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Procter & Gamble (PG -4%) is amid meaningful selling pressure today after lowering its FY25 (Jun) outlook over the material impact of tariffs. The household durables giant, known for numerous brands like Tide and Pampers, reduced its adjusted EPS forecast for the year by $0.21 at the midpoint to account for a more pronounced headwind tied to FX rates, commodity costs, and tariffs, assuming they hold at current rates. Management mentioned that the largest tariff-related impact stems from raw and packaging materials as well as some finished products sourced from China. Even though the region comprises slightly over 10% of total imports for PG, the tariff rate is high enough to produce a sizeable hit to the company's earnings.

The trade policy problems for PG mirror what we saw from peer Kimberly-Clark (KMB) earlier this week, which lowered its adjusted EPS outlook for 2025. While the reciprocal tariff rates on China from earlier this month are reportedly set to change, the uncertainty surrounding the final number and the consequences remain elevated, clouding the near future and sparking alarm among investors, sending shares of PG to 52-week lows today.

• Adding to today's sell-off was PG's mixed Q3 (Mar) results, registering adjusted EPS of $1.54, marking its ninth straight beat on slightly lower-than-expected revenue of $19.78 bln, a 2.1% decline yr/yr. On an organic basis, which excludes FX and M&A impacts, sales ticked 1% higher. Volumes on a reported basis were sluggish, sliding by 1%, while organic volumes were flat.
• By category, Grooming was the notable standout and the only one to post positive reported volume growth in Q3. On an organic basis, Beauty also delivered volume growth. Health Care and Fabric & Home Care posted a 1% drop in reported volumes while Baby, Feminine & Family Care was the weakest, posting a 2% drop in reported and organic volumes.
• Prices climbed by 1% on a consolidated basis, potentially nudging some consumers to pull back their spending or shift toward lower-cost alternatives. However, on that note, PG commented that it continues to grow or maintain its market share across the U.S. and Europe as private label shares continue to trend lower, accelerating downwards in Europe. PG is leveraging this clear brand loyalty to potentially hike prices in the coming months.
• Still, in the interim, PG is wading through choppy waters. The company sliced its FY25 adjusted EPS outlook to $6.72-6.82 from $6.91-7.05 and revs to $84.04 bln from $85.72-87.40 bln, implying stagnant yr/yr growth this year.

CFO Andrew Schulten noted that the company's playbook centers on delivering balanced top and bottom-line growth over a two-to-three-year period, conceding that it will not hit that goal every quarter. As such, PG is pulling the right levers now, such as hiking prices, to place it in a more advantageous position for longer-term growth. However, this comes at a gamble as consumers are still feeling the sting of cumulative inflationary pressures and may gravitate toward private labels or pull back their spending. Meanwhile, without clarity surrounding how tariffs will shake out, investors are beginning to steer clear of PG, a trend that could persist over the near term.