PROCTER & GAMBLE Co Q1 FY2025 earnings call

• Execution of integrated strategy delivered solid earnings and cash results, enabling maintenance of fiscal year '25 guidance ranges. • Organic sales growth driven by volume, pricing, with mix in line. • North America had broad-based market share growth. • Europe focus markets had organic sales growth despite inventory headwinds. • Latin America organic sales up low single digits. • Greater China faced significant declines. • Core earnings per share up 5%, core gross margin in line, core operating margin increased 30 basis points. • Returned nearly $4.4 billion to shareowners. • Continued to push levers to offset headwinds, remain committed to integrated strategy, double-down on superiority, improve productivity, drive constructive disruption, with empowered, agile, accountable organization.

Organic sales grew 2%. Eight of 10 product categories grew or held organic sales for the quarter. Family care, home care and personal healthcare each grew mid-single digits. Hair care, oral care, feminine care, fabric care and grooming grew low singles. Baby care and skin and personal care were down mid-singles. Organic sales in focus markets grew 2% and enterprise markets were up 1%. Organic sales in North America grew 4%, driven by 4 points of volume growth. Europe focus markets organic sales were up 3% with a 2-point headwind from lower inventory. Latin America organic sales were up low single digits. European enterprise markets grew mid-singles. Greater China organic sales declined 15%. Global aggregate value share grew 10 basis points with 28 of our Top 50 category country combinations holding or growing share for the quarter.

• Maintains organic sales growth guidance in range of 3% to 5%. • Core EPS guidance range 5% to 7% ($6.91 to $7.05 per share). • Commodity cost headwind after tax approximately $200 million ($0.08 per share). • Foreign exchange in line with prior year. • Lower non-operating income benefits and higher tax rate add $0.10 to $0.12 headwind. • Adjusted free cash flow productivity expected at 90%. • Plans to pay around $10 billion in dividends and repurchase $6 billion to $7 billion in common stock, returning $16 billion to shareowners.

• Economic and geopolitical environment challenges. • Uncertainty in China and Middle-East markets. • Commodity cost and foreign exchange fluctuations. • Potential geopolitical disruptions, major supply chain disruptions or store closures not anticipated within guidance ranges.

Q: Steve Powers asked about the quarter and past 12 months' growth and concerns about deceleration in markets like China and Middle East.

A: Andre Schulten responded that headwinds were expected in front half of fiscal '25, core 85% of business is strong with sustained growth potential and innovation in second half.

Q: Lauren Lieberman asked about risk factor in the 85% of business.

A: Andre Schulten said consumer in daily-use categories continue to trade into P&G and trade up, with data and plans showing confidence in momentum of 85% of business despite China and Middle-East uncertainties.

Q: Dara Mohsenian asked about sustained category growth in US and perspective on 15% of business.

A: Andre Schulten talked about growth opportunities in US categories like fabric enhancers, power oral care, and innovation in Europe, with base assumption of annualizing effects in 15% of business.

Q: Bryan Spillane asked about gross margins and cost of goods sold inflation.

A: Andre Schulten said main driver of gross margin progress is productivity, with some effect from easing inflation but majority to spread throughout year.

Q: Chris Carey asked about baby business and family care business.

A: Andre Schulten said family care business model is sustainable with innovation driving category growth, baby care requires superior propositions for growth despite birth rate dynamics.

Q: Filippo Falorni asked about China recovery pace and progression of organic sales growth.

A: Andre Schulten said predicting China recovery pace is futile, expects sequential improvement due to annualization but range remains, headwinds still present in first two quarters.

Q: Robert Ottenstein asked about structural changes in Chinese market and SK-II brand.

A: Andre Schulten said Chinese consumer behavior is changing, team is adjusting to realities, SK-II brand is relevant but early signs of improvement.

Q: Kevin Grundy asked about market share performance and importance of market shares.

A: Andre Schulten said market share trend is generally positive, focus on growing markets and household penetration, with progress in Europe and US.

Q: Peter Grom asked about China improvement pace and sequential organic sales growth.

A: Andre Schulten said conceptually annualizing headwinds and maintaining run rate in core business needed for guidance range.

Q: Andrea Teixeira asked about skin care performance and confidence in 85% of business.

A: Andre Schulten said guidance is range, 85% of business has sustained track-record of growth with share trajectory upwards and innovation, but multiple scenarios exist.

Q: Kaumil Gajrawala asked about price points, promo, and inventory destocking.

A: Andre Schulten said promo situation stable, no indication of consumer trading down, inventory levels stable.

Q: Mark Astrachan asked about SK-II brand underperformance.

A: Andre Schulten said SK-II brand is relevant with core messaging and efficacy, effects due to Japanese brand in Chinese context, team investing to rebuild equity.

Q: Nik Modi asked about store closures and disruptive innovation.

A: Andre Schulten said no major store closures assumed in US, Olay Melts and Tide evo doing well in test markets with promising progress.

Q: Olivia Tong asked about performance divergence across categories.

A: Andre Schulten said different categories perform differently but global portfolio allows delivery, beauty excluding China and SK-II has growth, fabric and home care has innovation opportunities.

Q: Korinne Wolfmeyer asked about retailer inventory orders and retail dynamic.

A: Andre Schulten said inventory levels stable, retailer relationships constructive, supply chain programs progressing.

Q: Rob Moskow asked about commodity cost benefit and deployment.

A: Andre Schulten said still a $200 million after-tax headwind, business units control offsetting or reinvesting.

Q: Linda Bolton Weiser asked about beauty segment and hair care in China.

A: Andre Schulten said Olay in North America has innovation success, hair care in China has strong innovation with brands like Head & Shoulders and Pantene performing well but market still down.