Q3 2020 Earnings Call
[music].
Good morning, welcome to Procter and Gamble's quarter in corporate school huge you would like to remind you that today's discussion will include a number of forward looking statements.
If you will refer to PNG. His most recent kincaid since you an 8-K reports you will see a discussion of factors that could cause the companys actual results could differ materially from these projections.
So as required by regulation G Procter and gamble needs to make you aware that during the discussion the company will make a number of references to non-GAAP and other financial measures Procter and Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor Relations website.
Www Dot PG investor Dot Com, a full reconciliation of non-GAAP financial measures now I will turn the call over Japan, Genies, Vice Chairman, Chief operating Officer, and Chief Financial Officer, John Board.
Good morning.
[laughter] here at home by myself coming to your through my cellphone.
John several of your is that his home in his prepared to jump in if for any reason why connection tails and I can't reestablish it.
We're all going through a difficult.
Plunging time.
I want to start by expressing our sincere hope.
Thank you and your families are safe and are well.
Thank you for joining us on celebrate a timing.
Our motivation and advancing the timing of this release was simply transparency.
Getting information to you to the market as quickly as possible.
We didn't have very strong quarter.
I'm going to start by outlining our priorities in the crisis period.
These have then it will continue to guide or actions and our choices.
Well, then moved quickly to strategy, which remains unwavering.
I will discuss excellent potential results for three time periods.
The quarter, we just completed which as I said was strong.
The long term on the back side of this crisis.
Then the short to midterm as we all her way through this.
Following this all answer a couple of anticipated questions and then tried to additional questions.
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Our first priority in this crisis is to ensure that health and safety of the method what are we work with our colleagues around the world.
Second we're maximizing the availability of products that help people and their families with their health hygiene, EXINI needs, which have never been greater.
The next priority is helping society meeting in overcoming the challenges we all face.
Taken together these priorities help ensure PNG isn't there there for employees there for consumers there for communities, who have always been there for us.
Let me briefly discuss each of these priorities in terms.
Employee safety in house.
What's guidance for medical professionals, we're constantly evaluating updating.
The robust measures already in place to help our people, who are making packing and shipping PNG products stay safe at work.
This includes temperature scans shifts rotations do you mean avoidance and physical distancing.
Well performing comprehensive methodical cleaning of all production areas, including regular sanitization and surface disinfection.
That exceeds the most rigorous health authorities standards.
We're also equipping and encouraging all employees to make smart appropriate choices, such a staying at home as they feel a well are part of high risk groups or have preexisting medical conditions.
In all cases, we're partnering with our colleagues individually and proactively to ensure they feel and are protected and space.
This has never been more important as many of our facilities are running around the clock to deliver PNG products. During this period of increased amounts.
Our industry, leading benefits plans play a critical and providing PNG people with the resources they need to care for themselves and for their families.
From paid leave and comprehensive medical care to flexible work arrangements and financial support.
PNG people can work confidently knowing that the company stands with and behind though.
It's a very inspiring to witness the many acts of service people are taking into supporting care for each other.
Demonstrating creativity flexibility and commitment.
Truly PNG people that are best.
Turning to product availability <unk>.
PNG products play an essential role in helping consumers maintain proper hygiene personal health and healthy home environments.
Our products clean your laundry your home your hair your body your hands and we cleaned shade your face.
We provide hygiene products for Femina protection baby care adult incontinence and bathroom needs.
Hair care shampoos to clean air and conditioners and treatments to improve their house.
So cleansers body wash handsets, and adding perseverance and deodorants addressed additional hedging needs.
Oh to see health care products provide proactive health benefits as well as important symptom relief.
These products are more important than ever given the needs presented by the current crisis increased awareness around health and hygiene and the additional time, we're all spending many of us or spend it at home.
[noise] consumption of hand soaps is obviously increased.
Consumers in the U.S. are doing more laundry loads per week.
In Washington, more garments after wearing them just wants.
More loads are being done with unit dose detergents, we've seen a spike in demand for tide anti bacterial spray.
Just care consumption has increased as families eat more meals at home or more concerned about the hygiene other dishes glasses on silverware.
More meals at home means more surface, claiming.
Often with a preference for a disposable cleaning solution versus a funky spawns dingy coffers suspect mop.
Leading to increased consumption bounty swiffer and Mr clean.
In late February we launched micro band 24, and anti microbial technology that keep services sanitized for up to 24 hours when used as directed.
The power behind microwave and 24 as a multi layer protective shield that binds the bacteria fighting a great gradient to the surface as being cleans, even when contacted multiple times healthy homestay cleaner and more hijacked longer.
We've been working lockstep with governments around the world.
To ensure we can continue to operate enabling us to help people and their families meet their health hygiene and cleaning needs.
Our operations or brain resilient.
As of today are 108 manufacturing plants, along with our networks of external suppliers are broadly operational.
With only a few and modified capacity as a result of regulation.
Workforce travel restrictions curfews material availability or quarantine needs.
March was a true test for our product supply planning and logistics organization, which they passed with flying colors.
We set records for volume of product produced and shipped.
Our largest five north American plants produced and shipped 22% more cases in March and the average of the prior 12 months.
The PNG supply organization delivered similar records across Europe, Latin America, and other parts of the world.
Incredibly impressive.
Moving to the next priority PNG as a long history of supporting communities in times of need.
What's the products, we produce and other forms of supports.
CNG donations of products and cash or significant.
And we'll continue to increase as we work with communities around the world to support their efforts to help people through this crisis.
Millions of PNG products are being donated helping to ensure that families have basic access to the everyday essentials many of us take for granted.
We're partnering to provide additional support with some of the world's leading belief organizations.
Including the International Federation of Red Cross Americares and direct for lease.
On T. regional organizations, such as feeding America, Matthew 25 ministries trying to use development Foundation.
One Foundation, the Korea disaster Relief Association.
Hi, good way and many others.
We're working to protect healthcare workers and first responders.
The United States Center for disease control is issued guidance recommending proper shaving when wearing and 95 and similar respiratory mass.
In order to ensure a proper mask set for maximum protection.
So I just donated razors around the world to hospitals and other facilities to protect the people working to care for others.
We've modified equipment to produce hand, sanitizer, a nearly a dozen manufacturing sites around the world.
Usually that to ensure our people can continue to operate safely and sharing it with hospitals health care facilities and release organizations.
Colleagues in architectural plant and it in Italy volunteered to create an extra shifts to produce surface cleaning <unk> sanitizing products that are being donated to 70 hospitals across that country.
Work is underway to produce critically needed nonmedical face masks, we're already up and running in China in the U.S.. We currently have teams work into assault additional capacity in every region of the world and will quickly began production in those areas in coming weeks.
When fully operational we expect to be producing more than 10 million masks per month.
We'd leverage PNG, R&D engineering, and manufacturing <unk> ability to quickly produce face shields in Boston and Cincinnati, which are currently being used in hospitals in calls at 19 testing centers.
We're using our marketing communications expertise to encourage consumers to support public health measures to help flatten the curve and slow the spread of the virus.
PNG is committed to the priorities of ensuring their health and safety of our employees maximizing availability of products and helping society overcoming the challenges of the crisis.
Our strategic choices remain the right ones and serve each of these priorities.
Portfolio of daily use products, many providing health hygiene and cleaning benefits and categories, where performance plays a significant role and brand choice.
Superior science based products delivered with superior packaging at retail execution.
Consumer communication in value and all priced here's where we compete.
As you know we've made investments to strengthen the long term health and competitiveness of our brands and we'll continue to want us to extend our margin of advantage and quality of execution improvement options for consumers around the world.
The <unk> strategic need for this investment the short term need to manage through this crisis and the ongoing indeed to drive balanced top and bottom line growth, including margin expansion. Each underscore the continued importance of productivity.
We're driving cost savings.
And efficiency improvements in all facets of our business in our second five year 10 billion dollar productivity program.
Cost productivity and cash up and down the income statement that across the balance sheet.
Success in our highly competitive industry requires agility that comes with a mindset of constructive disruption.
A willingness to change adapt and create new trends and technologies that will shape our industry for the future.
In this environment that agility and constructed disruption mindset or even more important.
I'm going to be even safer well, both producing at helping more.
What new needs must we meet and what new ways.
And ongoing mindset of construct a disruption and disruptive possibility.
Our new organization structure six industry days sector business units at manage our 10 product categories with a differentiated approach in focus markets and enterprise markets and very small corporate groups with best in class function expertise is serving us well.
A more empowered agile and accountable organization with little overlap or redundancy.
Going to new demands seamlessly supporting each other to deliver our priorities around the world.
These strategic choices, we've made to focus and strengthen our portfolio and daily use categories, where performance drives brand choice to establish and extend the superiority of our brands.
To make productivity is integral to our culture is innovation.
To lead constructive disruption across the value chain and to approve improve organization focus agility accountability or not independent strategies, they reinforce and build on each other.
As we said at Cagney the best response to the uncertainties and source of volatility we face is to double down on this integrated set of strategies, which are delivering very strong results.
These integrated a mutually reinforcing strategies are a foundation for strong balanced growth and value creation.
The best response to what we're challenged with today is to push full award Nox to pull back and that's exactly what we intend to do.
I'm wondering I would describe how this approach has played out in the quarter. We just completed and how we think it could play out across both the longer term and the arguably more challenging short to midterm.
First as I said strong results in the January to March quarter.
When we spoke with you at the Cagney Conference on February 20 us.
He said that results for the January to March quarter in China and for the total company will do materially impacted on both the top and bottom line by the dynamics affecting the market in China.
Remember at that point in time covert 19 was really just a China and travel retail issue.
Korea had reported only 50 cases.
The U.S., Japan, Italy in Iran. Combined had reported only 30 cases.
15, 10, Threed and Twod, respectively.
I Cagney, we were internally expecting organic sales in greater China, our second largest and second most profitable market to be down as much as 20%.
Through the incredible efforts of our organization, we did much better than we were expecting a greater China.
Down only 8% excluding travel retail.
We saw strong lift in our categories in E commerce to make up a portion of sales lost enclosed physical stores.
We quickly restored production capability built share as a result and are now operating and that's very close to full strength.
As a pandemic unfortunately developed in the U.S. and Europe as the quarter progressed demand surge.
We finished the quarter with organic sales growth of 10% in the U.S., 14% of Canada, 6% and European focus markets, 15% of European Enterprise markets and 11% in Latin America.
Cagney, we were internally projecting Q3 organic sales growth for the company of around 2%, we delivered six with nine of 10 categories growing organic sales.
We built aggregates share despite temporary out of stocks on some of our highest demand items.
While we don't have filed U.S. all outlets share through March share results untracked channels through March show broad based growth.
Fixed respiratory products were up more than four points.
Metamucil and have to Bismol up three points.
Oh lay moisturizers and Worldview power toothbrushes up more than two points.
All those pads always discreet tampax tied dawn Cascade, Insulet blades and razors, each up a point or more.
Pants, he'd head and shoulders old Spice native secret crest, Mr clean gain a bounce each growing share.
As you can see in the tracked channel data our share declined recently and baby and family care categories, due largely to out of stocks and our high demand brands.
We're pushing production to its limits, but we expect share softness to continue while consumer pantry stocking remains at extreme levels.
In China, we built share and offline stores and in E Commerce.
Safeguard insulet delivered strong share performance in both channels head and shoulders was particularly strong offline and a lay whisper and peppers posted solid online share growth.
Topline results this quarter, obviously benefited from consumer pantry loading in preparation for in home Quarantining.
We're planning for pantry inventory levels to eventually return to normal.
This higher level of consumer demand was served with our ramp up in production levels.
And the depletion of retailer inventories.
As at home inventory decreases we expect to refill the retail inventory pipeline.
We believe the net effect of all the shifted about two points of sales growth on a global basis from Q4 into Q3.
Back to Cagney, we were expecting a slight decline in core earnings per share for the quarter. We delivered instead of dollar 17 per share an increase of 10%.
The significant volume of sales increase related fixed cost leverage and our ongoing productivity efforts more than offset a growing FX challenge and higher virus related operational costs.
Commodities also provided a benefit.
Core gross margin up 120 basis points, excluding currency up 130 <unk>.
Core operating margin of 100 basis points currency neutral core operating margin of 180 basis points.
Core earnings per share up 10%.
Currency neutral core earnings per share up 15%.
$4.1 billion operating cash flow adjusted free cash flow productivity at 113%.
Returning $2.8 billion in cash to shareholders 1 billion or does it 1.9 billion or dividends and $900 million and share repurchase.
So January March 6% organic sales growth, 10% core earnings per share growth honored and 13% free cash flow productivity building share.
Fiscal year to date, 6% organic sales growth, 16% core earnings per share growth over 100% adjusted free cash flow productivity.
Building share.
Just two days ago, we announced a 6% increasing our dividend.
Reflecting both these results and the confidence we have in our future.
This was the 64th consecutive annual increase and the hundred and 30th consecutive year, which PNG has paid a dividend.
So that's January through March or fiscal year to date very strong results in very difficult conditions.
Shifting to longer term.
We remain well positioned to serve consumers and create value in a very attractive industry.
And as I said previously our strategy to do this is unwavering.
Consumption of our products is not likely to dissipate.
In fact, the relevance of our categories in consumers' lives potentially increases.
We will serve what will likely become a forever altered health hygiene, including focus for consumers, who use our products daily or multiple times each day.
There may be an increased focus on home more time at home more meals at home more cleaning of homes with related consumption impacts.
The importance of noticeably superior performance potentially gross.
There's potential for increased preference for established reputable dependable brands. That's all newly frame problem is better than other alternatives potentially less experimentation.
Potential for a lasting shift to ecommerce belt Etailers, an omni channel.
Our experience to date makes us believe we're generally well position in this environment.
Increased demand has focused retailers on the core SK use that drives the business.
There's potential for this to result in a cutting of the long tail of inefficient skews and brands and our categories.
We're discovering daily lower cost ways of working with fewer resources.
Todays necessity birthing the productivity intentions of tomorrow.
New digital tools are being brought to the forefront providing another productivity rocket booster on the factory floor and and the office environment.
So in the longer term, we believe we're relatively well positioned to serve consumers height needs and their change in behavior.
The serves the needs of our retail and distributor partners across channels and geographies.
And to create value.
In the short to midterm outcomes are frankly anyone's guess.
Epidemiologist still have wide variations and their best and worst case scenarios for Bible spread mortality the shape of duration of the curve.
We may see bonds of sporadic production suspension due to local quarantines or raw material supply.
It's not just our operations that matter here as those of our suppliers of contractors and of our transportation partners.
A lot must go right in a very challenging environment and not all of it will.
Customers may close stores.
There will continue to be extreme foreign exchange and commodity costs volatility.
Added operational complexity will result in higher costs.
Unemployment will impact outcomes, perhaps severely.
All of this occurs on top of what was already unprecedented uncertainty and volatility in our categories and markets.
But as you saw in the development of the business in just five weeks from Cagney to March 30 Onest.
And as we've just talked about in our long term outlook, where there is volatility there are opportunities to serve as well as challenges.
There's a very wide range of possible near term scenarios and its futile spend too much time trying to assign probabilities to each.
We'd be fooling ourselves and fooling you to try.
As we stand here today, though we continue to believe our guidance ranges for the fiscal year.
On both the top and bottom lines remain relevant.
Our internal forecast remain within these ranges, but I must again emphasize ranges and I must again emphasize the degree of uncertainty and volatility we face day today.
We currently expect organic sales growth for the year in the range of 4% to 5% assuming continued operations at our facilities and those of our customers and suppliers.
On the bottom line, we're forecasting core earnings per share growth in the range of 8% to 11% for the year.
This to assumes no significant interruption the extended supply chain through our retail and distributor partners.
This earnings per share range now includes over $400 million of after tax foreign exchange headwinds.
Just sense Cagney FX has moved against us by approximately 10 cents per share over two percentage points for core earnings per share growth on a year.
In the fourth quarter FX is currently forecast to be a seven point hit to core earnings per share growth.
Please recall that our fourth quarter Bottomline comps include the earnings gains from the Boston land sale and the divestiture of two oral care brands in the base period.
These items combined or an additional seven point headwind to core earnings per share growth Q4.
Well, we do expect some mid term benefit and commodity costs on the recent decline in oil prices. It usually takes about six months for movements in feedstocks like oil to make their way through the raw material supply chain and our inventories to our piano.
No. We don't expect an offset to FX headwinds from lower commodity cost within this fiscal year.
As a result of all this you might rightly guess that were closer as we talk today to the bottom end of the earnings per share guidance range than the top end.
Let me also go back quickly to our priorities and know that none of the three include hitting quarterly consensus estimates.
We will be focused on serving colleagues consumers customers communities.
Building our business for them any more months that will follow this crisis than the months that will exist within it but.
But we'll do this responsibly and keep our choices squarely centered on mid and long term value creation.
We continue to expect adjusted free cash flow productivity of 100%.
We'll extend our long track record of significant cash generation and cash returns expected to pay over seven and a half billion dollars and dividends share repurchase in the range of $7 billion to $8 billion in fiscal 2020.
I will provide our first outlook for fiscal 2021 on our yearend call because we typically do in July.
Before turning to your questions I want to address just two items I expect on your minds.
The first is liquidity.
Our liquidity saddest remains very strong.
Well 183 year old company this year, and we take a long term view to balance sheet management.
We aim to maintain our double a minus credit rating and to manage within the ratios that support that rating.
With a 5 billion dollar term issue three weeks ago approximately 3%.
We now have $15 billion in cash on hand, and are generating more each day.
We continue to have open access to the U.S. commercial paper markets recently issuing over $3 billion on three month paper as a part of our routine and financing efforts.
The amount of debt maturing in the next 18 months as well with an anticipated cash availability.
And while we don't expect to need to draw on them, we have $8 billion and bank credit lines available if needed.
That's credit very strong.
The second topic is recession.
We're assuming it's already here and will be here for some period of time.
Well, we're not immune our current strategy puts us on better footing than prior downturns to weather economic headwinds.
Our portfolio is now focused on daily use items, where performance drives branch voice.
We have much less exposure to discretionary items than we had during the last downturn.
We've increased the superiority of our offerings simultaneously increasing their value.
Well not perfect we have stronger entries across price tiers.
Better pricing ladders.
We're emphasizing performance based value messaging will serve with relevant pack sizes designed to hit key out key cash outlay thresholds for consumers, who need to make week to week purchase decisions based on cash availability.
Our productivity muscle is now well developed.
None of these make us recession proof, but they should each help.
Summing up the men and women to PNG working together have delivered three very strong quarters, averaging 6% organic sales growth.
16% core earnings per share growth in over 100% adjusted free cash flow productivity.
We build market share.
Our board has increased the dividend 6%.
Reflecting both strong results and confidence in the future.
We really do believe there is a very bright future ahead.
Well managed to short to midterm consistent with the strategy, we've outlined many times and against the immediate priorities of ensuring employee health and safety maximizing availability of our products to serve health hygiene and cleaning needs and helping society overcome the challenges this crisis.
We're stepping forward not back we're doubling down to serve consumers in our communities. We're doing this in our interest in societies interest and in the interest of our long term shareholders.
Well, we may not see when person soon we look forward to engaging with you on the phone and would love to hear your voice.
We are here with you in our here for you.
Feel free to color offices, if you normally would our phones no where to find us.
With that I'll be happy to take questions.
And gentlemen, if you have the question. Please press star followed by one on your phone.
Your question has been answered or he would like to withdraw your question. Please press star followed by too.
Your first question comes from the line of Steve powers with Deutsche Bank.
Good morning, John Thanks for the comprehensive update.
Clearly that's kind of question I guess, maybe we could start with just a little more detail on what you're expecting in terms of the shape of the man book consumption shipment wise, we hadn't for fourth quarter, especially in the U.S. where.
It appears shipment fly consumption in the March period, it sounds like you're expecting a reversal that in the coming quarters. This more color there.
Well, it's China, where whereas we say things seem better on trend versus where you thought they'd be in February and then I'm also curious it building on your final comments there around preparedness for coming recession I guess, if you. If you think about where you are in your fiscal 21 planning process can you just give us a little insight as to.
How.
It's been an abrupt change but in terms of PNG.
Planning preparedness, how recessionary planning has factored into you know into your your thinking a more on a on a run rate basis. Like are you I guess the question for investors are your scrambling to put in place the recession playbook or is this something that PNG.
I'd been factoring in and and you.
You know considering for sometime.
Yes.
Thanks, Steve as relates to the fourth quarter, there or is your readily appreciate a ton of moving parts.
Geographies are in very different places in the cycle categories or.
Have a different levels of need and demand [noise].
There's the supply situation and then there's the retail inventory dynamic as well as consumer pantry dynamics and again, you multiply that by.
100 countries around the World and then 10 categories and many more brands and you realize.
But you did you probably don't have the answer.
As we were sitting together at Cagney five weeks ago, I don't think any of us a in our conversations would've assumed how the next five weeks would've would unfold.
And I don't pretend to know how the next.
Eight to 10 weeks, it's going to unfold.
Having said that.
Or you mentioned, China Oh.
Our business there is rebounding nicely both front from an operation standpoint and.
From a consumption standpoint, or we are seeing a continued significant demand in our categories and the.
The supply and retail inventories are being a steadily rebuild.
In the U.S. and I focus on these two markets because as you know there are our largest markets that should give you some relative field.
April has started off a very strong double digit rates from an order standpoint.
We expect that to a tail off as the lines, our sex between retail inventory restocking and.
Consumer demand, but having said that we are definitely seen increased consumption levels, not just increased buying levels to put in pantries.
I mentioned that in the U.S., we're seeing an increasing the number of loads of laundry that are done per week. The number of garments that are cleaned after one wearing.
With much more in home meal preparation, there's a lot more cleaning or that needs to be done and we're seeing consumption for example at home consumption of.
Cleaning AIDS or whether that's a surface cleaners or paper towels for swift for continuing to be very very strong our home care business. If I have my numbers right was a double digits and in sales and that's a following are in line with similar we're seeing in terms of consumption.
No [laughter], having said all that sorry for the long answer, but there's no short one.
We.
Have never faced.
The level of unemployment that were likely to see in this country and potentially and others.
And we don't know how long that will occur for.
We've never faced a complete shutdown of very important.
Channels of Commerce, whether that's a travel retail whether that's the electric channel and Europe.
Whether that's the specialty beauty channel so there's a huge amount of oh volatility.
We are likely to experience and we'll learn more every day.
Our fourth quarter sales.
Guidance deductively, given fiscal year to date results and our fiscal year guidance.
As minus two to plus too.
As I indicated in my prepared remarks, the pull forward from.
Q4 to Q3 was about two points, so that minus two to plus two on an apples to apples basis is really zero to four.
And while that may not seem like a lot given a six year to date.
Recall again, a number of things one it's our highest comp period, so last year organic sales by quarter Bill for four or five and seven.
But to we'll have a full quarter of the impacts of these channel closures and store closures.
Three we'll have the inventory dynamics, however, those net out that I described.
So when you put all that together [noise].
You know a zero to four accurate I I doubt it but it's it's representative of the combination of all those dynamics.
So it so that's the best number we have.
And again I apologize for the length of this answer, but it's it's not a satish topic that <unk>.
Lends itself to simple formula.
On a recession and recessionary playbook I really do believe.
Oh that we have made major steps as a company.
Since the last recession that significantly improve our hand.
Whether that's productivity.
Whether that's a focus on superiority, which is critical because it's it certainly price points matter and we're prepared to address that.
Overall value proposition or really matters and at a time when a this heightened concern about the need for a product to work it'd be efficacious as I take care of my family and my home.
That the superiority plays an even bigger role. So they did changes we've made there I think will put us in much better stead I talked about the portfolio and the difference in the preponderance of our.
Of our products serving needs on a daily basis versus much more discretionary portfolio.
And not not daily use based in some categories that weve divested.
So this is a playbook that we've been developing for both good times in bad times.
Month by month year by year end, I really do believe where we're at a better position.
Having said that when something submit significant like this happens.
Would it be right or to sit back and assume that we've got a cover.
No. So we are making very deliberate plans business by business market by market.
To ensure were as well positioned as we can be there there will be changes and there will be adjustments and they won't always be right or will have to.
We remain agile and learn how to justice we as we go.
Next question will come from the line up Lauren Lieberman with Barclays.
We think it down.
I mean, obviously could talk a little bit on you mentioned you know didn't you are looking at production I'm kind of it. So he is starting to talk about thinking through change again in Parkside and affordability.
But it's not the I'm wondering about promotional spending and they you know we've heard certainly can come at a few companies already I'm thinking about you know promotions more lacking for being shut down you Act and that's happening in Europe.
Government mandate.
So how should we think about pricing going how were you didn't spend that standpoint as you.
You know compete team getting their promotional landscape didnt normal everyday kind of added staff count one area of question. Then you have anything is curious about it we haven't talked much about emerging markets outside of China.
And just thinking about I'm just diary.
Hey, you know they've spread than it had a bigger impacting tenant your enterprise you mean market [noise].
How you maybe planning for that or what kind of built into the how fast you know beyond the next.
I'm pick him I'm getting worse in emerging markets. Thanks.
Thanks Lauren.
HM.
The promotional dynamics in our categories are changing pretty significantly just as they are in a food and beverage which you referenced.
[laughter], it's really nobody is interest to be.
Promoting products.
Well when you don't have them, a when there's not a sufficient inventory to supply demand.
So if we look at for the full quarter.
The amount of ER volume in our categories or the percentage of sales that moved on promotion that's down about five points.
And obviously that number would be much more significant in the month of March.
I don't I don't really know how that will develop going forward, but certainly a if I have to guess there'll be less promotion.
In the next couple of quarters or where the the job as restocking and replenishing.
I'm done had been the case historically.
Price in the in the quarter was a net benefit of plus one.
And you know if I look back over the last 30 quarters prices typically better benefit of one to two sometimes very rarely, but sometimes the zero or minus one.
Sometimes a little bit more than that range, but it's it's pretty much in that range.
And as I mentioned, our strategy is unchanging I'm, so on innovation based strategy.
You know.
I don't see any reason why just there'll be a dramatic change and the contribution of price.
Particularly also because you have significant currency devaluations in many parts of the world where are some amount of pricing will be needed overtime done appropriately and sensitively.
To recover cost structures and in those markets.
Right now you know and emerging markets outside of China.
We're we're operating and thinking rightly or wrongly day by day because situation changes dramatically.
India as a good example that market is effectively.
Shot.
And we'll be at least through the end of April.
We're working with governments as I mentioned in my prepared remarks to establish.
The essential nature of our product categories for their citizens and therefore, a gain the ability to operate which we largely have that's been a significant focus area over the last.
Five weeks and its and its a daily.
Endeavor.
And then once we establish our ability to operate we that we then have to source materials and we have to ensure that employees can get to work.
It sounds simple, but as anything but.
For example go back to India again.
There's a prohibition on any transport.
People are across state lines.
And you can imagine it wouldn't be unusual that we might have a plane or two that are located close to a state or.
Then you might imagine that some of the people that work in that facility with on the other side of that line.
So that's just an example of kind of the level of operational.
Agility or that were having to to execute in order to continue operator in the Philippines.
We had to basically.
Secure access to a dorm.
Our next to our production facility in which to house and and.
Protect employees as a condition of operating.
So so we're not.
Ah that far out.
Our thinking about how to operate in these markets right now it's it stay today.
It's a question will come from the mine have done most anything with Morgan Stanley.
Hey, good morning, John hope or as well in Europe.
I'm, so I just want to spend some time on your marketshare expectations going forward that the comments were helpful. In terms of thinking about a recession and can you guys. It had a lot of market share momentum over the last couple of years, particularly in the U.S.
Can you just discuss the forward puts and takes if you think about acos who bid environment.
On your market share and specifically what it was most interested in what is consumer trade down risk in your mind.
And then also in emerging markets as you think about covering FX pressure there with pricing.
You know relative to local competition can you talk about how marketshare dynamics would play into your thought process there. Thanks.
Now some real positive developments for market share standpoint, as I walked you through over the last Ah Ah quarter and no reason for those underlying trends I'm not to continue.
Particularly when they're based on again performance advantages at a time when performances required more than ever.
Will there be a trade down pressure.
Oh, I don't know, but I think it would be solely to assume none.
And will there be.
Some share pressure as a result of pricing moves that need to be made.
Undoubtedly there we're going to be very.
Careful in terms of Ah pricing that we do take it on emerging markets and likely tie that much more closely to local inflation.
Then we would to you know the financial markets are on currency and as a result of shouldn't count or fewer issues relative to competition.
Than we would if we were just pricing to a.
The currency conversion number.
The biggest pressure on shares in the near term.
There is none of any of that.
It's the ability to supply very very high levels of demand in some categories.
I mentioned two categories or in our prepared remarks family care, which is our bounty and Sherman business.
And and baby care.
And let me just described briefly similar dynamics that occur in the family care category as an example.
Oh, we can see a scenario where.
Our business continues to grow as strong double digit rates and we lose share.
Oh, that's because the market is growing at an even higher rate than that.
Many of our competitors in that business source, the industrial or commercial market.
As well as the consumer market our business is entirely focused on the consumer market.
Those companies have the ability with what is largely a shuttered hospitality industry. As an example to move production from industrial or commercial focus to the consumer focus.
Don't have that excess capacity or to make that move.
So our throughput is up a significantly on a per line basis to results are going to be very very good, but we will probably in that context lose some share.
So what I wouldn't expect going forward and I'm here I'm talking about the next three to six months.
He is a continued steady.
The increase in share levels, but I also wouldn't expect.
You know a significant diminishing of our position.
We're committed to not have that happened and we talk about that actively but there will be more volatility and the share numbers just because of all the ER.
The market dynamics that we're trying to manage.
Next question will come from the line of Wendy Nicholson, let's see.
Hi, Good morning, two questions first pretty straight forward on micro band. It seems like you know great tiny to have launched that's what I'm surprised you had an expanded it to.
More a consumer centric I think as opposed to professional so any plans. There I also noticed that you don't sell like are banned whites, which seems like a category thats just going to be bigger growth year for a long time to come. So can you just comment on why or why not you might enter that category and what can you talk about just ecommerce generally.
Hi to sort I think the ecommerce channel is no different than its everything other second order retailers, but maybe can you talk about I don't know that I heard how much it grew in the quarter or whatever what percentage of business. It was in the corner on its definitely anyway. Thanks, so much.
Sure when they let me start with the second part of your question ecommerce business grew about globally about 35% in the quarter.
Let's now about 10% of our business globally as we've talked many times previously we view ourselves is very well positioned within that channel and continue to strengthen that position.
The two largest sources of growth by far our the U.S. and and China.
With some categories growing in E commerce in those two markets as much as a 50%.
And obviously that the the at home dynamics and the unwillingness to [noise].
Congregate and the physical stores is driving a fair amount of that we'll have to see where that nets out, but I don't think it all goes away I think we've seen a permanent shift.
And the percentage of business, that's gonna be done and E Commerce, and we view that positively and when I talk about ecommerce I'm talking broadly, including Omnichannel you know.
Click and pet and all all forms and variety.
Of ecommerce.
Micro ban is has a wonderful fantastic product, we were serendipitous and in terms of our launch timing.
We are.
At full capacity at this point and are focused on.
The products, we currently have their markets ER and the channels that we're currently operating in but obviously, we'll work to do all that business to its full potential and I could include a number of different avenues of pursuit.
Next question will come from the line of Olivia Tong with Bank of America.
Great. Thank you Mike John.
Two questions here.
I think about <unk> product what about timing.
I might be getting contract, while others get pushed out a promotional strategy hasn't mark and I will turn out because obviously Martin.
We couldn't do their job right now and then secondly in terms of margin how did the current environment help or hurt margins because the category, but I'm moving are typically lower margin the commodity can obviously come down.
Motion.
In that category.
But any other hand, FX is more or something like that the country down to just those two area.
Okay. Thank you.
[noise]. So we obviously saw positive margin development and the quota. We just completed we've seen positive margin development Ah fiscal year to date.
Our guidance would imply positive margin development for the fiscal year.
And as we talk about a balanced growth and value creation I've explained many times that it's not possible to get to where we want to get from a value creation standpoint, without strong topline growth and and margin improvement.
Yes, there are some headwinds, but they're also tailwinds commodities or as you mentioned should be a tailwind longer term.
And we've got our we continue our efforts on our productivity program as I mentioned in my prepared remarks, there's additional learning that's come out of our experience the last five weeks.
Ways, we might be I'm, even more productive both in generating top line sales and then.
Containing cost.
So my expectation is that are there continues to be a level of margin improvement going forward.
In terms of product launch and <unk>.
We're in the Middle now is going through each category and determining one other or any changes that need to be made.
Either.
Out of necessity or by design.
To maximize the impact of.
Of those planned initiatives.
And in terms of how products are brought to market I don't see.
Really significant changes.
You know there's there's for example, there's more media consumption that's occurring.
Right now.
Then probably there has been in the last three or four years.
So changing that model doesn't doesn't really make a lot of sense and by media I'm talking about not just TV, but but digital consumption as well.
So I don't I don't see significant changes there I think are our model with some.
Adjustments will continue to be a relevant and effective and then we just need to look at a time in by initiative, but I wouldn't expect the net of that exercise either.
To have a significant impact on our ability to continue to grow.
Your next question will come from the line that Steve Stricker with CBS.
Hi, good morning, and congratulations on being able to raise the dividend then period of time like this and deliver consistency of results [noise] <unk>.
John I had the question I appreciate that the company's pivoted involved this portfolio to more daily use products over the last decade, but could you help us for the products in still had in today's portfolio. How did the organic sales really performed during the financial crisis for those products that are still in the portfolio team in a quick follow.
I don't have a category by category analysis of that I, just haven't had time to get to that.
It's a very good question, but what we do know.
And Weve refresher learning on over the last five weeks.
Is what's happened to market sizes.
In our categories during times of recession, and as theirs are readily understand our categories are not immune from recessionary impacts, but there is much less sensitive to that dynamic them.
Most other categories across.
Industry and so if we look at recessionary periods of the market.
Has typically contracted in terms of its growth rate. So it's continued to grow.
But as contracted maybe a point.
So the other question becomes okay. One can we do anything about that are I think we can.
To what's your relative position within that market and the are you well position to to at least hold your ground.
If not build your position.
And again I feel better about that but I have at any time in our recent history.
That doesn't mean that there won't be categories that from a market standpoint or aren't impacted more than others and that doesn't mean that there won't be individual situations typically at a brand or category country level.
Where are we in fact do do some share but.
I mean put it this way as we think about our planning for next year.
Oh, we're not giving ourselves and they break.
Relative to a share we expect to hold them and build share.
Thanks for that and then just a quick follow up for emerging markets I'm not asking about the month of April taking a longer term view here, but in a marketplace were made in some of the points of distribution are temporarily shuttered and consumers are being impacted by the macro.
<unk> batch that Volumetrically <unk>.
Also personal care products as an industry should be able to grow during a period like this the volatility and what can you guys. Do then proctors capability to really execute under that type of environment. Thank you.
Oh, absolutely we should expect growth in these markets absence, you know physical barriers either regulations or operational barriers that prevent product from getting first into stores and into markets and into consumers.
Yes.
[music].
You know, it's not a that's not necessarily a harbinger for future, but I mentioned.
Latin America as an example, growing 11% in the last quarter.
The fundamental drivers of that demand remain as we go forward.
In terms of or our ability to capture those opportunities our strategy and emerging markets is fundamentally the same as ER and it's been it's been working very very well from both the topline standpoint on a in a bottom line standpoint by the set by the same I mean, I focus on superior products and Dale.
We use categories, where performance needs brand choice delivered as productively as we can we still have lots of opportunities.
To improve in in that context with excellent communication.
Best in class a go to market execution. The playbook is this the same and works and enterprise markets.
Especially in will come from the line of Jason English with Goldman Sachs.
Oh.
Hey, good morning folks thank you for sliding in.
John you've covered a lot of ground I appreciate that they're on it so lucky as to dive into a couple of business with some of them. We've got the possible [laughter] first you you mentioned that travel retail has been at them more challenging.
Can you contextualize, how large is it for you as a percentage of settled and how it performed last quarter and what you're seeing more recently and secondly in terms of resolves grooming list was a bit of US applies to mean you mentioned the press release and weakness in North America, maybe I missed it but I don't think you called out lot in prepared remarks can you touch on what's happening.
Grimly businesses.
[noise] sure. Thanks.
Let me start and a slightly different place, but get I will get to year end points.
The beauty business generally and which is a primary business that's sold in a travel retail.
Continues to perform very strongly we had our 17th quarter of organic silk consecutive of organic sales growth and duty and what is arguably the most difficult quarter, we faced in a long long time.
Really significant and positive growth across almost all parts of the portfolio.
So we overcame a in the quarter.
A greater than 20% reduction and SK to sales with solid growth in our other categories.
The travel retail business specifically.
As round numbers a billion dollar business that's gone.
Its gone because there's no travel.
Having said that <unk> that the <unk> products that were bought in travel retail were consumed in markets.
And our job needs to be to make up for that travel retail loss in the near term.
By serving those markets and worse. We are for example seen significant uptick already on SK to consumption purchase and ER in mainland, China, which was one of the big sources of the travel retail demand.
Source, so generally performing very very well and beauty and we'll continue to open. It you know that the S.K. to any impact well have for a full quarter now going forward for the next three quarters in all likelihood. So the challenge will become greater in terms of overcoming that.
But were going up in a pretty good position to be able to till at least make progress in that direction.
From a agreement standpoint, a we've built share during the quarter, a global basis, which is great and follows on a number of periods in a row now of share gross.
For the global grooming business.
But the biggest challenge we face on a phase two challenges in grooming currently one is <unk>, which I I'm.
Just.
Well actually I have no I've talked about it doesn't matter.
Is the closing of the electric channel in Europe, where.
A large amount of Braun products were sold.
Then also effects by the way, our or power oral care business, which also.
Utilizes about channel [noise], but presumably as soon as that reopens, which hopefully will be soon that that challenge dissipates.
The other challenge is is lower shave frequency, while working from home to put it bluntly.
But.
That's something we're we're currently working through as I said, we've built share we want to maintain our share position.
Well you need to work with our retail partners.
As well who have in some cases de prioritized grooming and the very near term to.
To deal with the empty shelves and some of the other trials in the store.
You know if we can do that effectively.
No reason, we can't continue to hold and build sure.
Next question will come from the line of Andrea to share with JP Morgan.
I think there now we see continued how that's all of you and it's called young I appreciate the bridge underlying the old stuff up with some globally and it gets to think about the puts and takes by region. Why the team comes on the peak happening Simon I think you alluded a little bit on the call I mean, theres many beauty in baby there.
Do you have to stop the E. By my math 80 basis points that I know that took quite soon flat or what would be at bogs. Again, you know took four range that implied and also question on mix improvement in skincare globally and in China coming back on how the mix of Fab, which I think was flat in the quarter.
I just completed but typically the way that he just said how debate and spoken about thank you.
So definitely relative to the quarter that we just completed a China offers upside quarter to quarter sequentially and I expect that upside is a significant [noise].
I would see us growing that business ideally at very healthy levels at precrisis levels ideally.
And and the subsequent quarter, which you're right would get it give a lift.
Or to the zero to four or kind of logic.
We are seeing at least in China or mix come back and pre crisis levels from a positive standpoint, I mentioned the strength of the the S.K. to restart as an example, so.
So that also was a positive but remember.
We have massive challenge ahead of us collectively.
In the U.S. and Europe, depending on how the economy develops I mean, we literally since the great depression had not managed with the level of unemployment.
We might see.
I'm sorry, if the question behind your question.
Is is there upside to the zero to four <unk> I would encourage you not to go there.
Next question will come from them I know Nik Modi with RBC capital markets.
Hi, good morning, everyone.
John It's pretty clear looking at the data that you know consumable unlikely back big brands now that could be because of the ability or just safety and completed warmed up and getting but I'm. Just curious on two pumps wanted kinda had you been interacting because you know how do you think there's not going to shake out in terms of how they think about taking one band I think you made some comments.
Earlier in your prepared remarks on that but any specifics of the it'd be helpful. And then the second thing is in a lot of trial happening right now for a lot of Grand but maybe consumers may not a pride in some of your brands and so I was just thinking about proactively like what Procter and Gamble can do to kind of quick sticking with that some of that trial going forward.
Thanks.
The [noise].
I'm going to focus my comments on the on the U.S.
There has been active partnership very active partnership on the part of ourselves in our retail partners.
To ensure that to skew lineup.
That exist in stores today.
Ah maximizes throughput.
All with the design to best serve our consumers and their shoppers.
To ensure the product is available.
So there's been in some categories a fairly significant concentration.
Skews.
On the on the power skews that that generate the most.
Movement.
We're not at a place yet as I mentioned where are we.
Retail inventories have been sufficiently replenished.
So for them for the near term.
I think this dynamic or continues but they and we are very focused on.
I'm staying in touch with consumers and consumption and what they demand and that will ultimately be the driver of our skew line ups and I don't see situations, where our retail partners and ourselves will will view that are very differently as long as we keep our eye on their shopper and ER and our consumer.
And our skew portfolios will need.
In order to fully sort of consumers.
So we expand.
I don't think it necessarily goes back to.
The everything that was on the shelf previously I think this is a reset opportunity for us and for our retail partners and I'm encouraged by the conversation so far in terms of.
Approaching that in a in a constructive.
Partner fashion.
But the trial dynamic that you mentioned.
Unfortunately works both ways.
So I gave you. An example for example in and family care.
There.
Their consumers that are trying products that they haven't tried before but there aren't necessarily hours.
And we need to work hard to ensure that we maintain mental and physical availability.
So the greatest extent possible so let those consumers return.
Two there the loves and trusted brands, which are ours as they're more fully available.
On the other hand, you're right, there's there's there's big upside here.
In Turkey in terms of reminding consumers of the benefits that they've experience on our brands and how they serves their and their families needs, which is why this is not a time to go welfare I've talked to several other companies.
Different industries now who are viewing this as a time when when we should be cutting back on support obviously, if you're in a industry that doesn't.
Operator in this environment that makes sense.
But but in ours I mentioned more media consumption now than ever.
Youre a trial retention points builds on that.
And this is at all ties back to the comment I made several times in her prepared remarks about doubling down.
And moving forward not backward this is not a time to retrench.
And really that's all you know in service and service to consumers and service too.
Our retail partners and we believe in service to a broader society.
Next question will come from the line of Kevin Grundy with Jefferies.
Hey, good morning, John Congratulations on strong quarter, particularly the current environment.
I wanted to come back to longer term implications for consumer behavior.
Given the nature of the current recession increased working from home and social distancing and what this is going to mean longer term you touched on some of it so positive for cleaning products and fabric care potentially negative for categories like blades and beauty with people working from home. So I wanted to come back to do is it as you see.
What are the longer term implications versus those that are more transitory how those conversations doing internally.
You organization balancing near term objectives, given the challenges in the current environment versus potentially modulating the playbook your bid with what could be longer term structural changes to demand in some of these categories that additional thoughts there would be helpful. Thanks, yet.
We need to stay very close to consumers and their habits needs and desires are more now than ever.
Just because we're at change points in their habits and their consumption levels, and we need to understand those and be responsive to those.
We actually meet as a.
As a portion of the leadership group three mornings a week at seven o'clock.
And one of the things that we're very focused on at that meeting is what is changing relative to consumer need and making sure I mentioned skew portfolio is one example, but making sure that we're positioning ourselves to serve those changing needs as well as lead.
Possibly can.
I think the net.
In terms of demand to impact on our and total portfolio is clearly a positive longer term.
And I don't know when I say that I, almost I don't want to minimize for a second any amount of human suffering that's led to the situation.
But but we are seeing increased levels of consumption.
And in the majority of our product categories.
Even when we come to something like beauty remember I talked about how this was the 17th consecutive quarter organic sales growth in a row.
And just to get to organic sales growth on beauty.
With a minus 20% plus number on SK too.
You have to assume very healthy purchase in consumption levels across the portfolio, which which were saying.
And I don't see a reason that that put that.
Wanes.
So generally I. Thank you for poignant again to the long term, which we view as.
We want to it it's just it's a trite an overused statement, but we really do well expect to come out of the stronger than we went into it we really do believe that there's a very bright future ahead and to your point, we need to be very deliberately.
Keeping ourselves aware of what those opportunities are and putting steps in place to be able to to seize those opportunities again really under the heading of fully serving consumers.
Next question will come from the line of Mark Astra came with Stifel.
Yeah, Thanks, and Marine John.
When I got to briefly on private label so.
How should we thinking about.
How you're thinking about what potentially happen brands versus private label as obviously unemployment increases your commentary what specific thing you think we should be watching for categories that are more susceptible than others or <unk>.
One of those that.
We've watched historically if so what are you concerned about what are things that we should be focused on it how do you think about that in terms of playing out this time around.
Generally so let me take you through [noise].
Recent trends of them.
Realize your question is more feature focus.
We're seeing modest increases in private label share in North America.
At the same time that we're we're building significant share ourselves.
We're seeing private label share declines a pretty consistently and Europe.
At a time when were Dolby and share there as well.
We can we can grow our business in our share and Europe's a Prime example, we've done it for years.
During a time when private label is is growing.
So that's the first and very very important point.
Second in terms of recessionary dynamics are those relate to private label.
I don't.
We see.
A number of different behaviors would have which affected overall equation. There are certainly a subset of consumers for home price becomes a significantly greater portion of their personal value equation.
And that will in some cases result in a trade down to private label.
Our job become means becomes having an offering an alternative for them that allows them to achieve the same objective within our branded portfolio and we have many more wrong. This in that pricing ladder now than we had during the last recession.
There are other consumers, who who move.
The other way.
Oh for home performance efficacy dependability.
I can't afford to be wrong.
I can't buy too.
So I need to buy the best results in a migration to branded offerings.
And that's different by category and by market.
But again going back to something Weve mentioned, a couple of times in this call I don't see any reason.
For us to have an expectation of ourselves.
That we hold their build share over a reasonable periods of time, I mean, given month or given quarter with different category given country.
Well have issues, but our expectation is that whether this is a V shaped recovery, whether its l. shaped recovery, whether it's a prolonged recession.
With our portfolio as a structured today.
Continued focus on superiority continued focus on excellence in execution.
We should be able to hold and and build share positions.
Your next question will come from Bill Chappell with Suntrust.
[noise]. Thanks, Good morning, and hope you doing well John.
A.
Quick questions one I'm not sure you can answer, but you know maybe from what you've seen in China or what you've seen elsewhere. I mean, if you're looking at a given category that had 10% type or increase [noise].
Would you say like <unk>.
We will wait if they like a five this none of that and.
I can't be stocking people send a bad is Ah stay at home orders and then the rest is just normal growth I mean is there any way to look at that and then secondly on advertising kinda, what's the plan in in this environment. It seems like most large CPG companies have moved away from product advertising with.
That kind of the company methods and we're all in with together, which is great, but just didn't know what the longer term you know kind of change or cut back or is that something to temper.
[noise].
So in some categories Bill we have we do have the ability.
To tease out increases and consumption from pantry loading et cetera, and for example, there are several categories in the U.S. where.
We have a panel of either consumers or devices washing machines dishwashers, a that give us information a routine basis on consumption levels and where we have that implies a that's how we're able to know for example, when I mentioned.
Earlier.
What's happening to a wash frequency of clothes and.
What what constitutes a that load.
The same in it and it just washing context, so we were able to and those categories see very clearly the increase in using consumption and obviously then deduct into what might be.
Pantry stocking there are other categories, where we don't have as good of.
As good of visibility into that but we're working to develop that ability across a piece of the categories and then a major markets and that's a clear focus.
But I would say that in general.
We're seeing as much as a 20% increase in consumption.
Across categories, where you'd expect to see that and and the balance is.
As pantry to some extent, but remember also in many of our categories.
Pantry availability itself leads to greater usage I.
I start conserving on my usage for example of paper towel or certainly of.
Bathroom tissue.
As I've reached the end of my inventory.
Ah to defer that trip to the store and certainly avoid a situation where I don't have any available.
If there is lots available I'm typically not rationing or conserving.
So just having that their results and increased consumption and many of our categories.
Oh, I'm not the expert and the company on advertising, but I want.
But I would offer a couple thoughts.
Helping consumers understand how they can meet.
Their own perceived and critical needs for them on their family through the use of our products and many categories.
As a public service.
And.
As well or you know you know that for many years well before this we focused on.
If you will both.
Think about how the all was like a girl campaign as an example.
And done well Ah you can do both simultaneously.
But again I'm not a advertising expert if you want more perspective on that feel free to call My friend Mark Richard.
Okay.
Your next question will come from the line of Rob on the Stein with Evercore.
Great. Thank you very much and John Thank you you and your colleagues for all the things that you're doing do I make procter and gamble, increasing medea into spent.
Two questions first.
Clearly E commerce is becoming increasingly important and you know obviously in the U.S. and in China, but can you talk about the things that you were doing to you know become increasingly advantage and meet the needs of your E Commerce partners a in the U.S. in China and maybe what your.
It sure looks like in E commerce versus brick and mortar it in the U.S. Yoo China and then the second question, obviously, 6% increasing the did.
Crashes.
But I think I think what would be what's interesting for me is to understand.
I thought process that increase given that you know you're very clear idea you I'm just what the challenge is that the world faces over the next 12 plus months. So you know how how how good Procter and Gamble think about that sort of increase in that context. Thank you.
Let me start with the second question.
We have a very simple.
Philosophy and belief.
Which is that the cash we generate is not ours, it's yours.
And we have that's of course after meeting.
Oh, the needs and opportunities that are presented by attractive investments.
We're having a good year.
And you know if we deliver against our guidance it'll be 8% to 11% core earnings per share growth.
Operating earnings growth has done a pretty much and in line with that.
And going back to the philosophy and the commitments that that results in a certain outcome.
Our business is generally a highly cash generative.
So I mentioned, we generated $4.1 billion of cash in the quarter.
ER our payout ratio.
With the movies just made is is a little bit under 60%.
So there's plenty of of room, there if you will.
So it really stems from our philosophy and our commitment and our result, and the cash generative nature of our business and I don't expect that to change going forward.
Obviously.
In in extreme situations.
We might come to a different conclusion, but so far we've been weathering the situation fairly well.
And are expected to well as we go as we go forward.
I might also just comment on the general topic of capital allocation.
I've started receiving some questions on.
Share repurchase.
And whether that's appropriate use of funds or in this environment.
And I don't.
Fully understand the question I do you know if you're if your accepting.
Our government support or something like that but.
Again going back to our philosophy.
That's your cash not our cash that needs to come back to either through a dividend or share repurchase.
And and probably the worst thing we could do.
At this period of time when I go back to our priorities. The third one being to help society get through this crisis.
It is take a bunch of cash and sit on it.
We're much better off I think returning that cash to society and helping people during a very difficult time.
And.
As you know we had a large percentage of retail share owners individual people.
And we have a large ownership position from pension funds, which are.
Representing the needs and wants and dreams that desires of.
Aren't line.
Healthcare workers of firemen policemen have the bus driver.
Teachers.
And and so I don't see any reason not to maintain.
The steps we've taken for many many years.
Relative to a cash return and I think it's more vital now than ever.
[laughter], sorry, I got kinda waylaid on that point, but it's one I feel strongly about.
Relative to ecommerce it differs pretty widely by category by country, but generally our market shares in E Commerce are.
Our online shares are equal to our offline shooters are slightly ahead.
And also our margins are generally in line online and offline.
Up they're up in general the things that we do to win ER and best serve consumers offline or relevant online as well.
But there are some specific things we can do to better serve both online shoppers and online retailers for example, with with packaging that's designed to.
Survive or the the ecommerce journey, which is physically very demanding.
And before we're working to develop a proprietary packaging that.
That improves packaging integrity and consumer experience.
In that specific channel. So there are channel specific.
Areas of superiority that we can help.
Customers be.
Relevant in and then as in the in the process increase our relevance.
Yeah.
Oh no further questions at this time.
Thanks, everybody I'm stay well stay safe.
Ah we're here I don't hesitate to call have a great day.
[laughter], ladies and gentlemen that concludes today's conference. Thank you for your participation you may now disconnect have a great day.
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