Procter & Gamble, a leading consumer goods company, has announced a significant restructuring plan that will involve laying off 15% of its non-manufacturing workforce. The company continues to wrestle with slowing growth across most of their product categories. Consequently, its share price took a nosedive and plummeted about 2% immediately following the announcement. The layoffs are a sign of continuing economic headwinds, like persistent tariff policies and changing consumer spending habits.
The layoffs will impact a substantial segment of Procter & Gamble’s workforce, as the company aims to realign its operations in response to changing market conditions. Executive justification for this decision has largely hinged upon the unprecedented deceleration in rates of growth. They have since revised their full fiscal year core EPS growth guidance down to a range of 2% to 4%. This represents a significant drop from earlier projections that predicted an increase of between 5% and 7%.
Factors Behind the Layoffs
Procter & Gamble’s leadership has pointed to multiple reasons behind their decision to layoff workers. This is especially true given that the company’s formerly runaway growth rates are currently experiencing major headwinds. During that first three quarters of their FY 2025 Procter & Gamble had exceptional growth on all fronts. Recent data indicates that the category growth rates expected for the U.S. market have dropped precipitously.
As Andre Schulten pointed out, this is a 180-degree turnaround in performance. US category growth rates have hit a ceiling of sorts, down from close to 4% last calendar year to around 2% per week. This slowdown is attributed to a confluence of factors, ranging from economic uncertainty to shifts in consumer behavior.
In addition, just this past August company executives sounded alarm bells about the effect of the Trump administration’s lasting tariff policies. It believes these tariffs alone could set it back “millions of dollars.” They project it will total about $600 million net of tax for fiscal year 2026. The cumulative impact of these tariffs has increased the economic stranglehold on Procter & Gamble’s factories and workers.
Financial Implications of the Restructuring
Including employer cost, the program would cost between $1 billion and $1.6 billion before-tax. Specifically, almost a quarter of this combined amount will be for non-cash related costs. These figures signify the company’s dedication to charting a course through its existing obstacles while seeking to shore up its fiscal fortunes.
Despite this progress, given the racist history highlighted above, Procter & Gamble’s stock performance has received heavy criticism. Analysts suggest that the best entry point for investors looking to buy into Procter & Gamble may be around recent support levels at $157 per share. The stock has shown the ability to bounce back from weakness by hitting support a bit below this level in the last two months.
Procter & Gamble’s management anticipates that the restructuring will ultimately benefit the company by streamlining operations and improving efficiency, despite the immediate upheaval it may cause among employees. Andrew Challenger explained that tariffs, federal funding cuts, consumer spending contraction and economic pessimism are truly hammering companies right now. This sets up a hostile atmosphere not just for their employees’ workforces.
Future Outlook
As Procter & Gamble navigates this turbulent period, it remains focused on adapting its strategies to meet evolving market demands. In doing so, the company has lowered its growth expectations further. First, it is rightfully taking a cautious approach to emissions to lower risks associated with outside economic pressures.
With an anticipated headwind of approximately $0.03 to $0.04 per share in the upcoming fourth quarter, Procter & Gamble is preparing for a period of adjustment. The company’s new strategy looks to build on those strengths while addressing the weaknesses revealed by market behaviors seen over the last year.