Q2 2025 Procter & Gamble Co Earnings Call
[music]
And while recent consumer trends and FX rates make the balance of the year more challenging.
We continue to expect stronger results in the second half.
Andre will discuss this more in the guidance update.
We remain committed to the integrated strategy that has enabled our strong results and that is the foundation for balanced growth and value creation.
We highlighted many of the reasons, we're confident in this strategy at our Investor Day in November.
If you Werent able to attend I encourage you to listen to the replay on our IR website.
To recap we remain very disciplined in our portfolio choices include.
Including some moves over the past year to strengthen our ability to generate U S. Dollar based returns.
We're doubling down on superiority across all five vectors no single vectors of superiority can carry the day itself. It's all five together.
The innovation plans to create an extend superiority across the business are very strong and we continue to leverage recent innovations by driving more trial and household penetration.
A few examples chairman smooth tear with its patented scallops edge the biggest innovation in toilet paper in 100 years.
<unk> to drive chairman volume and value share growth in the U S.
We were first to launch the whole body deodorant sprays now across the old Spice secret in native brands, and we continue to drive trial and the growing segment in this growing segment of the category P&G.
P&G USD odorant volume and value share are each up nearly a point over the last year.
Don Power Wash continues to drive market share up more than a point in the U S market after nearly three years in the market.
Swiffer power mob has become the largest innovation on square for its history.
Interpreting to 40% growth of the brand portfolio and driving a remarkable 35% growth in the category.
We've launched our most advanced power toothbrush oral B I O Tam early last year.
We followed up with I O. Two the first Io designed to help consumers trade up from our manual toothbrush to a power brush.
Early results in the U S are very encouraging and we're expanding Iot across major markets over the next several months.
We just launched our best ever whitening toothpaste crest, <unk> white deep deep stain remover.
The new Formula works in just one day to dissolve the bonds that lock stage to your teeth and better prevent stains from occurring.
The trial period for deep stain remover is off to a great start.
We're expanding vivo, our insect Kelly sprays mosquito and tech repellents, and insect traps with worry free ingredients inspired by plants natural defenses against bugs.
We're building distribution and trial and receiving very strong consumer ratings and reviews.
Hi, Oxy boost power pods have just launched online with a great response from retailers and customers.
Akshay boosts includes two times, the oxy power to provide tides most powerful clean.
Oxy boost power pods will be available in stores soon and we'll be following up quickly with additional innovations and wanted to detergents and fabric enhancers.
Finally tied to Evo, our new laundry detergent developed on our breakthrough functional fibers platform.
<unk> to exceed expectations in our Colorado test market.
So passing our year one performance goals in just the first 12 weeks after launch we're.
We're progressing through the last phases of supply chain readiness, and we'll be assessing our expansion plans in the coming months.
There are many more examples we could share considering in the next six months.
Speaker Change: Of innovations across tied game Downey for Breeze Dawn Cascade, Mr claim pampers loves <unk>.
<unk> always always discreet.
Speaker Change: T old Spice crest, Gillette, and Venus brands and that's just in the U S.
Speaker Change: So I hope you can see this is one reason we're confident in our prospects going forward.
Speaker Change: We're improving productivity in all areas of our operations to fuel investments in superiority mitigate cost and currency headwinds and drive margin expansion, we've extended our visibility to productivity improvement with each business unit building three year cost savings Master plans.
Speaker Change: And what we've done for years in our innovation program.
Speaker Change: We're driving constructive disruption of ourselves and our industry, a willingness to change adapt and create new trends technologies and capabilities that will shape, the future of our industry and extend our competitive advantage.
Speaker Change: We've designed to continue to refine and strengthen P&g's organization structure.
Speaker Change: So that it enables P&G people to be fully empowered agile and accountable focused on business outcomes to deliver.
Speaker Change: The greatest value.
Speaker Change: Creation.
Speaker Change: We call. This an integrated strategy for a reason each part of the strategy needs to be delivered.
Speaker Change: It's not a menu to pick and choose from each.
Speaker Change: Each element is incredibly incredibly important so.
Real advantage comes from being able to do all of these things at the same time.
Speaker Change: The strategy is inherently dynamic and adapt to the changing needs of consumers customers and society.
Speaker Change: A man's that were not sit still.
Speaker Change: We continue to believe our best path forward is to double down on this integrated strategy operating with a focus on driving market growth.
Creating business versus taking business to deliver balanced top and bottom line growth and value creation.
Speaker Change: With that I'll hand, it back to Andre to discuss guidance.
Andre: Thank you John.
Andre: So with half of the fiscal year complete our guidance ranges for fiscal 'twenty five are unchanged and remain consistent with our long term algorithm.
Andre: We've highlighted we continue to expect the environment around us to remain volatile and challenging from input costs to currencies to consumer competitive retailer and geopolitical dynamics.
Andre: On the top line, we are maintaining our organic sales growth guidance in the range of 3% to 5%.
Andre: We continue to expect the markets in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year.
Andre: And our objective remains to grow organic sales modestly ahead of the underlying growth of these markets.
Andre: On the bottom line, our core EPS guidance range for fiscal 'twenty five remains at growth of 5% to 7% versus fiscal 'twenty for core EPS of $6 59.
Andre: This guidance equates to a range of $6 91 to 705 per share.
Andre: Our outlook for commodity costs remains consistent with our most recent guidance expecting our commodity cost headwind of approximately $200 million after tax.
Andre: Which equates to a headwind of <unk> <unk> per share for fiscal 'twenty five.
Andre: Since last earnings foreign exchange rates have moved sharply against US. We are now expecting a headwind of approximately $300 million after tax which equates to a headwind of <unk> 12 per share for fiscal 'twenty five.
Andre: We continue to expect lower nonoperating income benefits this fiscal year, and a somewhat higher tax rate versus the prior year combined these additional headwinds amount to 10 to 12.
Andre: Two core EPS on top of the commodities and FX headwinds I mentioned.
Andre: With projected softer market growth and stronger foreign exchange headwinds. We currently have good visibility towards the lower end of the top and bottom line guidance ranges. However, we will continue to push all levers in our control to offset these headwinds that are largely not in our control.
Andre: We expect adjusted free cash flow productivity of 90% for the year and we have plans to pay around $10 billion in dividends until we purchased 6% to $7 billion in common stock combined returning 16% to $17 billion of cash to shareholders for the fiscal year.
Andre: This outlook is based on current market growth estimates commodity prices and foreign exchange rates significant additional currency weakness.
Andre: A modest cost increases geopolitical disruptions major supply chain disruptions or store closures are not anticipated within the guidance ranges.
John: Now I'll hand, it over to John for closing thoughts.
John: We're very pleased with the results P&G people have delivered in a very challenging and volatile environment.
John: A good first half of the year and a stronger outlook for the second half.
John: We remain focused on excellent execution of our integrated dynamic market constructive strategy.
John: <unk> delivering balanced top and bottom line growth and value creation star.
John: Starting with a commitment to deliver irresistibly superior propositions to consumers and retailers.
John: With that we'll be happy to take your questions.
If you have a question. Please press star followed by one on your Fad. If your question has been answered or you would like to withdraw your question. Please.
John: Please press star followed by two.
John: Your first question comes from the line of Dara. Thanks Shannon.
Speaker Change: Morgan Stanley. Please go ahead.
John: Okay.
John: Hey, good morning, guys.
John: I just wanted to drill down a bit more short term and organic sales growth for the back half of the year given some of the volatility over the last year, you've talked historically about the OSB is split between the robust, 85% and country mix versus the lagging 15% in the last few quarters can you just give us a bit of update on the performance in fiscal Q.
John: Two in each of those buckets.
John: Youre on track for continued improvement in the 15% in the back half of the year as you look versus Q2, and also just sustainability of growth in that 85%, but that's stronger presumably driven by the U S and Europe.
John: Yeah.
Dara: Good morning, Dara Thanks for the question.
John: Take a crack at it and John you jump in.
So if you look at quarter, two and I apply the same logic that we've been using to explain the divergence of the majority of the business versus some of the tougher markets.
John: 85% of the business so comprising of the U S Europe.
John: Latin America.
John: <unk>.
John: Latin America, and Europe enterprise markets.
John: 85% continues to grow at around 4%.
John: What has improved as the 15% so the performance of the balance of the markets, mainly the Asia Middle East Africa markets, but the significant improvement in greater China.
John: So China was down 15% organic sales in quarter, one and was down as we mentioned in the prepared remarks, only 3% in quarter. Two so we see encouraging momentum towards recovery and hopefully.
More neutral picture as we go into half two.
John: That's exactly what we're expecting as we go into the second half of the of the year.
John: We expect the U S.
John: Continue to grow at the pace that we've seen in quarter, two and quarter one.
We expect some increased.
John: Our momentum across Europe, and Latin America, specifically.
John: Comps ease versus the base period.
John: And with that if we are.
John: If we are combining hopefully a little bit stronger growth in North America easier comps in Europe and.
In Asia Middle East Africa, and if China continues to move towards a more neutral contribution to sales growth.
John: That would actually allow us to be at the mid point of organic sales growth guidance, maybe a little bit higher.
John: Conversely, if we saw weakening across some of the core markets of North America and Europe.
John: We saw China, returning to more negative territory that would move us to the lower end or slightly below the current organic sales growth guidance.
John: Our base case.
Dara: Dara to summarize continued strong performance around 4% in.
John: The 85% of our business continued recovery on the 15%.
Speaker Change: The next question will come from Lauren Lieberman of Barclays. Please go ahead.
Lauren Lieberman: Thanks, Good morning.
So Andre Thank you were kind of running through.
Speaker Change: Projected performance for P&G business that I was hoping you could also comment on what youre seeing in terms of consumer behavior and dynamics I think in December you guys had flagged a little bit of a softening in the consumer environment in the U S.
Lauren Lieberman: Maybe it's something that sticks, maybe it doesn't.
Lauren Lieberman: But would just love to get a read on that and same in Europe sort of the consumer dynamic not just your own performance and market share trajectory. Thanks.
Lauren Lieberman: Hey, Lauren.
Speaker Change: Generally I would describe the consumer in our categories.
Speaker Change: Again, non discretionary and very focused on performance as stable.
Speaker Change: In Europe, specifically the market continues to grow at around 4% in focused markets and then double digits actually and enterprise markets.
Speaker Change: Our ability to continue to grow ahead of that.
Speaker Change: Zinc is visible in the volume share numbers, we are growing volume share about 50 basis points in focused markets.
Speaker Change: And 60 basis points and enterprise markets inflation is down in Europe to about 2% and we see a relatively stable environment.
Speaker Change: Which we expect to continue going into half two and we.
Speaker Change: Investing in strong innovation in half to benefit from the stable consumer environment.
Speaker Change: In the U S. The current quarter has been a bit more volatile in terms of phasing of consumption. We saw very strong consumption in October driven by Hurricanes and buy a port strikes.
Speaker Change: Easing off a little bit in October in November and then coming back in December so it was volatile.
Speaker Change: But when I step back I would characterize the situation very similarly to the European consumer stable in our categories market growth continues to be around 4%.
Speaker Change: Volume growth continues to be around 3% and again, our job is to encourage consumption in all categories with strong innovation and communication, which we're doing and continue to do.
Speaker Change: Across half two.
Speaker Change: Only thing I would add to <unk>.
Andres: Andres comments.
Speaker Change:
In terms of reflecting on consumer behavior.
Speaker Change:
Speaker Change: We're also seeing continued flat to declining private label shares in both.
The United States and in Europe.
Speaker Change: So that again is relatively reassuring in terms of the stable consumer that Andre rightly referred to.
Speaker Change: Our next question will come from Steve powers of Deutsche Bank. Please go ahead.
Steve Powers: Thank you good morning.
Steve Powers: I guess Andre I mean, I'm, a little surprised that your currency outlook as it relates to the impacts on the top line Didnt move off the negative 1% call you have in place as of October even as the after tax after tax profit impact stepped up by the $300 million. So maybe you could just.
Steve Powers: Talk about the key moving parts, there and whether you've assumed further currency movements or if the full year now sort of effectively assumes spot rates as we've seen in the last few weeks and then Relatedly I guess I'd love a little bit more discussion of our productivity and pricing levers you have.
Steve Powers: Available to you as a as an offset to those those dynamics and whether you see any limitations to implement them over the balance of the year.
Steve Powers: Ask you that in the context that historically <unk> <unk> gross margins stepped down sequentially. So I think your guidance assumes a fairly strong operating leverage over the balance of the year in SG&A, but just wanted to see if you could clarify those moving parts. Thank you.
Steve Powers: Good morning, Steve.
Steve Powers: I think we will.
Speaker Change: We are forecasting right now at spot rates as we always do both on the on the P&L side and the organic sales growth side.
Steve Powers: Europe.
Steve Powers: We are seeing high volatility in currencies obviously.
Steve Powers: That I'm moving on a daily basis based on commentary.
So we'll reserve our ability to update here, but for now we're reflecting spot rates.
Steve Powers: The.
Steve Powers: <unk>.
Steve Powers: Impact of foreign exchange rates were.
Steve Powers: Will mostly.
Steve Powers: Hit in the second half.
So we saw a lot of the commodity.
Steve Powers: The impact in the first half.
Steve Powers: And the corresponding impact of FX will be mostly in half two.
Steve Powers: That is built into our <unk>.
Steve Powers: Guidance logic that we've communicated.
Steve Powers: Our ability to deal with foreign exchange as with any headwind is a combination of productivity, which we feel very good about for the year.
Steve Powers: Across all productivity buckets. So we're confident in our $1 5 billion productivity guidance on cost of goods sold.
Steve Powers: And the $2 billion guidance overall, including SG&A.
Steve Powers: And pricing levers pricing, it's probably most pronounced in enterprise markets where.
Steve Powers: Where we see strong foreign exchange rate exposure, but it's going to be a combination of both.
All of that is baked in into our guidance commentary.
Steve Powers: But again, we're watching this closely because there is a lot of volatility in this as you know.
Speaker Change: Just on on pricing Steve.
Steve Powers: <unk>.
Steve Powers: Our business model is hopefully what's reflected again in my comments this morning.
Steve Powers: As heavily innovation.
Steve Powers: Based.
Steve Powers: At the heart of everything we do.
Steve Powers: And Thats the primary enabler of.
Steve Powers: Modest amounts of pricing as we move forward.
Steve Powers: If you look at our.
Steve Powers: Our history.
Steve Powers: Again, as a source of potential confidence.
Steve Powers: And our ability to continue to execute modest amounts of pricing.
Steve Powers: Even as Andre said in our focused markets.
Steve Powers: <unk> has been a neutral or positive contributor.
Steve Powers: Our topline growth for 19 out of the last 20 years.
Steve Powers: 54 of the last 57 quarters.
Andre: Andre mentioned.
Andre: We have very strong second half innovation.
Andre: Programs.
Andre: Across markets and so that should enable us to continue to put.
Andre: Some upward pressure on the topline again modest.
Andre: We're in a pretty good position with all of that innovation.
Speaker Change: The next question will come from Bryan Spillane of Bank of America. Please go ahead.
Bryan Spillane: Thank you operator good morning.
Guys.
Speaker Change: Just a question or maybe two on China, one just the 3% in the quarter, just how did Chinese new year's impact that impact that so I guess is that kind of reflective of consumption or is there any timing shifts shipment versus consumption and then.
Maybe just more broadly John.
Speaker Change: The market is changing.
Speaker Change: And does it create opportunities are you looking now to kind of use your position as a position of strength and expand in China, while while the market is soft just curious if that changed in the marketplace at all change the way youre thinking about the market strategically.
Speaker Change: Let me answer the first part.
Speaker Change: I can.
Speaker Change: Brian.
Speaker Change: <unk>.
Speaker Change: So.
Speaker Change: I think that the China results are not impacted by heavy phasing within the quarter that was phasing in China on the timing of pre shipments for 11, 11, but that kind of evened out across the quarters. So the progress is really what we had anticipated.
Speaker Change: We're getting into easier comps part of that.
Speaker Change: Part of that is SK <unk> returning to growth in China at 5%, which is encouraging to see.
And the last point I'll make is on the core brands, we're making progress.
Speaker Change: We are innovating on hair care across Pantene head <unk> shoulders, we're innovating on fabric care, we're innovating on olay and that is driving progress we are carefully investing in the fastest growing channel in Dorian.
Speaker Change: To ensure that we create value there, but that allows us to now grow share in that channel in.
Speaker Change: And the last element is I think the go to market interventions that we've made we talked about in the last call, where we improve our <unk>.
Speaker Change: Collaborations and synchronization with our core distributors is paying dividends. So all of that is moving in the right direction.
Speaker Change: To be clear I don't think China is out of the woods. This will continue to be difficult. It will continue to be volatile as reflected in my guidance commentary.
Speaker Change: That volatility can drive us to the midpoint or the lower end of the guidance.
So we don't want to get ahead of ourselves, but it's good to see the trend go.
Speaker Change: More positive and you make a very very good point.
Speaker Change: <unk> taken advantage of significant change that's occurring in the marketplace, both with regard to consumer behavior.
Speaker Change: And with regard to.
Speaker Change: Customer behavior and channels.
Speaker Change: And we intend to do exactly as you described which is to take advantage of those changes one of the.
Speaker Change: There are a couple of things that I, just wanted to bring a little bit more focus too.
Speaker Change: That are very very important one is.
Speaker Change: If you look at our distributor channels.
Speaker Change: Largely fit in the wholesale markets and smaller.
Speaker Change: Grocery stores.
Speaker Change: Okay.
Speaker Change: We're being.
Speaker Change: Paid.
Based on.
Total P&G business.
Speaker Change: And we've changed that.
Speaker Change: So now being paid by category, so they have to deliver against each of the categories.
Speaker Change: That we have products in in order to be fully <unk>.
Speaker Change: <unk>.
Speaker Change: That might not seem like a big deal that's a big deal it changes.
Speaker Change: Behavior significantly.
We've also moved we've taken advantage of all the changes that are going on to move our China operations.
Speaker Change: Even closer to for example, how we manage things in the U S. Our focus Europe.
Speaker Change: In terms of end to end, meaning that the categories one.
Everything from the front end of innovation, all the way through to the customer discussions.
Speaker Change: And that wasn't fully the case.
Speaker Change: Say two years ago.
Speaker Change: Year ago.
Speaker Change: So those are those are big changes the third big change.
Speaker Change: <unk> is really reorienting the conversation.
Speaker Change: That we're having internally and externally with.
Speaker Change: Our customers to.
Speaker Change: So one of market growth.
And demonstrating how we can be the biggest drivers there are.
Speaker Change: Our strongest partners and driving that market growth, which is something that everyone wants badly.
Speaker Change: So that's another example of taking advantage of the current situation.
Speaker Change: To become even stronger.
Speaker Change: And more relevant.
Speaker Change: Two.
Speaker Change: To our customers. So thanks for asking that question I think it's an excellent one and it's something we're very much focused on.
Speaker Change: Your next question will come from Peter Grom of UBS. Please go ahead.
Speaker Change: Thanks, operator, and good morning, everyone and hope you do them all I wanted to get just some perspective on the input cost environment I recognize you maintained your outlook for the $200 million.
Speaker Change: After tax headwind that we have seen some volatility across some of your key raw materials over the past few months.
Speaker Change: Can you, maybe just give us or unpack, what you're seeing or expecting across your key cost bucket and then just kind of looking at the first half impact in the full year guidance, you kind of alluded to that.
Speaker Change: Are you anticipating input cost deflation on the back half of the year, when we think about our gross margin bridge.
Peter Grom: Good morning, Peter.
Speaker Change: Yes.
Speaker Change: Input costs for US obviously, you can appreciate as a wide variety of different materials and commodities.
Speaker Change: What I will tell you, which I think is most relevant for what you're after is any.
Speaker Change: Variation that we see now.
Speaker Change: Versus what we already incurred in half one which is the majority of the 200 million impact that we are talking about will likely not hit the current year P&L.
Speaker Change: Because of variance holding.
Speaker Change: And because of our contract structures.
Speaker Change: Any major deviation in terms of oil prices outside of maybe transportation will impact half one of next fiscal year, most of our materials and commodities.
Speaker Change: Will impact.
Speaker Change: The first half of next fiscal year.
Speaker Change: So we feel relatively good about that end of the equation because it provides stability for the second half.
Speaker Change: More of the volatility again in foreign exchange rates.
Speaker Change: That doesn't mean, we don't look at our input costs carefully because as we said we need to get ready to deal with it in the first half of next fiscal year, which then comes to Jon's point on appropriately developing pricing plans with innovation productivity programs et cetera.
Speaker Change: But the very weak variability in the current year, we believe it's going to be limited.
Speaker Change: Our next question will come from Andrea Teixeira of Jpmorgan. Please go ahead.
Andrea Teixeira: Thank you operator, good morning, everyone. If we step back from the tone in the first quarter and then now the second quarter of fiscal in regards to the range of guidance for both organic and EPS growth is it fair to say, you're feeling a bit better about getting to the midpoint on the topline, but etfs more pressured given.
Andrea Teixeira: The increased headwinds in FX, and then I just wanted to understand how.
Andrea Teixeira: It changed and then if so if any changes it seems like your productivity is coming in or even your operating leverage is coming in better than anticipated or better than CRE. If you will and related to that just a clarification about the disruptions you called out in December.
Andrea Teixeira: One of your suppliers have been getting questions regarding there is anything in terms of selling seller to understand there wasn't anything material in.
In the quarter either like.
Andrea Teixeira: Catching up to that.
Andrea Teixeira: Or anything that we should be aware of into the fiscal third quarter. Thank you so much.
Andrea Teixeira: Good morning, Andrea so related to guidance, what I would tell you is what I mentioned in the prepared remarks right at the moment when we when you look at foreign exchange rates you look at what we've delivered in the front half of the year.
Andrea Teixeira: We would say we have good visibility and confidence to the lower end of the guidance range, both on organic sales growth and on core EPS.
Andrea Teixeira: That doesn't mean that we don't have a shot at delivering the middle of the range.
Andrea Teixeira: As I said, if we continue to make good progress in China.
Andrea Teixeira: If we continue to see some easing of the tensions in the middle East and therefore business picks up.
Andrea Teixeira: Europe and North America continue to deliver we have a good shot at the top line around the midpoint of the range and corresponding EPS, but at the moment I would point you to the lower end.
Andrea Teixeira: On transportation management system interruption look we wanted to give you guys visibility to what we were seeing.
Andrea Teixeira: We when we experienced the disruption we saw our backlog of orders building up that would have been worth about 60% to 70 basis points of the quarter and we had assumed at that point that we would get rid of half of that.
Andrea Teixeira: Backlog through intense work by the team to operate a backup solution and get US back on the main operating system. The team did way better they were able to not only work through the full backlog and get us back on the operating system faster. They were also able to then process strong orders.
Andrea Teixeira: In late December.
Andrea Teixeira: There is no impact quarter over quarter, driven by the transportation management system outage.
Andrea Teixeira: No unusual effect to consider they're just great work by the team to get us through this without any impact on the quarter.
Speaker Change: Question will come from Robert Aten, Stan at the Evercore ISI. Please go ahead.
Speaker Change: Great. Thank you very much just just first.
Speaker Change: A clarification on China, and I apologies, if I missed it but.
Speaker Change: I know that Youre doing better your brands Youre doing better SK II is doing better, but just wanted to get any commentary on the Chinese consumer the health of the Chinese consumer as the quarter developed and then into into January so.
Speaker Change: So just as a follow up on that and then my main question is on innovation.
Speaker Change: This year.
Speaker Change: You sound more upbeat positive on this and excited in terms of what you are bringing out.
Speaker Change: In calendar 2025 is there any way.
Speaker Change: To quantify that versus prior years any way to think whether it's incremental shelf space or.
Speaker Change: The expected impact of the business on the top and bottom lines. So that we can handle it.
Speaker Change: Model that thank you.
Speaker Change: Thanks, Robert from a Chinese consumer standpoint.
Andre: As Andre intimated.
Speaker Change: And some of his commentary.
Andre: It's still a challenge.
Andre: So that really hasnt changed significantly.
Andre: There are signs though.
Andre: Of of some <unk>.
Andre: Improvement.
Andre: What am I talking about so for example, if we just look at the number of Chinese travelers.
Andre: Two.
Andre: Korea and Japan.
Andre: <unk>.
Andre: Significantly quarter on quarter.
Andre: We actually see that reflected in our SK II business in those.
Andre: Countries.
So that would indicate.
Andre: More confidence.
Andre: And a willingness to spend.
Andre: The growth of SK to itself and actually consumption growth on that business is a little bit ahead of even our shipment growth.
Andre: As an indication of confidence.
Andre: No a very premium price product.
Andre: But the.
Andre: The broad swath of society.
Andre: Is not confident.
And there's still a.
Andre: Struggling.
Speaker Change: And Thats why Andre says, we're not out of the woods I agree with that statement.
Andre: And that will take some time still.
Speaker Change: To get to.
Speaker Change: Dependable growth.
Speaker Change: And in China.
Speaker Change: And the best data, we have Robert too.
Speaker Change: Confirm what John was describing past three months market in our categories. In dollar terms was down 5% has 12 months was down 5%. So.
Speaker Change: Macro consumer environment pretty much stable, but not positive.
Speaker Change: Relative to innovation I don't have a numerical.
Speaker Change: Ability to describe the strength of our innovation thats coming to market over the next six months vis vis <unk>.
Speaker Change: Year ago.
Speaker Change: But we.
Speaker Change: We are relatively we have gained confidence in that program in part.
Speaker Change: Because of what we're seeing in the marketplace.
Speaker Change: And.
Speaker Change: And what we're seeing in terms of consumer response.
Speaker Change: For example, the tide Evo test market in Colorado again, we've delivered.
Speaker Change: What we expected to deliver in the first year, we've delivered in 12 weeks.
Speaker Change: We're looking at the continued growth of.
Speaker Change: Some of our premium innovations in terms of household penetration and market share.
Speaker Change: I went through a litany.
Although as examples earlier.
Speaker Change: And then of course, there are some things that are not at Liberty.
Speaker Change: Talk about but in general.
Speaker Change: Your observation in terms of.
Speaker Change: As you describe excitement or confidence in our innovation program is strong.
Moderator: Our next question will come from Bonnie Herzog of Goldman Sachs. Please go ahead.
Bonnie Herzog: Thank you good morning.
Bonnie Herzog: I guess thinking about your guidance.
Speaker Change: Ganic sales come in at the lower end.
Speaker Change: Kind of touched on its trend decelerate further.
Speaker Change: And thinking about growth.
Speaker Change: Margin tailwind likely moderating this year.
Speaker Change: How much flexibility you have on your EPS guidance range.
Speaker Change: The context of that.
Speaker Change: What potential that you might look to lower reinvestment levels.
Speaker Change: I'll, let Ron your bottom line guidance any color on.
Speaker Change: <unk> continued to reinvest in your business.
Speaker Change: Thank you.
Speaker Change: Hey, Bonnie when we went through the.
Speaker Change: The years with really.
Speaker Change: Significant headwinds in terms of currency.
Speaker Change: Commodities and FX.
Speaker Change: And I'm talking there about a 55 zero percent reduction in our profit over a two year period because of those items.
Speaker Change: We increased.
Speaker Change: Our spending on innovation.
Speaker Change: We increased our spending on commercialization of that innovation.
Speaker Change: And we grew earnings modestly.
Speaker Change: So that's our mindset.
Speaker Change: And I just described a strong innovation pipeline.
Speaker Change: We will fully support that pipeline.
Speaker Change: And.
Speaker Change: Frankly, I don't think it will but if that means.
Speaker Change: That would come in a little bit lower than that.
Speaker Change: What we need to accept and we'll be very transparent and clear about that if that were to be the case.
Speaker Change: Currently it's not.
Speaker Change: But.
Speaker Change: We're going to continue to invest in both innovation and commercialization of that foundation.
Speaker Change: Next question will come from <unk> <unk> of Citi. Please go ahead.
Speaker Change: Hi, good morning, everyone.
Wanted to ask a little more color on the enterprise market business, you talked about Europe enterprise market still growing solidly maybe can you give a little more color on Latin America, how does the consumer journey.
General how theyre in key countries like Brazil, and Mexico, and then on the Middle East you're starting to cycle easier comps is your expectation of a return to growth in the second half of 'twenty five thank you.
Filippo: Good morning Filippo.
Speaker Change: L a and.
Speaker Change: In aggregate delivered 3% growth in this quarter on a base of 17% so quite impressive base period and continued growth.
Speaker Change: Across the markets. If you look at the consumers I would describe.
Speaker Change: Mexico as.
Speaker Change: More difficult right now, but we are making good progress.
Speaker Change: And I have great confidence in the half to plans that we're executing and.
And the same is true for Brazil.
Speaker Change: My expectation would be an acceleration in Latin America, partially driven by the base, becoming a little bit easier, but also given strong plants across those core markets.
Speaker Change: Europe Enterprise markets were up a point in the quarter on a base of.
Speaker Change: 8% growth.
Speaker Change: Encouragingly, we are growing volume share in enterprise markets in Europe by 60 basis points market growth still very strong.
Speaker Change: So we feel good about the market context, but also about our own ability.
Speaker Change: To execute I would just add with our CEO.
Speaker Change: Last week the.
Speaker Change: The innovation plans are very strong the go to market trends are very strong the stores looked phenomenal and the opportunity is huge and the profitability. We have in both Latin America and in Europe Enterprise markets allows us to remain fully invested in that innovation and to support thereof.
Speaker Change: Yeah.
Speaker Change: Amman Asia Middle East Africa.
Speaker Change: The main driver here will be stabilization in the middle East.
Speaker Change: We hope that that progress is sustaining.
Speaker Change: And we can go from there, but I think it will remain a more difficult environment for us through the second half.
Speaker Change: Your next question will come from Chris Carey of Wells Fargo Securities. Please go ahead.
Chris Carey: Hi, everyone. Thank you for the question.
Chris Carey: Like to ask a few categories specific questions.
Chris Carey: Okay.
Chris Carey: One single category question, if you'll allow.
Chris Carey: In the family care business to double digit growth you saw.
Speaker Change: And would you attribute most of that the timing.
Speaker Change: Some sort of reversal expected in the next quarter.
Speaker Change: In the oral care business second quarter consecutive of low single digit which is a bit below trend than what we've seen over the prior one year.
Speaker Change: One year period.
Speaker Change: And then.
Speaker Change: <unk>.
Speaker Change: In the baby business, you did highlight that youll be making some merchandising investments John spent some time on the resilient.
Speaker Change: Longer term history of pricing at P&G is a contributor to organic sales. Clearly this is one of those categories that has been a bit more challenged over time and you are leaning in a bit more on investments.
Speaker Change: Can you expand on that a bit more what drives those sorts of decisions and wide out so just.
The three kind of category questions.
Speaker Change: Any kind of timing dynamics, specifically with family care that we should be thinking about going into next quarter. Thank you very much.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Good morning, Chris.
Speaker Change: Let me take them one by one so family care, we saw very strong shipments and very strong consumption. Most importantly, and as I mentioned, we had the port strike in October and we had a hurricane in October both of those led to pantry loading from a consumer standpoint. So there was some <unk>.
Speaker Change: Tree up stocking clearly.
Speaker Change: In October.
Speaker Change: We also saw strong shipments in late December in anticipation of the January merch event. That's typical we've had the same thing happened last year.
Speaker Change: But there isn't some increased pantry inventory.
Speaker Change: History would tell us that consumers tend to hold onto that pantry loading for quite a while.
Speaker Change: Seamless during Covid and we always expected it would come out that never did.
So hard to say what the going impact is for the year I think we've appropriately protected for that in the guidance.
Speaker Change: But it's pantry inventory loading, but we expect the majority of that was sustained through the through the next quarter.
Speaker Change: Oral care I would point you to two things number one we're rolling out the full lineup of Io innovation, both Io tensile up the value chain and I O two down to lower price points and as we do that I think the full opportunity across the <unk> business will become more.
Speaker Change: Accessible to us.
Speaker Change: Even in high penetration markets like in Europe, lowering the price point with <unk> will give us access to more consumers. We have a very strong marketing campaign building on the inside that power oral care, we moved 100% of block while manual brushing owner removed, 50% of block that seems to resonate well with consumers. We also have.
Speaker Change: Our strongest paced innovation program, including heavy focus on widening where we had an opportunity to strengthen so all of that gives me confidence that in the second half we will see acceleration.
Speaker Change: <unk> point on baby. The reason why we want to make investments on baby both in communication and potentially be in promo is due to innovation.
Speaker Change: We have talked for a while about the opportunity to continue to innovate across the entire lineup. We've seen the lots of innovation and I'll hit the market in September we see sequential share growth on us. So we want to give consumers the incentive of the opportunity to try those propositions, while continuing to drive the premium end of the port.
Speaker Change: <unk> and cruisers. So it's really about the combination of combining innovation with strong in store visibility and incentive to try and strong communication to ensure consumers understand the benefits of <unk>.
Speaker Change: All of those the foundation to create growth in baby, which is one of the tougher categories to do so.
Speaker Change: Next question will come from Olivia Tong of Raymond James. Please go ahead.
Olivia Tong: Great. Thanks, good morning.
Olivia Tong: Alright, a two parter here firstly on China. You mentioned you expect continued normalization. So how much of this is category versus your market share improvements as you cycle less demanding comps and I ask that because comps aren't particularly demanding in second half of course, but they do get a little less easy than the minus 15 that Youre Comping next quarter and then just if you could.
Olivia Tong: Talk briefly about the level of investment necessary to achieve your <unk>.
Olivia Tong: Our goal is not specific to China.
Olivia Tong: But more broadly.
Does it have to go higher or can you leverage many of the brand support investments that you talked about an answer to it.
Olivia Tong: Different question that you've already made.
Olivia Tong: Okay.
Speaker Change: So hey, Olivia on China, what I would tell you is I.
It's a bit of both right.
Speaker Change: We would expect some improvement as the market cycles tomorrow for giving comps.
Speaker Change: And we for sure.
Speaker Change: Would expect some improvement in our business, we talked about all the interventions we've made.
Speaker Change: On innovation on brand building on go to market, including the distributor model that John elaborated on so it's going to be a bit of both.
Speaker Change: Unfortunately, a bit of both means we have too hard to predict elements here.
Speaker Change: So we hope this is going to result in a more neutral.
Speaker Change: Panic sales growth contribution of China in the back half.
Speaker Change: But we also fully aware that this could go either way.
Speaker Change: From an investment standpoint.
Speaker Change: My take on this would be you see us adjusting based on the opportunity we have 30 basis points of incremental.
Speaker Change: Investment in the front half that.
Speaker Change: That was more moderate than what you would've seen in the base period or even a couple of years before.
Speaker Change: Some of the experimentation that we talked about and how far can we push frequency and reach.
Speaker Change: I think we concluded where it makes sense and where it doesn't make sense for one or more clear on where that playbook goals and.
Speaker Change: And we're focusing mostly now on optimizing within that playbook and improving content quality as we go into the half two innovation.
Speaker Change: So we will continue to invest where it makes sense.
Speaker Change: Albeit probably at a slower pace than what we've seen in the last years.
Speaker Change: Yes, I would just add a couple of things.
Speaker Change: In response to your question Olivia just one.
Speaker Change: Net for clarity.
Speaker Change: Minus 15 isn't what we're comping from an index standpoint.
Speaker Change: Actual number.
Speaker Change: Last quarter, so just for clarity on that.
Speaker Change: The.
Speaker Change: In terms of investments in commercialization and.
Speaker Change: And advertising and other forms of marketing.
Andre: Agree with what Andre said.
Speaker Change: At the same time.
Speaker Change:
Speaker Change: He talked about optimizing within within that context.
Speaker Change: We're making significant strides.
Speaker Change: To be more profitable.
Speaker Change: In the fastest growing categories, our fastest growing channels.
Speaker Change: The country.
Speaker Change: So while we will be opportunistic in investing I expect as well we will be saving.
For example, bringing in.
Speaker Change: The support of key opinion leaders in house.
Speaker Change: And utilizing some of our R&D.
Speaker Change: Resources for that that activity that saves a bunch of money.
Speaker Change: And our testing shows that that is as.
Speaker Change: As or more effective.
Speaker Change: So it's not as simple as that.
Speaker Change: The level of.
Speaker Change: Reach and frequency, which are important but it's also the cost of delivering that which we're working.
Speaker Change: To bring down.
Speaker Change: The next question will come from Kevin Grundy of BNP Paribas. Please go ahead.
Kevin Grundy: Great. Thanks, good morning, everyone.
Kevin Grundy: Like to pivot to capital allocation two part question. One just just updated thoughts on appropriateness of M&A as a potential avenue to drive shareholder value and what it looks like it's going to be a slower growth environment and then two with respect to buyback.
Kevin Grundy: Tumor staples stocks, including proctors have underperformed the market valuations are below historical averages versus the S&P 500.
Kevin Grundy: And that sort of context has there been any school of thought internally to accelerate the pace of share repurchases as an avenue to drive shareholder value. So thanks for that.
Speaker Change: I'll take that thanks, Kevin I'll take the M&A question Andre can add to it and then move to your share repurchase question.
Speaker Change: The answer is the same as it's been for some period of time here.
Speaker Change: Which is that it starts with most of our categories.
Speaker Change: We wouldn't contemplate acquisition being part of the growth model and kind of any economic environment simply because.
Speaker Change: Our market positions as typically the number one and sometimes both the number one and number two brands.
Speaker Change: Would preclude any acquisition of any size.
Speaker Change: There are two categories that we compete in that are attractive that we like.
Speaker Change: That are much more fragmented in there and their current constitution, we've talked about those before.
Speaker Change: One is personal health care.
Speaker Change: Another is skin and other parts of the specialty.
Speaker Change: Beauty.
Speaker Change: We don't we're going to be continue to be extraordinarily responsible.
Speaker Change: In regards to pursuit of any.
Speaker Change: Potential acquisitions.
Speaker Change: We don't.
Speaker Change: Engage in.
Hostile attempts.
Speaker Change: So basically assets have to be available and then we have to be able to make sense of the purchase of that asset.
Speaker Change: In a way that leaves us highly confident that we can create value.
Speaker Change: So that's kind of it from.
Speaker Change: And M&A standpoint.
Speaker Change: Before I turn it over to Andre just one comment on <unk>.
Speaker Change: Share repurchase.
Speaker Change: As Andre said in his prepared remarks, we're going to be returning between dividend and share repurchase 16 to 17.
Speaker Change: $1 billion to shareholders this year.
Speaker Change: And as a general element of our capital allocation.
Speaker Change: Approach I would expect significant cash return to shareholders to continue to play prominently but with that I'll turn it over to Andre.
Andre: Agree with everything you said on M&A, John nice not to have to do it.
Andre: So we can do it if it makes sense.
Kevin Grundy: On the capital allocation, Kevin nothing nothing new here, we will continue to aggressively fund the growth in the business. We will continue to pay the dividend likely increase the dividend we will do M&A, if we find a target that makes sense.
Andre: It is willing to play and.
And the rest goes to shareholders in <unk>.
Andre: Share repurchase Thats really the simple logic that we apply.
Andre: So it's a it's an outcome rather than a target.
Andre: And we don't there isn't a lot of if you will publicity.
Andre: About a special share repurchase program or.
Andre: Our newly approved share repurchase program and why is that.
Andre: Because we do it every year.
Andre: And we do it at the highest levels.
Andre: We can.
Andre: Andre said, well, we will continue to pursue that approach.
Speaker Change: Your next question will come from Mark Astrachan of Stifel. Please go ahead.
Mark Astrachan: Great. Thanks, good morning, everybody.
Mark Astrachan: Two quick ones, just remind us on the approach to offset FX pressures were pronounced in places like Latam, where where the dollar has strengthened.
Mark Astrachan: Pricing and then returning to SK too.
Mark Astrachan: It seems a little bit like.
The performance was a little bit better than anticipated at Investor Day, where I think Alex it highlighted mainland China improvement would suggest obviously on China.
Mark Astrachan: At a time, but your commentary would suggest otherwise.
Is it part of the improvement that the Chinese consumer perception of the brand. The geopolitics angle that improved is it category improvement is it both any color there would be helpful. Thank you.
Mark Astrachan: Hey, Mark good morning.
Approach on foreign exchange is not different.
Mark Astrachan: So I just want to confirm we will.
Mark Astrachan: In enterprise markets, mainly there is a relatively good market discipline to price for foreign exchange rate.
We want to be part of that and.
Mark Astrachan: And we will combine pricing with innovation wherever that's possible and reasonable that approach has worked well in Europe enterprise markets in Latam and across online we will continue to follow that playbook.
Mark Astrachan: On S. K two youre right I think it is.
Mark Astrachan: It's actually good to see the brand strengthening with our China consumer number one the whole dynamic of Japanese.
Mark Astrachan: Brand sentiment I think is easing.
Mark Astrachan: Most importantly, I think have made significant investments in brand building.
Mark Astrachan: Soon as we were able to get back into broad media coverage. We have done so with very strong amplification of the benefit and the efficacy of the product, which has worked well we've upgraded our department store.
Mark Astrachan: Presence, both from a culture standpoint, and from a personnel standpoint to ensure that consumers can see us find us at high quality locations.
Mark Astrachan: And we've innovated, we've launched a super premium proposition CT at XP, which is doing very well in the market and again contributing to the brand equity that we want to build and re establish so all of that is contributing.
Mark Astrachan: And the last element I would say you can some I would tell you is consumption is actually stronger than organic sales.
Mark Astrachan: Specifically in travel retail.
Mark Astrachan: <unk> sales number is still negative but the consumption continues to return in line with John's earlier comments that we also see increased Chinese travel.
Mark Astrachan: Two two different locations. So generally I think more positive outlook on SK too.
Mark Astrachan: And what we would have given at Investor day.
Mark Astrachan: And just to build a little bit on that.
Mark Astrachan: S K too.
Mark Astrachan: You never know.
Mark Astrachan: This cross current of geopolitical sentiment in brand sentiment as you rightly point out in your question.
Mark Astrachan: The geopolitical dynamic one.
One of the ways, we track that.
Mark Astrachan: In terms of how it affects consumer behavior is.
Mark Astrachan: Through.
Mark Astrachan: Social media references.
Mark Astrachan: And those are down significantly in terms of so in other words the number of positive comments is much higher.
Mark Astrachan: Then the number of negative comments and Thats continued to improve so yes as Andre confirmed that that is an improvement there is part of what's going on.
Mark Astrachan: The.
Mark Astrachan: But the branding part is that he also mentioned.
Mark Astrachan: And equally significant component what you suggested.
Mark Astrachan: If you look at.
Mark Astrachan: The premium skincare segment right now.
Mark Astrachan: S. K two is the fastest growing brands within that segment.
Mark Astrachan: Now growth on SK II is Glenn <unk>.
Mark Astrachan: Going to be.
Mark Astrachan: Strange to follow simply because of the base period.
Mark Astrachan: Dynamics.
Mark Astrachan: But so the important thing to look at is what's happening to consumption trends quarter on quarter and as Andre indicated.
Mark Astrachan: That's given us some confidence.
Mark Astrachan: Yes.
Speaker Change: Next question will come from Ken Neocart for Wala of Jefferies. Please go ahead.
Speaker Change: Hey, everyone.
Mark Astrachan: Morning.
Speaker Change: To Chris's question, you answered for a few different categories, but if we could maybe dig in a little bit more on consumer health or health care.
Speaker Change: <unk> accomplished a bit easier slowed down a little bit is just anything in there that we should be aware about future thinking about thanks.
Speaker Change: The trends there.
Speaker Change: Year to year quarter to quarter are most impacted by the cough cold season.
Speaker Change: Which really hasnt existed significantly at least through the month of December.
Speaker Change: Which is the period of time that we're reporting results for currently.
Speaker Change: We continue to be very happy about the growth.
Speaker Change: Delivery and the growth prospects for the broader CIC business.
Speaker Change: And have brands outside of the cough cold space that are growing.
Speaker Change: Very well by the way within the cough cold space, we continue to build share.
Speaker Change: So thats kind of whats going on.
Speaker Change: I don't want to wish for illness.
Speaker Change: But thats.
Speaker Change: Less illness will have slower growth more illness will have higher growth.
Speaker Change: Our family is contributing heavily to that growth.
Speaker Change: Sitting right next to you.
Speaker Change: Yeah.
Speaker Change: Right.
Speaker Change: Sure.
Yes.
Speaker Change: And our next question will come from Edward Lewis of Redburn Atlantic. Please go ahead.
Edward Lewis: Thanks, operator.
Speaker Change: Wanted to.
Speaker Change: I guess look at the components of the FERC Seabourn pairing R&D plan and particularly on the consumer value side. If I look at this quarter, it's another quarter of flat pricing, but if I look back over say the last three years on average pricing is still up around 4%.
Speaker Change: And you're clearly getting positive volumes. So I wonder if you could just talk to sort of what the consumer value side of the focus on superiority is telling you and whether we should then why do you feel confident about being able to take more pricing sort of.
Speaker Change: In subsequent quarters or years.
Speaker Change: The evidence youre seeing from from the data you are getting from the focus on security plan.
Speaker Change: I think we will be taking more pricing as we move forward.
Speaker Change: As we bring.
Speaker Change: More.
Speaker Change: As we bring innovation.
Speaker Change: That produces a more efficacious product and a better experience to consumers.
Speaker Change: The data that you referenced do indicate to us that we have the ability with that combination.
Speaker Change: Two continue.
Speaker Change: Contributing to the top line through a modest amount of pricing.
Speaker Change: The next question will come from Linda Bolton Weiser of D. A Davidson. Please go ahead.
Speaker Change: Yes, hi, you've talked quite a bit about.
Speaker Change: Judy in China, and certainly the SK to improvement is contributing to that beauty improvement that we saw in the quarter, but I was curious about the U S side of it and when.
Speaker Change: What youre doing.
Speaker Change: You asked like focusing more on the generous and acquire grower if that's paying any benefits in terms of market share changes.
And.
Speaker Change: And also just in beauty overall it was a little curious why volume was actually down 1% for the whole CAD for the whole segment for you.
Speaker Change: William had been sort of flat to up in the previous quarter. Thank you.
Alan: Alan Good morning, Luke.
Speaker Change: Look let me start with North America, and it's similar beauty is it's a story of pockets of real strength.
Speaker Change: And some pockets of opportunity and Thats true for North America in the Globe. If you look at.
Speaker Change: Our anti.
Speaker Change: Postponing the deodorant business in the U S. It's growing 11% and we are the number one whole body segment brands will have the number one position across our brands in that whole body segment.
Speaker Change: Personal care North America is growing 16%. So again real source of strength in North America is up 3% on a base of 15, so real strength.
Speaker Change: You pointed out skincare is an opportunity skincare is down in North America double digits.
Speaker Change: And we are working to increase the innovation specifically on the <unk> business.
Speaker Change: The new innovation that we've launched so although melts and super serum those are doing very well, but they are just not big enough yet to offset the decline in the in the core business of jobs, where we saw some distribution changes in the club channel.
Speaker Change: But also I think a shifting consumer bench.
Speaker Change: Benefits space that we need to address similarly.
Speaker Change: Similarly.
Speaker Change: At the globe same logic.
Speaker Change: Strength on <unk> strength on personal care strength on hair care with an opportunity on skincare.
Speaker Change: And again same dynamic there, but the only point I'll call out China. For example, the <unk> brand has been historically focused on tone benefits. The market is shifting more towards anti aging or multi benefit.
Speaker Change: And so we've launched innovation day, which is going in that direction. So work to do on skincare real strength across the other categories within beauty.
Linda: Relative to your question on volume Linda.
Speaker Change: China.
Speaker Change: Beauty.
Speaker Change: Broadly has a higher price.
Speaker Change: Presence in China than any of our other cat.
Speaker Change: Categories.
Speaker Change: We're still not out of the woods will use that expression again.
Speaker Change: Volume in China. So while sales were three I believe volume was minus six.
Speaker Change: I feel comfortable that thats going to continue to improve.
Speaker Change: But when you look at beauty volumes, you have to realize that that China weighting.
Speaker Change: Which in many.
Speaker Change: Periods has been a very positive thing, but now presents a challenge.
Speaker Change: Next question will come from Robert Moskow of TD Colin. Please go ahead.
Speaker Change: Robert Your line is live.
Speaker Change: You may be muted.
Speaker Change: Sorry about that can you hear me now.
Speaker Change: Yes, my apologies.
Speaker Change: I wanted to ask about pricing in a different way. This is the first quarter, where pricing has been flat and in many quarters and is there any scenario you could imagine where pricing turns negative or is there just a line in the sand here.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: That just won't happen.
And then secondly on mix mix is positive and I wanted to know what's driving that is it geographic.
Speaker Change: Can we assume that if Europe and U S continue to.
Speaker Change: Perform well that would be positive to your mix or is there something within the categories that's driving in stack.
Speaker Change: I can start John jump in please.
Speaker Change: No.
Speaker Change: Price is an outcome.
Speaker Change: <unk>.
Speaker Change: That consistently hill.
Speaker Change: Hill helps our organic sales growth number I think Jon mentioned this 54 out of 57 quarters positive contribution of price mix to our organic sales growth.
Speaker Change: And the timing of pricing outside of foreign exchange rate pricing or heavy commodity cycles, which has driven a lot of the pricing in the base period is mostly driven by our innovation cycle, because we like and we tend to take pricing with innovation and that just falls in different quarters, but generally that is.
Speaker Change: Fact of.
Speaker Change: Modest pricing with inflation or foreign exchange rates and enterprise markets and pricing for innovation is driving that consistent contribution of pricing to our organic sales growth numbers and we'll continue to do so.
Speaker Change: What is driving mix here.
Speaker Change: Focus less on geographic mix I think what we're seeing is trade up within our categories and you see that impacting the top line positively and impacting the growth margin line negatively so as consumers trade up from liquid laundry detergent into unit dose.
Speaker Change: Even within unit dose to the highest performing variance.
Speaker Change: They pay more per unit.
Speaker Change: And we make more profit per unit, but mathematically the gross margin is lower.
Speaker Change: That's really the effect you see on the top line positive effect of mix on the gross margin line, the slightly negative effect of mix, which is exactly what we want.
Speaker Change: So healthy dynamics on both we expect both of those the pricing dynamic with innovation and the mixed dynamic to continue.
Speaker Change: And we're going to there is no.
Speaker Change: Straight line or Red line.
Speaker Change: On on pricing.
Speaker Change: Do what maximizes where make the choices that maximize value.
Speaker Change: And we will be responsive to consumer.
Speaker Change: Needs.
Speaker Change: In that context.
Speaker Change: But.
Speaker Change: I don't think all the time that I've been working on this business.
Speaker Change: I've ever thought about the question of.
Speaker Change: What we have negative pricing is just not part of our thought process, where we're focused on value creation.
Speaker Change: And as Andre said pricing is kind of an outcome of that series of decisions.
Speaker Change: Your final question today will come from the line of <unk> <unk> of Piper Sandler. Please go ahead.
Speaker Change: Hey, good morning, Thanks for taking the question I just wanted to touch a little bit on how you're feeling about.
Speaker Change: Are your conversations with some of your retail partners have been going and really across the globe what are the confidence level here filling with Dan.
Speaker Change: It's still being cautious with inventory order is more normalized and then how are you thinking about that heading into the back half of the fiscal year.
Speaker Change: So I just spent time.
Speaker Change: Sure.
Speaker Change: With two of my counterparts, who are Ceos of large European retailers.
Speaker Change: I had a top to top meeting.
Speaker Change: With the largest customer outside of the U S. Just yesterday.
The entirety of those conversations.
Speaker Change: Is focused on market growth.
Speaker Change: And.
Speaker Change: How as we pursue market growth.
Speaker Change: We can do that most efficiently.
Speaker Change: So working together.
Speaker Change: We call it one supply chain.
Speaker Change: To figure out how.
Speaker Change: And there's a lot of power in that because we used to optimize parts of the of our respective supply chains, but bringing that view altogether as produce significant results both for ourselves and our retail partners.
Speaker Change: So right now the conversation is is very positive generally and focuses on the opportunities that we have.
Speaker Change: In front of us.
Speaker Change: In the U S. So those that's kind of.
Speaker Change: Europe.
Speaker Change: In the U S in.
In the retail environment currently.
Speaker Change: You have.
Speaker Change: Some retailers who are doing extraordinarily well.
Speaker Change: And some retailers and channels of trade that have more challenges.
Speaker Change: And you can imagine that the conversations are slightly different across.
Speaker Change: That that universe of customers.
Speaker Change: But in general.
Speaker Change: Follows the same pattern that I just described for Europe.
Speaker Change: Yeah.
Speaker Change: Alright.
I think that concludes our call again in summary, a good quarter good progress across multiple geographies cautiously optimistic with a lot of moving pieces throughout the second half. Thanks for your time today, we are available for any follow up questions. So please don't hesitate to reach out.
Speaker Change: And have a great rest of the day. Thank you.
Speaker Change: That concludes today's conference. Thank you for your participation.
Speaker Change: You may now disconnect have a great day.