Finding the Details on Margin Pressures

Today we return to tariffs, which continue to be a vexing issue for companies and financial analysts alike. What are companies paying for tariffs? How much are tariffs squeezing margins? How much money might companies recoup from tariff refunds, if any at all? 

Consumer products giant Procter & Gamble ($PG) provided a fascinating example of what companies are disclosing in its latest quarterly report, filed on April 24.


In the Management Discussion & Analysis section, tucked away on Page 19, of the filing, Procter & Gamble disclosed that gross margin decreased 150 basis points to 49.5 percent of net sales for the quarter. Then came a long list of bullet points for why gross margins were getting squeezed (emphasis ours):


  • 180 basis points of decline from unfavorable product mix,

  • 100 basis points of product and packaging investments, 

  • 50 basis points of higher restructuring costs,

  • 50 basis points of higher costs from tariffs,

  • 20 basis points of other items and rounding and

  • 10 basis points of higher commodity costs.


So tariffs pushed up costs by 50 basis points, or 0.5 percent. Then Procter & Gamble provided two steps management took to protect gross margins (again, emphasis ours):


  • 210 basis points of manufacturing productivity savings and

  • 50 basis points of increase due to higher pricing.

One could reasonably conclude, therefore, that Procter & Gamble is raising prices to cover its higher costs from tariffs. 


Interestingly, the above numbers reflect P&G’s gross margins across the whole enterprise. But if you keep digging deeper into the MD&A narrative, management only cites tariffs as a source of margin pressure for one specific segment: beauty products. 


P&G reports net sales and earnings for six operating units, beauty included. See Figure 1, below, shamelessly lifted from Page 22 of the 10-Q.



Under that table, the MD&A then painstakingly walks through a discussion of each unit’s performance and the pressures it faced. For the beauty segment, P&G specifically said (as always, emphasis ours)… 


Net earnings margin decreased due to a decrease in gross margin and an increase in the effective tax rate, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decline of 210 basis points was driven by unfavorable product mix, higher commodity costs and higher cost of tariffs, partially offset by productivity savings.

P&G did not mention tariffs in the discussion of any other business unit! For example, this was the corresponding disclosure for the Fabric & Home Care unit, P&G’s largest operating segment:


Net earnings margin decreased due to a decrease in gross margin, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decrease of 130 basis points was driven by unfavorable product mix, partially offset by productivity savings.


Do you see any mention of tariffs there? We don’t. Nor did we see mention in any of the other five operating segments; only the Beauty division.


We will let others judge the significance of these tariff disclosures, and the questions this information allows you to ponder (or ask on an earnings call). Calcbench subscribers, however, can find details like this pretty easily. 


How to Search


To find disclosures in the MD&A (or any other part of the 10-Q, 10-K, or earnings release) simply fire up the Disclosures & Footnotes Query page and pull up the company and period you want to search. Then enter the relevant search terms, and start reading through the results.


You can also get fancy with your searches, looking for multiple words in close proximity to each other. 


For example, we searched “gross margin,” and “tariff” and included a “~20” after the word tariffs. That allowed us to search for all disclosures that mentioned gross margin and tariffs within 20 words of each other. See Figure 2, below.



We found 100 firms that mentioned tariffs and gross margins in close proximity to each other in Q1 2026. 


So, more food for thought as we all prepare for Q2 filings to arrive in July. Higher costs are likely to be a major theme, and Calcbench has the tools to help you find out exactly what companies are saying.

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