P&G latest to flag diverging consumer spending as profit tops on beauty demand

Core Insights - Procter & Gamble (P&G) exceeded Wall Street expectations for first-quarter results, driven by strong demand for beauty and hair-care products despite economic uncertainty and higher prices [1] - The company halved its annual tariff cost estimate to approximately $400 million after tax due to Canada lifting retaliatory duties on U.S. goods, leading to a 3% increase in P&G's shares [1] Financial Performance - P&G reported core earnings per share of $1.99, surpassing estimates by 9 cents, supported by a strategy of introducing improved products at higher prices [6] - The company experienced a 50-basis-point decline in operating margins year-over-year, attributed to higher commodity costs and measures to cater to value-conscious consumers [5] Consumer Behavior - There is a bifurcation in consumer behavior, with financially stable shoppers opting for larger pack sizes while lower-income consumers are purchasing smaller packs for essential items [4] - The overall consumer environment is described as "not great, but stable," with a slight slowdown in U.S. consumption across P&G's categories [5] Pricing Strategy - P&G has raised prices in the U.S. to mitigate tariff impacts while lowering prices in Canada following the cancellation of retaliatory tariffs [3] - The company is facing increased discounting from competitors in the U.S. and Europe, particularly in fabric-care and baby-care products, prompting a focus on offering more affordable options [4]