Tariffs: A Billion Guided, 30 Basis Points PaidNarrow moat

Procter & Gamble (PG) — moat facet

P&G braced for a billion dollars of tariffs in fiscal 2026 and paid 30 basis points of margin, then began getting some back.

P&G entered fiscal 2026 expecting a large tariff bill. Its July 2025 guidance included about $1 billion before tax, about $800 million after tax, of higher tariff costs1. By January 2026 the estimate was about $400 million after tax2. In the full-year gross margin bridge, net tariffs cost 30 basis points3.

Tariff figures for fiscal 2026 ($M)about 800July 2025 guide, after taxabout 400January 2026 guide, after taxabout 200IEEPA tariffs paid, recoverableP&G earnings releases July 2025, January 2026; Form 10-K FY2026
Half the feared bill, and some coming back.

Then part of it came back. After the Supreme Court ruled the IEEPA tariffs invalid on 20 February 2026, P&G said it had paid about $200 million of those tariffs that might be recoverable, and it recognised half of that recovery in the June 2026 quarter4. That quarter's core gross margin included 40 basis points of net tariff benefit from recognised recoveries and higher costs5.

The episode is a small test of the moat. The estimate halved within six months, and P&G ended the year with total company price up 1%6 and volume flat. It helps that 24 of its manufacturing sites are in the United States7, where 28% of its employees work8.

The limit is that tariffs are set by governments, not by the market. P&G's fiscal 2027 guidance explicitly excludes significant tariff changes9.

Currency helped offset the rest. In January 2026 P&G said it expected a foreign exchange tailwind of about $200 million for the year, with commodities neutral10, and foreign exchange in the end added about $224 million to net earnings11. The tariff bill was absorbed partly because other costs moved in P&G's favour.

The facet is stable. What would move it is a new round of tariffs large enough to show up as a bigger negative in the margin bridge than productivity can offset; the net tariff line, minus 30 basis points in fiscal 202612, is where to look.

Moat trajectory: Holding steady

Net tariffs -30bp in FY2026; IEEPA recovery recognised in Q4.

The number that tests this moat
Reported
Net tariff impact on gross margin, FY2026
-30bp

The tariff cost that price and sourcing did not offset; a larger figure would mean tariffs are beating the brands.

Source: P&G Form 10-K, FY2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
Tariff Changes Sit Outside the Guidance
P&G's fiscal 2027 guidance assumes no significant tariff changes, a year after its tariff estimate halved within six months.
References
  1. ReportedIts July 2025 guidance included about $1 billion before tax, about $800 million after tax, of higher tariff costs.
    Procter & Gamble fourth-quarter and fiscal 2025 results release, Form 8-K exhibit 99.1, with fiscal 2026 guidance including about $1 billion of tariff costs. — Q4 FY2025 · publ. 29 July 2025 · source ↗
  2. ReportedBy January 2026 the estimate was about $400 million after tax.
    Procter & Gamble second-quarter fiscal 2026 results release, Form 8-K exhibit 99.1, with the revised tariff estimate. — Q2 FY2026 · publ. 22 January 2026 · source ↗
  3. ReportedIn the full-year gross margin bridge, net tariffs cost 30 basis points.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 7 MD&A: net sales drivers, organic sales and gross margin bridge. — FY2026 · publ. 4 August 2026 · source ↗
  4. ReportedAfter the Supreme Court ruled the IEEPA tariffs invalid on 20 February 2026, P&G said it had paid about $200 million of those tariffs that might be recoverable, and it recognised half of that recovery in the June 2026 quarter.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1A risk factors, Item 5 market information and performance graph, and critical accounting estimates (Gillette brand). — FY2026 · publ. 4 August 2026 · source ↗
  5. ReportedThat quarter's core gross margin included 40 basis points of net tariff benefit from recognised recoveries and higher costs.
    Procter & Gamble fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1, with fiscal 2027 guidance - quarterly and fiscal-year headline results and cash flow. — Q4 FY2026 · publ. 29 July 2026 · source ↗
  6. ReportedThe estimate halved within six months, and P&G ended the year with total company price up 1% and volume flat.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 7 MD&A: net sales drivers, organic sales and gross margin bridge. — FY2026 · publ. 4 August 2026 · source ↗
  7. ReportedIt helps that 24 of its manufacturing sites are in the United States, where 28% of its employees work.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1 business and Item 2 properties: employees, manufacturing sites, customers, channels, competition and strategy. — FY2026 · publ. 4 August 2026 · source ↗
  8. ReportedIt helps that 24 of its manufacturing sites are in the United States, where 28% of its employees work.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1 business and Item 2 properties: employees, manufacturing sites, customers, channels, competition and strategy. — FY2026 · publ. 4 August 2026 · source ↗
  9. ReportedP&G's fiscal 2027 guidance explicitly excludes significant tariff changes.
    Procter & Gamble fourth-quarter fiscal 2026 earnings slides, Form 8-K exhibit 99.1 - organic sales and core EPS history, share results and fiscal 2027 guidance assumptions. — Q4 FY2026 · publ. 29 July 2026 · source ↗
  10. ReportedIn January 2026 P&G said it expected a foreign exchange tailwind of about $200 million for the year, with commodities neutral, and foreign exchange in the end added about $224 million to net earnings.
    Procter & Gamble second-quarter fiscal 2026 results release, Form 8-K exhibit 99.1, with the revised tariff estimate. — Q2 FY2026 · publ. 22 January 2026 · source ↗
  11. ReportedIn January 2026 P&G said it expected a foreign exchange tailwind of about $200 million for the year, with commodities neutral, and foreign exchange in the end added about $224 million to net earnings.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1A risk factors, Item 5 market information and performance graph, and critical accounting estimates (Gillette brand). — FY2026 · publ. 4 August 2026 · source ↗
  12. ReportedWhat would move it is a new round of tariffs large enough to show up as a bigger negative in the margin bridge than productivity can offset; the net tariff line, minus 30 basis points in fiscal 2026, is where to look.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 7 MD&A: net sales drivers, organic sales and gross margin bridge. — FY2026 · publ. 4 August 2026 · source ↗
Sources
Generated September 26, 2026