missed expectations of $21.38 billion.
Fiscal 2027 guidance points to slower growth and higher costs
The Tide maker expects fiscal 2027 total net sales to grow in the range of 1% to 3%, compared with 3.3% growth in 2026. At the mid-point, the forecast was slightly below analysts' average estimate of 2.7% growth.
The company stuck to its expectation of a roughly $1 billion profit impact in fiscal 2027 from higher costs as a fallout of the U.S. war in Iran, including in raw material, energy and transportation.
Its annual forecasts assume the war in Iran continues and oil prices remain elevated, the company said. "That is the biggest variable we see in our guidance range," P&G CFO Andre Schulten said on a media call.
Consumer-facing companies such as PepsiCo have flagged higher input costs in the back half of the year.
P&G expects fiscal 2027 adjusted earnings per share between $6.89 and $7.11, with a midpoint slightly below estimates of $7.04, according to data compiled by LSEG.
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