Weak Q1 for Nestle, Tata Consumer, and Colgate; what's next for the industry?

FMCG stocks like Tata Consumer, Nestle India and Colgate are in focus after reporting their Q1FY26 earnings. Shares of Nestle closed as the top loser on Thursday by losing over 5.5% after Q1 earnings disappointed investor expectations. Shares of Colgate-Palmolive also traded over 6% lower post-reporting Q1FY26 earnings on Wednesday. While Tata Consumer shares are trading largely muted.

The muted response post earnings highlights underlying pain in the FMCG sector. The NIFTY FMCG index has corrected more than 4% in the six trading sessions. In addition, shares of key players like Hindustan Unilever, Britannia, and ITC also corrected more than 4% in the same period. The selling pressure in the FMCG stocks highlights investor sentiment pessimism around the upcoming earnings.

Here are key highlights and trends from the latest Q1 results

Nestle

Amongst the three key FMCG players that declared their Q1 results, Nestle India posted the weakest set of numbers. Nestle India reported total revenue of ₹5096.1 crore, rising 6% YoY. However, the EBITDA margins declined marginally by 1.2% YoY to ₹1,100 crore, and the EBITDA margins for the quarter also contracted over 150 bps YoY and 360 bps QoQ. Lastly, the net profit dropped 13.7% YoY and 26% QoQ.

The sequential decline in the results is what worries the investors more than the yearly growth. The total revenue declined 7.4% QoQ, with a 20.7% drop in the EBITDA, and a 360 bps contraction in EBITDA margin highlighted the real worry in the results. According to the management, elevated consumption prices across the commodity portfolio, higher operational costs due to expansionary activities and elevated finance costs due to borrowing to fund temporary operational cash-flow requirements, dented the operating profit and the margins.

Colgate Palmolive

The leading oral care company reported subdued numbers in Q1FY26 with a 4.4% drop in net sales and a 12% YoY decline in net profit. According to the management, the current quarter’s subdued performance was largely led by persistent headwinds from tough operating conditions, subdued urban demand and elevated competition. The management expects to navigate the challenges and witness recovery in the second half of the year.

Tata Consumer Products

The Tata Group company reported strong topline growth, but failed to deliver growth at the operating level. The company’s EBITDA declined 8% YoY to ₹615 crore due to higher tea costs in India and coffee price corrections in the non-branded business segment. Starbucks reported 6 new store additions in over 80 cities, with a total of 485 store additions for the quarter. The management highlighted the higher tea costs and coffee price corrections as transitory headwinds and expects it to moderate further.

In summary, the early birds' earnings from the FMCG sector paint a not-so-rosy picture for the remaining sector participants. However, index participants expect to see some outliers from the industry players like Britannia, Hindustan Unilever, ITC and Marico, which are expected to release the Q1 reports soon.

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