PG · 10-K · 2026A · Full report

Gross Margin Drivers

PROCTER & GAMBLE Co · 2026-08-04 · Importance 31 · Surprise 32

Company-wide gross margin declined 140 basis points in fiscal 2026, driven by unfavorable product mix and higher commodity costs, partly offset by productivity savings. Baby, Feminine & Family Care gross margin declined 40 basis points from unfavorable category mix, partly offset by lower commodity costs and productivity savings. The Company uses raw materials exposed to volatility from weather, supply conditions, political variables and economic conditions, but had no financial commodity hedging activity in fiscal 2026 or 2025.

Key facts

• A sensitivity analysis showed that a +25 bps discount rate or -25 bps growth rate would each reduce estimated fair value of the Gillette intangible asset by approximately 5%, and a -50 bps royalty rate would reduce it by approximately 4%. source
• Gross margin decreased 100 basis points to 50.2% of net sales in fiscal 2026. source
• Gross margin decline included 120 basis points from unfavorable product mix and 70 basis points from product and packaging investments. source
• Gross margin decline included 60 basis points of higher restructuring costs and a 30 basis point net tariff impact from higher costs and recognized recoveries. source
• Gross margin was partially offset by 180 basis points of manufacturing productivity savings and 40 basis points of increase due to higher pricing. source
• Net earnings margin declined 110 basis points. source
• Gross margin decreased 140 basis points driven by unfavorable product mix and higher commodity costs, partially offset by productivity savings. source
• Baby, Feminine & Family Care net earnings margin was 19.3% (down 50 bps). source