Procter & Gamble cut its annual sales and profit outlook, citing tariffs and volatility in consumer demand.

The consumer bellwether expects organic sales growth this year of approximately 2 per cent versus the prior year, the company said in a statement. That’s lower than what the company forecast in January when it said it was expecting that figure to increase between 3 per cent and 5 per cent.

Given its size and scale of consumer good, P&G is long seen as a measure of the wider economy. Its products include Oral B and Ariel detergent among many others.

Sales in the most recent quarter were $19.8 billion (€17.4 billion). The overall volume of organic sales was flat during the three months that ended on March 31. Beauty and grooming products increased slightly, while the volume of baby and feminine care products fell. Prices rose by 1 per cent, driven by beauty and grooming.

“We delivered modest organic sales and EPS growth this quarter in a challenging and volatile consumer and geopolitical environment,” chief executive Jon Moeller said in a statement. “We’re making appropriate adjustments to our near-term outlook to reflect underlying market conditions.”

P&G said it expects earnings per share in the current fiscal year, which ends in June, to be in the range of $6.72 to $6.82 per share versus $6.59 in the prior year. That’s below the company’s January outlook.

Shares in the company dropped 2 per cent in premarket trading in New York. P&G’s stock is down 1 per cent so far this year, compared to a 9 per cent drop in the S&P 500.

Moeller told CNBC in an interview that the company will likely roll out price increases during its next fiscal year, which starts in July. “Tariffs are inherently inflationary,” Moeller said.

He said the Trump administration has been “very open to dialogue” but that the company is spending a “fair amount of time” trying to figure out where the economy is headed. “Our job isn’t to design policy. Our job is to optimise the business outcome against the backdrop of that policy.” He also noted that the weaker dollar has been “a help recently.”

Moeller said revenue in China, P&G’s second-largest market in terms of sales and profit, were down 2 per cent in the most recent quarter. While that’s an improvement from the 3 per cent drop in the prior quarter, the recovery in the country is “going to take a while and the path forward will be bumpy,” Moeller said.

P&G’s baby diaper business is growing at a double-digit rate in China, he added, despite declining birth rates.

P&G started the year strong, reporting in January its first quarterly sales beat in more than a year. That revenue increase came mostly from higher volume rather than price hikes, which had fuelled much of the previous year’s growth.

But in February, chief financial officer Andre Schulten said its shipments to retailers had slowed and warned there was a risk the company could miss its profit guidance. He also called out slower consumption in Asia and Africa as well as in the Middle East, which he attributed to “anti-western sentiment” in that region.

Major US companies have taken different tacks to navigate the difficulty of offering investors guidance on their sales and profit while the outlook on trade and the economy keeps shifting. United Airlines took the unusual step of issuing two profit forecasts – one if the current environment remains stable and another one if the US economy enters a recession. Delta Air Lines withdrew its annual financial guidance.

Even before the tariffs implemented during the first Trump administration, P&G reworked its supply chains to manufacture more of its products in the countries where those items are sold. The company domestically manufactures 90 per cent of what it sells in the US and imports the remaining 10 per cent. That’s reduced the company’s exposure to the latest rounds of tariffs. But it still has some exposure to the high tariffs on imports from China. Of the goods that P&G imports into the US, less than 15 per cent of them are sourced from China, which includes mainly raw materials, packaging and some finished products. – Bloomberg