Q4 2025 Procter & Gamble Co Earnings Call
Unknown Executive: Procter & Gamble's quarter-end conference call.
Unknown Executive: Today's event is being recorded for replay.
Unknown Executive: This discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections.
Good morning and welcome to Procter & Gamble's quarterly earnings call. Today's event is being recorded for replay.
This discussion will include a number of forward-looking statements.
Unknown Executive: As required by Regulation G, Procter & 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 & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website www.pginvestor.com a full reconciliation of non-GAAP financial measures.
If you will refer to PG's most recent 10K 10q and 8K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections.
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.
Jon Moeller: Now I will turn the call over to P&G's Chief Financial Officer, Andre Schulten. Jon Moeller here.
Procter and Gamble believes. These measures provide investors with useful perspective on underlying business Trends and has posted on its investor relations website, www.pg investor.com, a full reconciliation of non-gaap financial measures
Now, I will turn the call over to PG's Chief Financial Officer Andre Shelton.
Jon Moeller: I'm going to start the call and then I will hand it over to Andre. Good morning.
Jon Moeller: Obviously, Andre is joining me here, as is Jon Chevalier, Senior Vice President of Investor Relations.
Uh, John Mueller here, I'm going to start the call and then I will hand it over to um, Andre. Uh, good morning. Um, obviously Andre is joining me here. As is John Shelby here. Uh, senior vice president of investor relations.
Jon Moeller: Last evening, we announced that after 38 years of service, I will transition into the role of Executive Chairman of the Board beginning January 1st, 2026. and that the Board of Directors has elected Shailesh Jejurikar as the incoming President and Chief Executive Officer. This move has been thoughtfully planned and provides P&G with highly capable. Experienced Leadership Going Forward. Shailesh has a distinguished track record throughout his 36-year P&G career and has been an integral part of P&G's leadership team for the past 12 years. He's delivered substantial contributions across multiple businesses in both focus and enterprise markets, including regional and global leadership of our fabric and home care category.
But last evening, we announced that, after 38 years of service, I will transition into the role of executive chairman of the board.
Beginning January, 1st 2026.
And that the board of directors has elected shy last juror car as the incoming president and chief executive officer.
This move has been thoughtfully, planned and provides PNG with highly capable and experienced leadership going forward.
Try Lash has a distinguished track record throughout his 36-year European G career.
And has been an integral part of PG's leadership, team for the past 12 years.
He's delivered substantial contributions across multiple businesses in both focus and enterprise markets.
Including regional and global leadership of our Fabric and Home Care categories.
Jon Moeller: Most recently, Shailesh served as Chief Operating Officer with P&L ownership for our Enterprise Markets Business along with the management responsibilities for our product supply, market operations, global business services, and IT organizations. Over the last 17 years, as CFO, COO and CFO, COO and CEO, I've had the benefit of working closely with Shailesh and our outstanding global leadership team to develop an integrated comprehensive set of strategies to guide our choices and priorities. Those strategies continue to serve us well. Shailesh has been a partner in advocating for a focus on balanced top and bottom line growth and the need for P&G brands to lead the growth of our market.
Most recently, Charlotte served as Chief Operating Officer with p&l ownership for our Enterprise markets business,
Along with the management responsibilities for our product supply market operations, global business services, and IT organizations.
Over the last 17 years as CFO.
And CFO Co and CEO. I've had the benefit of working closely with shy lash and our outstanding Global Leadership team to develop an integrated comprehensive set of strategies to guide our choices and priorities.
Those strategies continue to service well.
Our leche has been a partner in advocating for a focus on balance, top and bottom line growth.
Jon Moeller: Growing Markets Versus Simply Taking Business to Build Markets. These fundamentals guide our decision-making as we execute our integrated growth strategy and drive value creation for shareowners.
And the need for P&G Brands, to lead the growth of our markets.
Growing markets for simply taking business to build market share.
These fundamentals guide our decision-making as we execute our integrated growth strategy and drive value creation for shareholders.
Jon Moeller: For my part, it's been a tremendous honor to serve as P&G's Chairman, President, and Chief Executive Officer. As I've walked the halls of P&G Buildings around the world for the last 38 years, I'm constantly reminded of the privileges. to work alongside such committed colleagues and friends. P&G has afforded me the chance to serve consumers and communities around the world. It's been a true joy. and a tremendous learning experience. Our strategy is working. Our bench is strong.
For my part, it's been a tremendous honor to serve as PNG's Chairman, President, and Chief Executive Officer.
As I've walked the halls of PNG buildings around the world for the last 38 years.
I'm constantly reminded of the privilege. It is.
To work alongside such committed colleagues and friends.
PNG has afforded me the chance to serve consumers and communities around the world.
It's been a true Joy.
In a tremendous learning experience.
Jon Moeller: As we cross the calendar year, it's a good time to transition to the next generation to lead the P&G team. through its next chapter of top and bottom line growth, and of course, value creation.
Our strategy is working. Our bench is strong as we cross the calendar year. It's a good time to transition to the next generation to lead the PNG team.
Andre Schulten: With that, I'll now turn the call over to another esteemed colleague, Andre Schulten, to lead us through fiscal year 2025. 4th quarter and the year-end results.
Through its next chapter of top and bottom line growth and of course, value creation.
With that, I'll now turn the call over to another esteemed colleague, Andre Schulten, to lead us through fiscal year 2025.
at the fourth quarter in the year end results.
Andre Schulten: Thank you, John, and congratulations to you and to Shailesh. And I'm very happy you will be in the current position for the next six months and executive chairman thereof.
Thank you, Joan and congratulations to you. And to shalesh
And I'm very happy. You will be in the current position for the next 6, months and executive chairman thereafter.
Andre Schulten: So with that, I'll start with an overview of results for Fiscal 25 and then the fourth quarter. John will add perspective on strategic focus areas and capabilities, and we will close with guidance for Fiscal 26. and take your questions. Execution of our integrated strategy enabled the company to grow organic sales and core EPS and to return cash to share owners in line with our target range in a challenging fiscal 25 despite volatile macroeconomic, geopolitical and consumer dynamics, resulting in market level headwinds that were not anticipated at the start of the fiscal year. Organic sales for the year grew 2%, volume growth contributed one point and price mix added one point.
So, with that, I'll start with an overview of results for fiscal 2025. Then, in the fourth quarter, John will provide perspective on strategic focus areas and capabilities, and we will close with guidance for fiscal 2026.
And then take your questions.
Execution of our integrated strategy enabled, the company to grow, organic sales, and core EPs, and to return cash to share owners in line with our target range. In a challenging fiscal, 25, despite volatile market, economic geopolitical and consumer Dynamics.
Resulting in market-level headwinds that were not anticipated at the start of the fiscal year.
Andre Schulten: Growth continues to be broad-based across categories and regions. Nine of ten product categories grew organic sales for the year. Family care and personal health care each grew with singles. Fabric care, home care, feminine care, hair care, grooming, oral care, and skin and personal care were up low single digits. Baby care was down low single digits. Focus markets grew organic sales 2% for the year with North America up 2% and Europe focus markets up 3%. Greater China Organic Sales were down 5% versus the prior year, but improved sequentially throughout the fiscal year, growing 2% in the most recent quarter.
Organic sales for the year grew 2%, volume growth contributed 1 point and price mixed at at 1 Point.
Growth continues to be broad-based across categories, and regions. 9 of 10 product categories, grew organic sales for the year.
Family Care and personal health care, each group at Singles, fabric care, home care, feminine care, Hair Care. Grooming, Oral Care and skin and personal care were up low. Single digits. Baby care was download singles,
Focus markets, grew organic sales, 2% for the year with North America up 2% and Europe focused markets up 3%.
Andre Schulten: Enterprise markets were up 2% led by Latin America with 4% organic sales growth. e-commerce sales increased 12% now representing 19% of total company 30 of our top 50 category country combinations held or grew share for the year, 7 of 10 product categories held or grew share globally. In aggregate, global value and volume share were both in line versus prior year. All channel market value in the US categories in which we compete grew around 3.5% in fiscal 25. P&G consumption growth was last year in line with category value and volume levels for the year. Earnings per share were $6.83, up 4% for the year.
Greater China, organic sales were down 5%. It was the prior year, but improved sequentially throughout the fiscal year growing 2% in the most recent quarter.
Enterprise markets were up 2%, led by Latin America with 4% organic sales growth.
E-commerce sales, increased 12% now representing. 19% of total company.
30 of our top 50 category, country combinations, health or group share for the year.
7 of 10 product categories held or group, share globally.
In aggregate Global value and volume share were both in line versus prior year.
All Channel market value in the US categories in which we compete grew around 3 and a half percent in 5025 PNG consumption, growth was roughly in line with category value and volume levels for the year.
Andre Schulten: Core growth margin declined 40 basis points and co-operating margin increased 50 basis points. Nearly $2.7 billion of productivity improvement across cost of goods sold at SG&A enabled an increase in investment in superior products, packages, and brand communication to drive market growth. On a currency neutral basis, Core EPS was up 4% and Core Operating Margin increased 50 basis points. Adjusted free cash flow productivity was 87%.
For earnings per share were $6.83 up 4% for the year.
Core, growth, margin declined, 40 basis points, and cooperation margin increased. 50 basis points nearly 2.7 billion dollars of productivity Improvement across cost of goods, sold at sgna enabled. An increase in investment in Superior Products, packages and brand communication to drive market growth.
On a currency neutral basis. Core EPS was up 4% and cooperating margin increased 50 basis points.
Andre Schulten: We increased our dividend by 5% and returned $16 billion of value to share owners, nearly 10 billion in dividends and 6.5 billion in share repurchase, consistent with our guidance at the start of the fiscal year.
Adjusted free, cash flow productivity was 87%.
We increase our dividend by 5% and return, 16 billion dollars of value to share owners, nearly 10 billion in dividends and 6 and a half billion in share repurchase consistent with our guidance. At the start of the fiscal year.
Andre Schulten: Moving to fourth quarter results. Organic sales rounded up to 2%. Volume was in line with prior year, pricing and mix were each up 1%. Growth continues to be broad-based across categories and regions, as 9 of 10 product categories held or grew organic sales. Fabric care, home care, feminine care, family care, grooming, oral care, personal health care, and skin and personal care each grew low singles. Hair care was in line with prior year, and baby care was down low singles. 6 or 7 regions held or grew organic sales. Focus markets were up 1%. Organic sales in North America were in line with prior year, while we continue to see solid consumption growth in North America of around 2%, sell-in trailed sell-out due to retailer inventory reductions.
Moving to fourth quarter results, organic sales rounded up to 2%.
1%.
Growth continues to be broad-based across categories and regions, as 9 of 10 product categories held or grew organic sales: fabric care, home care, feminine care, family care, grooming, oral care, personal health care, skin care, and personal care. Each grew in the low singles; hair care was in line with the prior year, while baby care was down in singles.
Six or seven regions held or grew organic sales.
Focus markets were up. Organic sales in North America increased by 1%, which was in line with the prior year, while we continue to see solid consumption growth in North America of around 2%.
Andre Schulten: European focused markets organic sales were up 2%. Greater China organic sales grew 2%, another quarter of sequential improvement and positive momentum heading into Fiscal 26. 6.18 key consumption period was relatively strong, but we are closely watching economic and consumer confidence impacts resulting from higher US tariffs on Chinese imports. Enterprise markets grew 3% for the quarter. Latin America organic sales were up 6%, including double digit growth in Mexico, more than offsetting a modest sales decline in Brazil due to trade inventory reductions. Europe Enterprise and Asia-Pacific Middle East Africa Enterprise regions each grew organic sales low single.
Selling Trails, sell out due to retailer inventory. Reductions European Focus markets organic sales were up 2%.
Greater China, organic sales grew 2%, another quarter of sequential Improvement and positive. Momentum heading into fiscal, 26.
A 618 key consumption period was relatively strong.
But we are closely watching economic and consumer confidence. Impacts resulting from higher us tariffs on Chinese Imports.
Enterprise markets grew 3% for the quarter.
In Latin America, organic sales were up 6%, including double-digit growth in Mexico, more than offsetting a motor sales decline in Brazil due to trade and inventory reductions.
Andre Schulten: Global aggregate market share was down 20 basis points, 28 of our top 50 category country combinations held a good share for the quarter. On the bottom line, core earnings per share were $1.48, up 6% versus prior year, and on a currency-neutral basis, core EPS increased 5%. These results include a three-cent impact from tariffs. Our growth margin was down 70 basis points and co-operating margin increased 150 basis points. Very strong productivity improvement of 560 basis points with healthy reinvestment in innovation and demand creation. Currency neutral co-operating margin increased 170 basis points.
Europe, Enterprise and asia-pacific Middle East Africa, Enterprise regions. Each grew organic sales, low singles.
Global aggregate market share was down 20 basis points, 28 of our top 50 category country combinations, held our group share for the quarter.
On the bottom line, Co earnings per share were $148 up, 6% versus prior year and on the currency neutral basis. Core, EPS increased 5%, these results include a 3 cents impact from tariffs
For growth margin was down, 70% and cooperating margin increase. 150 basis points, very strong productivity, Improvement of 560 basis points with healthy. Reinvestment in Innovation and demand creation, currency, neutral cooperating, margin increased 170 basis points.
Andre Schulten: Adjusted pre-cash flow productivity was 110%, and we returned $3.3 billion of cash-to-share almost this quarter, $2.6 billion in dividends and $700 million in share repurchase.
Adjust the free cash flow. Productivity was 110%.
Andre Schulten: In summary, another year of sales and earnings growth and strong cash return to shareholders in a challenging economic and geopolitical environment.
And we returned 3.3 billion dollars of cash to share owners with quarter. 2.6 billion in dividends and 700 million in share repurchase.
Jon Moeller: With that, I'll pass it back to Jon.
Jon Moeller: Thanks, Andre. I'll start with a few thoughts on results before discussing the strategy. We're pleased with the performance P&G People delivered last fiscal year in the face of a very dynamic, difficult, and volatile environment. Growing sales and profit and returning high levels of cash to share owners despite heightened consumer anxiety with tariffs, inflation, interest rates, political and social divisiveness. and Immigration and Employment Status Uncertainty. All resulting in lower category growth. Unpredictable Geopolitical Environment, and Against Highly Capable Competitors. While not all results are at the levels we aspired to deliver at the beginning of the year, growth in this environment is worth acknowledging.
In summary another year of sales and earnings growth and strong cash return to share owners in the challenging economic and geopolitical environment with that. I'll pass it back to John. Thanks, Andre. I'll start with a few thoughts on results. Uh before discussing the strategy.
We're pleased with the performance PNG. People delivered last fiscal year in the face of a very Dynamic difficult and volatile environment.
Growing sales and profit and returning high levels of cache to share owners. Despite
Heightened, consumer anxiety, with tariffs inflation, interest rates, political, and social divisiveness.
And immigration and employment status uncertainty.
All all results in lower category growth.
And unpredictable, geopolitical environment and against highly capable competitors.
While not all results are at the levels. We aspire to deliver at the beginning of the year growth in this environment is worth acknowledging.
Jon Moeller: To be clear, there's more work to do to continue improving the areas in our control. which will be needed to offset the headwinds that are largely not.
To be clear, there's more work to do to continue improving the areas in our control.
Which will be needed to offset the headwinds that are largely not in our control.
Jon Moeller: The restructuring program we announced last month is one important step towards strengthening the execution of our integrated strategy. We'll talk more about this later. At Investor Day last year and at recent investor conferences, we've highlighted the significant growth opportunities we have ahead of us, just in the categories where we play today. In North America, up to $5 billion of market potential simply by growing household penetration of our brands among currently unserved or underserved consumers. In Europe, more than $10 billion of opportunity by driving consumption and growing markets to the current best-in-class levels in the region while maintaining current market share In enterprise markets, $10 to $15 billion of sales opportunity by driving per capita consumption to the levels we currently have in Mexico.
The restructuring program we announced last month is 1 important step towards strengthening the execution of our integrated strategies.
We'll talk more about this later.
At investor Day last year and at recent investor conferences. We've highlighted the significant growth opportunities. We have ahead of us just in the categories where we play today.
In North America up to 5 billion dollars of Market potential, simply by growing household penetration of Our Brands among currently unserved or underserved consumers.
In Europe more than 10 billion dollars of opportunity by driving consumption and growing markets to the current best-in-class levels in the region while maintaining current market share.
An enterprise markets $10 to $15 billion of sales opportunity by driving per capita consumption to the levels we currently have in Mexico.
Jon Moeller: Positioning ourselves to capture these growth opportunities and manage the increasing near-term challenges is best accomplished with disciplined execution of our integrated growth strategy. with a focus on driving category growth and value creation. A focused portfolio of daily use products in categories where performance drives brand choice. The portfolio is performing, delivering broad-based growth across nearly all categories and most geographies. We're active managers of this portfolio. Over the last several years, we've made some targeted additions and subtractions in our brand portfolio. We've adjusted our operating model in several markets. We'll be making additional portfolio moves as part of the new restructuring program.
Positioning ourselves to capture these growth opportunities and manage the increasing near-term challenges is best accomplished with disciplined execution of our integrated growth strategy.
With a focus on driving category growth and value creation.
A focused portfolio of daily, use products and categories where performance drives brand choice.
The most geographies.
Were active managers of this portfolio over the last several years, we've made some targeted additions and subtractions in our brand portfolio.
We've adjusted our operating model in several markets. We'll be making additional portfolio moves as part of the new restructuring program.
Jon Moeller: Next, an ongoing commitment to and investment in integrated, irresistible superiority through innovation. across the five vectors of product, package, brand communication, retail execution, and value, holistically defined. Leveraging that superiority to delight consumers, grow markets and our share in them to jointly create value with retail partners. The innovation plans across the businesses are broad, strong, as each category team works to increase their margin of superiority and consumer delight. Superior innovations that are driven by deep consumer insights, communicated to consumers with more effective and efficient marketing programs. Executed in stores and online in conjunction with retailer strategies to grow categories and our brands.
Next, an ongoing commitment to an investment in integrated, irresistible superiority.
Through innovation.
Across the 5 vectors of product package, brand communication, retail, execution and value. Holistically defined
Leveraging that superiority to Delight, consumers grow markets, and our share in them to jointly create value with Retail Partners.
The Innovation plans across the businesses are Broad and strong. As each category Team Works to increase their margin of superiority and consumer Delight.
Superior innovations that are driven by Deep consumer insights, communicated to Consumers with more effective and efficient marketing programs.
Jon Moeller: and Price to Deliver Superior Value. across each price tier where we compete. No one of the five superiority vectors can carry the day by itself. All five working together.
Executed in stores and online, in conjunction with retailer strategies to grow categories and our brands.
And price to deliver Superior value across each price, tier where we compete.
No, one of the five. Superiority vectors can carry the day by themselves. It's all five working together.
Jon Moeller: A few recent examples in China. Pampers is driving growth in the premium and super premium segments of the market by consistently upgrading and clearly communicating its superior offerings to deliver ultimate comfort, protection, and luxury softness on skin. In Fiscal 25, Pampers grew organic sales nearly 20% in China. and increased value share by over 2 points. Growing share in both offline and online channels. Pampers grew its point of market entry share, becoming the best diaper for newborns among moms less than 30 years old.
A few recent examples in China.
Amperes is driving growth in the premium and super premium segments of the market.
I consistently upgrading and clearly communicating its Superior offerings to deliver ultimate Comfort protection and luxury softness. On skin.
In fiscal 25, Pampers grew organic sales, nearly 20% in China.
An increase in value, share by over 2 points.
Growing share in both offline and online channels.
Amperes grew its point of Market. Entry share becoming the best diaper for newborns among moms less than 30 years old.
Jon Moeller: SK-2 recently launched a supercharged product line called LXP. It contains our highest concentration of Patera, delivering 8x faster visible results, and is positioned in the Super Premium segment of the Prestige Skin Market. The superior product in a beautiful package. Sold online and in department stores with upgraded counters and beauty counselors, it's a superior shopping experience and value for the Botero-loving, loyal consumer. The superior LXP messaging has the added benefit of haloing over the total SK-II brand and is building brand equity through consistent recognition from top beauty award winners. During the most recent key consumption event in China, SK-II and Pampers led growth in their respective categories.
Sk2 recently launched a supercharged product line called lxp.
It contains our highest concentration of beta, delivering 8 times faster, visible results. And this positioned in the super premium segment of The Prestige skin Market.
The superior product in a beautiful package.
Sold online and in the department stores with upgraded, counters, and Beauty counselors.
It's a superior shopping experience and value for the beta-loving, loyal consumer.
The superior lxp messaging has ADD has the added benefit of haloing.
Over the total sk2 brand.
And is building brand Equity through consistent recognition. From Top Beauty award groups.
Jon Moeller: Outperforming the Market and Gaining Share Another example, in Latin America, Pantene's Deep Conditioning Treatment Collection is leading category growth, leveraging formulas featuring visibly enticing melting pearls. which deliver Superior Hair Repair. Superior Advertising with Compelling Visuals and Retail Execution with Beautiful End Aisle Displays Communicate the Benefit and Value for the Consumer Seeking Softer, Shinier Hair. Mexico hair care organic sales were up mid-teens in fiscal 2025, with value share growth over 1.5 points.
During the most recent key consumption of event in China sk2 and Pampers lead growth and their respective categories.
Outperforming the market and gaining share.
Another example in Latin America, pantene's deep conditioning, treatment collection is leading category growth, leveraging formulas, featuring visibly. Enticing melting pearls.
Which deliver Superior Hair Repair.
Superior advertising with compelling, visuals and Retail execution, with beautiful and dial displays communicate. The benefit and value for the consumer seeking softer. Shinier hair.
Mexico Hair Care. Organic sales were up mid teens, in fiscal 2025.
With value share growth over 1.5 points.
Jon Moeller: Swiffer recently introduced the Sweep & Mop Deluxe, the first major upgrade to the original Swiffer Sweeper since its launch 25 years ago. and following the Swiffer PowerMob launch last year. Weapon Mop Deluxe features a sturdier stick that collapses in half for easy storage and two-in-one dry and wet cleaning capability. It's designed for efficient floor cleaning and is great for small spaces. Early launch results indicate 6% new users and 30% incremental sales to the Swiffer Sweeper Starter. For the PowerMob launch, the Swiffer team brought several top TikTok creators into their lab. to learn about PowerMot from P&G scientists and create engaging communication.
Whiffer recently introduced the sweep and mop deluxe. The first major upgrade to the original Swiffer Sweeper since its launch 25 years ago.
And following the Swiffer power mop launched last year.
We've been mop deluxe features. A sturdier stick that collapses in half for Easy Storage.
And 2 in 1, dry and wet cleaning capabilities.
It's designed for efficient floor, cleaning and is great for small spaces.
Early launch results. Indicate 6% new users and 30% incremental sales to the Swiffer Sweeper starter kit business.
But the Power Mop launch, the Swiffer team brought several top TikTok creators into their labs.
Jon Moeller: From there, the creator's social media content was tested with P&G's proprietary AI studio. This process ultimately created the Superior Mop Smarter campaign across TV, digital, and influencer marketing to connect with consumers in fresh ways. Swiffer PowerMob has become the largest product launch in Swiffer's history, contributing to 40% of the growth of the Swiffer portfolio and driving 35% of category growth, making it the number one growth driver in the category.
To learn about power, mop from PNG, scientists, and create engaging communication.
From there, the creators social media content was tested with png's proprietary, AI Studios.
This process ultimately created the Superior Mop Smarter campaign across TV, digital, and influencer marketing to connect with consumers in fresh ways.
so, if for power mop has become the largest product launch in swiffers history,
Making it the number 1 growth driver, in the category.
Jon Moeller: In the U.S. digestive wellness market, Align launched its bloating relief and food digestion version. To address the number one unmet need for nearly half of all consumers. Bloating Associated with the Inability to Digest Food The line delivered meaningful product innovation and communicated the symptom by showing one of the most common and relatable signs of bloating for consumers, not being able to button their pants. The spring, a lion launched its first three-in-one biotic. Prebiotic to Nourish Good Bacteria. Probiotic to soothe bloating, and a postbiotic to support. Immune Health This new innovation is off to a strong start, enabling Align to accelerate share growth since launch.
And the US digestive Wellness Market, a line launched its bloating relief and food digestion version.
To address the number 1, un need for nearly half of all consumers.
Bloating associated with the inability to, to digest food.
A line delivered meaningful product Innovation and communicated the symptom by showing 1 of the most common and relatable signs of bloating for consumers. Not being able to button their pants.
The spring, a lion launched, its first 3-in-1 biotic.
A Prebiotic to nourish. Good bacteria.
A probiotic to soothe bloating and a postbiotic to support.
Immune health.
This new innovation is off to a strong start, enabling a line to accelerate share growth since launch.
Jon Moeller: Finally, Tide Evo, our new laundry detergent developed on our Breakthrough Functional Fibers platform, has started its first stage of national expansion with an online launch of Tide Evo Free & Gentle. Evo offers superior cleaning performance in a recyclable package with no plastic bottles or water. Test Market Stores Evo sales have been highly incremental to category growth and retailer demand has been well above initial expectations. We're in the process of adding. Manufacturing Capacity and we'll have more to share about this exciting innovation over the coming months.
Finally tied Evo, our new laundry detergent developed on our breakthrough, functional fibers platform.
Has started its first stage of National Expansion with an online launch of Tide. Evo, free and gentle.
Evo offers superior cleaning performance in a recyclable package with no plastic bottles or water.
And test Market stores, Evo sales have been highly incremental to category growth.
And retailer demand has been well above initial expectations.
We're in the process of adding.
Manufacturing capacity, and we'll have more to share about this exciting Innovation over the coming months.
Jon Moeller: There are many more examples. across all categories. More than we have time to discuss in detail this morning.
There are many more examples.
Across all categories.
More than we have time to discuss in detail this morning.
Jon Moeller: One third-party measure of innovation success is the Circana U.S. New Products Pacesetter. In 2024, P&G earned four of the top 10 spots for the most successful non-food product launches of the year. is a measure by retail sales, and five of the top 25. This marks the fifth year in a row that we have had at least three of the top ten entries. Our five entries in the top 25 list are the most by any individual company. for the seventh consecutive year and more than our seven closest competitors. Unilever, Can Do, Kimberly Clark, Colgate, L'Oreal, Clorox, Reckitt, Benckiser combined for the fifth consecutive year.
1 third party measure of innovation. Success is the Kona us new products Pace Setters report.
In 2024 PNG earned 4 of the top 10 spots for the most successful non-food product, launches of the year.
As measured by retail sales, we have 5 of the top 25.
This marks the 5th year in a row that we have had at least 3 of the top 10 entries.
Our five entries in the top 25 list are the most by any individual company.
For the seventh consecutive year.
And more than our 7 closest competitors. Unilever can view Kimberly, Clark, Colgate, L'Oreal Clorox, record, then, keys are combined.
For the fifth consecutive year.
Jon Moeller: Looking forward, P&G has seven entries on the Pacesetters Rising Stars list for next year. Including Downy Comfy Cozy Fabric Enhancer, Febreze Premium Seasonal Collection Air Care, Game Mood Collection Detergent. Loves Platinum Protection Diapers, Mr. Clean, 2X Concentrated Cleaner, Oral-B IO Series 2 Power Brushes. Secret Whole Body Deodorant.
Looking forward. PNG is 7, entries. On the Pace Setters Rising Stars list for next year.
including Downey, comfy cozy, fabric enhancer
For Breeze premium seasonal, collection are care.
Gain mood collection detergent.
Loves Platinum protection. Diapers, Mr. Clean 2x concentrated cleaner.
Jon Moeller: For perspective, all three of our products on the rising stars last year, finished in the top 10 for the current Third strategy element, productivity improvement in all areas of our operation. Funded Investments in Innovation, Brand Building, and Market Growth to Mitigate Cost and Currency Challenges and to Expand Margins and Generate Cash. We have an objective for growth savings and cost of goods of up to one and a half billion dollars before tax enabled by platform programs with global application across categories with supply chain 3.0. We have line of sight to savings from improved marketing productivity, more efficiency and greater effectiveness, avoiding excess frequency and reducing waste while increasing reach.
Oral-B, IO Series 2 power brushes, and Secret whole body deodorant sprays.
For perspective. All 3 of our products on the Rising Stars last year finished in the top 10 for the current year.
Third strategy element: productivity improvement in all areas of our operations.
The fund investments in Innovation brand building and market growth.
To mitigate costs and currency challenges and to expand, margins and generate cash.
We have an objective for growth savings and cost of goods of up to 1 and a half billion dollars before tax enabled by platform programs, with global application, across categories, with supply chain 3.0
Jon Moeller: We're taking targeted steps to reduce overhead as we digitize more of our operations.
We have line of sight to savings from improved marketing, productivity, more efficiency and greater Effectiveness avoiding excess frequency and reducing waste while increasing reach.
We're taking targeted steps to reduce overhead as we digitize more of our operations.
Jon Moeller: Visibility to more savings opportunity is increasing as the businesses continue to build their three-year rolling productivity master plans, and as we accelerate productivity with our restructuring For more information visit www.FEMA.gov Next element of the strategy constructed 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. Finally, we've designed and continue to refine an empowered, agile, and accountable organization. an inclusive and diverse organization, enabling us to better serve an increasingly diverse set of consumers. There are times when continuous improvement of each element of the strategy is enough to deliver the near-term objectives we've set and to prepare us for the next phase of growth and value creation.
Visibility to more savings opportunities is increasing as businesses continue to build their 3-year rolling productivity master plans. As we accelerate productivity with our restructuring efforts,
next element of the strategy, 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.
Finally, we've designed and continue to refine and empowered agile and accountable organization.
An inclusive and diverse organization, enabling us to better serve and increasingly diverse set of consumers.
There are times when continuous Improvement of each element of the strategy.
is enough to deliver the near-term objectives we've set and to prepare us for the next phase of growth and value creation.
Jon Moeller: However, at times, there's a need for a bigger step forward to bolster P&G's growth and value The two-year restructuring program we announced is aimed at making changes to enable stronger delivery of our integrated growth strategy. This is not a new approach, rather an intentional strengthening of our current strategy to widen our margin of advantage in superiority fueled by productivity to win in the increasingly challenging environment in which we live. There are three main areas of focus, portfolio, supply chain, and organization design. The portfolio choices include exits of some categories, brands, and product forms in individual markets.
However, at times there's a need for a bigger step forward to bolster png's growth and value creation.
The 2-year restructuring program, we announced is aimed at making changes to enable stronger delivery of our integrated growth strategy.
Name of our current strategy to widen our margin of advantage in superiority fueled by productivity to win in the increasingly challenging environment in which we compete.
There are 3 main areas of focus.
Portfolio supply chain and organization design.
Jon Moeller: They may also include some brand divestment. It takes time to plan the execution of these moves, and most have not been communicated broadly, so we can't discuss all of the details today. A priority is communicating first to employees and to retail customers.
The portfolio choices, include exits of some categories Brands and product forms and individual markets.
They may also include some brand investors.
It takes time to plan the execution of these moves and most have not been communicated broadly. So we can't discuss all of the details today.
A priority is communicating first to employees and to retail customers.
Jon Moeller: So here are a few examples of the areas where we will be simplifying the portfolio. We'll be streamlining the Feminine Care Pad lineup in several markets in Asia. Similarly, in oral care, fabric care, and grooming, we'll be discontinuing small, non-strategic, country product form companies. will be discontinuing business operations in Bangladesh. This is not an exhausted list, but a representation of the ways we're focusing our energy and resources. Higher Value Creation Opportunity. These portfolio moves enable us to make related investments, interventions in our supply chain. Right sizing and right locating production to drive efficiencies, faster innovation, cost reduction, and even more reliable and resilient supply.
Still, here are a few examples of the areas where we will be simplifying the portfolio.
We'll be streamlining the feminine care pad lineup and several markets in Asia.
Similarly, in Oral Care. Fabric care and grooming will be discontinuing small, non-strategic, country product, form combinations.
We'll be discontinuing business operations in Bangladesh.
This is not an exhaustive list, but a representation of the ways. We're focusing our energy and resources on higher value creation opportunities.
These portfolio moves enable us to make related Investments interventions in our supply chain.
Right-sizing and right-locating production to drive efficiencies faster, innovation cost reduction, and even more reliable and resilient supply.
Jon Moeller: Finally, we're making additional changes to ensure an even more agile, empowered, and accountable organization. Making Roles Broader, Teams Smaller, Work More Fulfilling and More Efficient. Leveraging Digitization and Automation. Smaller teams with greater breadth of skills will work on an integrated end-to-end basis. from Consumer Understanding to Design and Execution. Eliminating the siloed approach to work, creating more integrated ways of working. Broadening Employees' Skills to Empower Increasing Individual Contribution and Development and Improving the Employee Value Problem.
Finally, we're making additional changes to ensure an even more agile and powered and accountable organization design.
Making roles broader teams smaller work, more fulfilling and more efficient leveraging digitization and automation.
smaller teams with greater breadth, of skills will work on an integrated end-to-end basis from consumer, understanding to design and execution,
Eliminating, the siloed approach to work, creating more integrated ways of working.
Broadening employees skills to empower decision-making.
Increasing individual contribution and development, and improving the employee value proposition.
Jon Moeller: Across these three areas, portfolio, supply chain, organization, we expect to reduce up to 7,000 non-manufacturing roles, or roughly 15% of our current non-manufacturing workforce over the next two years. These steps have been in evaluation by the leadership team for some time. We've been thinking through some of these organization design changes shortly after our last restructure change six years ago. And we've had pilots and focus and enterprise markets in place for well over a year. The portfolio moves have been evaluated over the last year following successful execution with other brands and markets over the past two years.
Across these 3 areas portfolio supply chain organization, we expect to reduce up to 7,000 non-manufacturing roles. Our roughly 15% of our current non-manufacturing Workforce over the next 2 years.
These steps have been in evaluation by the leadership team for some time.
We've been thinking through some of these organization design changes and shortly. After our last restructure Change 6 years ago,
and we've had pilots and focused and Enterprise markets in place for well over a year.
Jon Moeller: I say all of this to ensure our owners that these are well thought out plans. not knee-jerk reactions to recent slower markets or higher cost We remain as confident as ever in our strategy and our ability to drive market growth, to deliver balanced growth and value creation, to delight consumers, customers, employees.
The portfolio moves have been evaluated over the last year, following successful execution, with other brands of markets over the past 2 years,
I say all of this to ensure our owners that these are well thought out plans not need your reactions to recent slower markets or higher cost impacts.
Jon Moeller: Society, and Cheryl. And we're taking steps to drive better execution and more investment in the strategy to grow markets and improve our ability to achieve our growth and value creation objectives.
We remained as confident as ever in our strategy in our ability to drive market, growth to deliver, balanced growth and value creation to Delight, consumers, customers employees society, and share owners.
Andre Schulten: With that, I'll hand it back to Andre to outline our guidance for the new year. Thanks, John. As we enter fiscal 26, we continue to expect the environment around us to remain volatile. Challenging from cost to currencies to consumer, competitor, retailer, and geopolitical dynamics, we believe our going-in guidance for Fiscal 26 prudently reflects these market realities. On the top line, we currently expect the markets in which we compete to deliver local currency value growth in the range of flat to 3% for the year. with the current run rate roughly in the middle of this range.
And we're taking steps to drive better execution and more investment in the strategy to grow markets, and improve our ability to achieve our growth and value creation objectives.
With that, I'll hand it back to Andre to outline our guidance for the new year.
Thanks John.
As we enter Fiscal 2026, we continue to expect the environment around us to remain volatile.
And challenging from cost to currencies to Consumer, competitor retailer, and geopolitical Dynamics. We believe our going in guidance for fiscal 26, prudently, reflects, these Market realities.
On the top line, we currently expect the markets in which we compete to deliver local currency value, growth in the range of flat to 3% for the year.
Andre Schulten: Our objective is to grow organic sales modestly ahead of the underlying growth of these markets. However, our guidance includes a 30 to 50 basis point headwind from brand and product form discontinuations as part of our two year restructuring program. Taken together, our guidance range for organic sales growth is in line to up 4% versus prior year. The low end of this range protects for additional softness in underlying market growth rates. The high end would require acceleration in underlying market growth and market share. On the bottom line, we are guiding for core EPS growth in line to plus 4% versus fiscal year 25, core EPS of $6.83.
With the current run rate roughly in the middle of this range.
Our objective is to grow organic sales modestly ahead of the underlying growth of these markets. However, our guidance includes a 30 to 50 basis point headwind from brand and product form discontinuation as part of our two-year restructuring program.
Taken together, our guidance range for organic sales growth is in line to up 4% versus the prior year.
The low end of this range protects for additional softness in underlying market growth rates. The high-end would require acceleration in underlying market growth and market shares.
Andre Schulten: This guidance equates to a range of 683 to 709 per share, 696 or up 2% at the center of the range. This outlook includes a commodity cost headwind of approximately $200 million after tax, and a foreign exchange tailwind of approximately $300 million after tax. In addition, our outlook includes $1 billion before tax in higher costs from tariffs in fiscal 26. This is based on tariff rates announced since July 9th and assumes USMCA exemptions still apply for imports from Canada and Mexico. You can think about the tariff impact in three buckets. About $200 million from materials and products imported from China to the US.
On the bottom line, we are guiding for core EPS growth in line to plus 4% versus fiscal year. 25 core EPS of $6.83.
Or up 2% at the center of the range.
This outlook includes a commodity cost headwind of approximately $ million after tax, and a foreign exchange tailwind of approximately $ million after tax.
In addition, our outlook includes $1 billion before tax in higher costs from tariffs and fiscal 26.
This is based on tariff rates announced since July 9th and assumes usmca exceptions,
Exemptions still apply for imports from Canada and Mexico.
You can think about the Tariff impact in 3 buckets, about $200 million, from materials, and products imported from China to the US.
Andre Schulten: Another $200 million from Canada's tariffs on goods shipped from the U.S. and the remaining 600 million from tariffs on goods coming to the U.S. from the rest of the world. At these rates, tariffs alone are a five-point headwind to core EPS growth in Fiscal 2026. We will look for every opportunity to mitigate these impacts, including sourcing flexibility, productivity improvements, and pricing with innovation in affected categories and markets. Below the operating line, we expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20 to 21% for fiscal 2021.
Another $200 million from Canada's tariffs on goods shipped from the U.S.
And the remaining 600 million from tariffs on Goods, coming from coming to the US from the rest of the world.
At these rates, tariffs alone are a 5-point headwind to core EPS growth and fiscal 26.
We will look for every opportunity to mitigate these impacts, including sourcing flexibility, productivity improvements, and pricing with innovation in effective categories and markets.
Below the operating line, we expect modestly higher interest expense this fiscal year.
Andre Schulten: combined roughly a $250 million after-tax headwind to earnings growth. We are forecasting adjusted free cash flow productivity in the range of 85 to 90% for the year. This includes an increase in capital spending as we add capacity in several categories and as we incur the cash costs from the restructuring budget. We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock. Combine the plan to return roughly $15 billion of cash to share owners in fiscal 2026. These guidance ranges reflect current market realities for consumption and costs, including tariffs.
And a core effective tax rate in the range of 20 to 21% for fiscal 26.
Combined, we faced roughly a $250 million after-tax headwind to earnings growth.
We are forecasting adjusted free cash flow productivity in the range of 85% to 90% for the year. This includes an increase in capital spending as we add capacity in several categories and as we incur the cash cost from the restructuring work.
We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock combined, the plan to return roughly $15 billion of cash to shareholders in fiscal 2026.
Andre Schulten: They also reflect our desire to maintain strong investment in the business, to enable delivery of our growth algorithm over two- and three-year rolling periods as we work through market and cost volatility. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major supply chain disruptions or store closures are not anticipated within these guidance ranges.
These guidance ranges reflect current market realities for consumption and costs including terrorists. They also reflect our desire to maintain strong investment in business in the business.
To enable delivery of our growth algorithm over 2 and 3 year Rolling periods, as we work through market and cost volatility.
This Outlook is based on current market growth, rate estimates, commodity prices and foreign exchange rates.
Jon Moeller: With that, I'll hand it back to Jon for closing thoughts. We're very pleased with the results P&G people have delivered in a very challenging and volatile environment, growing sales, growing earnings and returning strong levels of cash to share owners. Continue to believe the best path to sustainable balanced growth is to double down on the strategy. Excellent execution of an integrated set of market constructive strategies delivered with a focus on balanced top and bottom line growth and value creation. Starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. We're taking proactive steps to improve the execution of strategy and our ability to deliver our growth and value creation objectives.
Significant additional currency weakness commodity cost increases geopolitical, disruption major supply chain. Disruptions or store closures. Are not anticipated Within These guidance. Ranges
With that, I'll hand it back to John for closing thoughts.
We're very pleased with the results. PNG people have delivered in a very challenging and volatile environment.
Growing sales growing earnings and returning, strong levels of cash to share owners.
Continue to believe the best path to sustainable, balanced growth is to double down on the strategy.
Excellent execution of an integrated set of Market constructive strategies.
Delivered with a focus on balance, top and bottom line growth, and value creation.
Starting with a commitment to deliver, irresistibly Superior propositions to Consumers and Retail Partners.
We're taking proactive steps to improve the execution of strategy, and our ability to deliver our growth and value creation objectives.
Jon Moeller: I'm looking forward to being with you through the calendar year as CEO and then as Executive Chair. I'm excited by the additional contributions that Shailesh and our team will make to delight consumers, customers, employees, society, and through this, our share owners.
I am looking forward to being with you through the calendar year as CEO, and then, as Executive Chair.
Unknown Executive: With that, we'll be happy to take any questions. If you have a question, please press star followed by one on your phone. If your question has been answered or you would like to withdraw your question, please press star followed by two.
I'm excited by the additional contributions that Char last year and our team will make to Delight consumers, customers employees society, and through this, our share owners.
With that, uh, we'll be happy to take any questions.
You have a question?
Or, if you would like to withdraw your question, please press star followed by 2.
Steve Powers: Your first question will come from the line of Steve Powers with Deutsche Bank. Please go ahead. Thank you. And good morning, everybody.
Your first question will come from the line of Steve's Powers with Deutsche Bank. Please go ahead.
Steve Powers: You know, picking up on last night's announcement, I guess I'd like to begin by extending my congratulations to Shailesh, assuming he's listening somewhere, and also say congratulations to you and the entire team, Jon, on what appears a well thought out transition. Two questions stemming from that, if I could.
Steve Powers: First, I know we'll hear a lot more from Shailesh starting in about six months, but maybe you could offer a bit more perspective, Jon, on what you see as Shailesh's unique attributes and why you feel he's the right person to succeed you, while also elaborating on your goals as you think about the pivot to Executive Chairman. And then secondly, shifting back to the business, Shailesh spoke in early June about the importance of P&G working, as he put it, to create its own tailwinds as we enter fiscal 26 in order to reaccelerate category growth and P&G's own top line.
Jon Moeller: You spoke to the innovation slate this year and overall priorities, but could you elaborate further on those tailwind creation efforts? And when, within the fiscal year, you might expect them to accumulate into more tangible overall results? Thank you. Thanks, Steve. As relates to... Shailesh's strong suitability. We are here to lead the next phase of growth and value creation for the company. He has successfully led our largest business Specifically, the fabric and home care sector most recently. He's led businesses in both enterprise markets and focus markets. Most recently, as COO, he had responsibility for, P&L responsibility for each of the enterprise markets.
Fiscal 26, in order to re-accelerate category growth and png's own Topline. Um, you spoke to the Innovation slate this year and, and overall priorities, but could you elaborate further on on those Tailwind creation efforts and when within the within the fiscal year, you might expect them to accumulate into more tangible. Um, overall results. Thank you.
Thanks Steve. Um,
as relates to, uh,
Shy. Lash's strong suitability.
To lead the next phase of growth and value creation for the company.
Um, he is successfully LED our largest businesses.
um, specifically the fabric and Home Care sector most recently
He's LED businesses in both uh, Enterprise markets and focused markets.
Um, most recently, as coo he had responsibility for pnl responsibility for each of the Enterprise markets.
Jon Moeller: As COO, he gained even deeper knowledge of some of our functional skill sets and capabilities. So he'll bring all of that to bear combined with 36 years of experience. I've worked closely with Shailesh, most closely in the last a number of years as he was COO and I was CEO. But we've worked in other capacities together. over the years. So he's gonna be a great... A very strong candidate to lead, again, the next phase of growth and value creation. And I feel very, very good about that. It gives me... A fair amount of peace and comfort as I move into my next.
Uh, as COO, he gained even deeper knowledge of, uh, some of our functional, uh, skill sets and capabilities.
Um so he'll bring all of that uh to Bear combined with a 36 years of experience.
I've worked, uh, closely with shy lash, uh, most closely in the last, uh,
Uh, number of years as he was coo and I was CEO, um, but we've worked, uh, in other capacities together, uh, over the years.
So, he's going to be a great. Um, um,
A very strong, uh, candidate uh, to lead again the next phase of growth and and value creation. And I feel very, very good about that. It gives me
um, a fair amount of uh, peace and comfort, as I move into, uh, my next chapter
Jon Moeller: In terms of... I'm creating our own headwinds, or sorry, tailwinds. I don't have the last thing we need to do is create any more headwinds. The Restructuring Program that both Andre and I referenced in our remarks is a very good example of that. Building a financial headroom to invest in innovation, invest in commercialization. And that's the reason we're doing that, is to continue to create our own tailwinds to accelerate growth in what is otherwise a very, very Focusing those efforts on the categories and brands and markets that matter is another example of creating our own tailwind.
um, um, in terms of
Um, creating our own headwinds or sorry, Tailwind.
uh, the last thing we need to do is create any more headwinds
um,
The restructuring program that both Andre. And I referenced in our remarks is a is a very good example of that.
Building, uh, financial headroom to invest in innovation, invest in commercialization.
um, um, and um
And that. And that's the reason we're doing that is to continue to create our own uh, Tailwind to accelerate growth and what is otherwise a very, very difficult environment.
Focusing those efforts on the categories, brands, and markets that matter.
Uh, um, is another example of?
Jon Moeller: And we continue to create tremendous advantage with all the work that we're doing in supply, both to improve service to consumers. and Customers Reduce Costs Creating More Financial and then obviously the appropriate levels of investment and expertise. focused on the next round of innovation. The next round of commercialization, and I took you through some of the on-market examples in my prepared. Remarks. And there are many exciting things coming. Not just in the categories we currently compete in, but also Selectively, a few additions.
Creating our own um, Tailwind.
And we continue, uh, to create tremendous Advantage, with all the work that we're doing in Supply, both to improve Service, uh, to Consumers.
Um, and customers, um, reduce costs, creating more financial headroom.
Um, and then obviously uh the appropriate levels of investment and expertise.
focused on the next round of
Motion, uh, the next round of commercialization, and I took you through some of the on-market examples, uh, in my prepared remarks, and there are many exciting things coming.
Jon Moeller: So, again, I move to my next assignment. with a sense of excitement and anticipation for what the team will accomplish. And that's one thing I think is important to emphasize when we have these times. Big multinational business is not a me sport. and I'm most comforted by the breadth and quality of the leadership team. The breath and quality of the organization that's been executing against the strategies that have generated some of the results that we've been talking about.
Not just in the categories we currently compete in, but also, uh, selectively in a few additional categories.
So again, um, I moved to my next assignment. Uh,
Uh, with a sense of, uh, excitement and anticipation.
For what the team will account. And that's 1 thing, I think is important to emphasize. Uh, when we have these kinds of
Uh leadership uh rotation.
Big multinational business is not a me sport.
It is a we sport.
And I'm most comforted by the breadth and quality of the leadership team.
The breadth and quality of the organization that's been executing against the strategies that have generated some of the results that we've been talking about.
I'll leave it there.
Lauren Lieberman: The next question will come from Lauren Lieberman of Barclays. Please go ahead. Great, thanks. Good morning, and I'll just echo everything that Steve so eloquently said, both to you, John, and to Shailesh. It was great to get the context of your expectations for market growth, and also kind of the current rate. But one thing that's become true over the last couple of quarters is the outperformance of P&G versus its categories, that gap has narrowed and narrowed and narrowed. And that's with what I think has still been a very steady fleet of innovation, consistent reinvestment. So notwithstanding all the words you just shared around consistency of strategy and confidence in the strategy, What do you think maybe needs to change?
The next question will come from Lauren Lieberman of barklay. Please go ahead.
Great thanks. Um, good morning and I'll just
Echo. Everything that Steve. So eloquently said both to you John and to shy Lash
Um, it was great to get the context of your expectations for market growth, um, and also kind of the current, the current rate. But 1 Thing
True over the last couple of quarters is the outperformance of PNG versus its categories. That gap has narrowed and narrowed and narrowed. And that's with what I think has still been a very steady slate of innovation and consistent reinvestment. Um, so notwithstanding all the words you just shared around the consistency of strategy and confidence in the strategy.
Lauren Lieberman: And maybe we can focus just on North America, to widen that gap back out where your innovation, your strategies are, in fact, growing the categories and by virtue of that growing your share, because that that math doesn't seem to be working more recently. So whether it's competitive environment, particular cohorts in the consumer landscape that have been more challenged, what your what your perspective would be on how that gap kind of widens back out to support P&G? outperformance? Thanks.
What do you think maybe needs to change? And maybe we can focus just on North America to widen that gap back out where your innovation, your strategies are in fact growing the categories and by virtue of that growing your share. Because that math doesn't seem to be working, um, more recently. So whether it's the competitive environment, particular cohorts in the consumer landscape that have been more challenged, what your perspective would be on how that gap kind of widens back out to support P&G outperformance. Thanks.
Jon Moeller: I'll provide some perspective on your accurate observations and our response to them and then I'll ask Andre to do the same from his vantage point. In North America specifically... We have kind of three things that are happening. One is the reduction in category growth. The second is, so, you know, if you're operating within a category that's growing at a lower rate, by definition, your margin of growth advantage narrows. Second, um... is, as Andre mentioned in his remarks, the relationship between sell in and sell out. where we've seen. Inventory Reductions and the part of our retail partners that is.
I'll provide some perspective on your um, accurate observations, and our response to them. And then I'll ask Andre to do the same
from his Vantage Point, um, in North America specifically
Um, we have, uh, kind of three things that are happening.
1 is the reduction in category growth rates.
Um, the second is, uh, so so, you know, if you're, if you're operating within a category that's growing at a, a lower rate by definition in your margin of growth Advantage, uh, Narrows
Second. Um,
Is uh, as Andre mentioned in his remarks, the relationship between uh, sell in and sell out.
uh, where we've seen, um,
Jon Moeller: Exaggerated by the shift of shopping across the retail channels. And the channels that are growing the quickest right now typically carry lower levels of on-hand inventory, whether that's Walmart, whether that's Amazon, whether that's clubs The third, and probably most important, is that we do have categories where we've lost superiority. And we simply must regain that level of superiority that allows us to outgrow the market. That's why we're going through the restructuring program that we are. There are specific plans, as you can imagine, they're competitively sensitive. and I'm not going to go into. step-by-step element. But you should assume that we clearly understand that we have work to do there.
Inventory reductions in the part of our Retail Partners. That is
um, exaggerated by
uh, the shift of shopping.
Um, across the retail channels.
and the channels that are growing the quickest right now, uh, typically
Um, carry lower levels of on-hand inventory.
So that's Walmart, whether that's Amazon, whether that's club stores.
The third and probably most important uh is that we uh do have categories.
Where we've lost superiority.
And uh, we simply must uh, regain that level of superiority that allows us to, to outgrow the market. Um, that's why we're going through the restructuring program that we are
There are specific plans as you can imagine. There are competitively sensitive. Um,
and uh, I'm not going to go into uh, you know, step by step elements.
Andre Schulten: And hopefully the restructuring program gives you some confidence that we're committed. Exactly that, and obviously as these things come to market, we'll be... more about them. as early as the back.
but, uh, you should assume that we clearly understand, uh, that we have work to do there and um, hopefully the restructuring program gives you some confidence that we're committed to
Do um exactly that, and obviously, as these things come to market, we'll be talking.
Andre Schulten: Andre, any other thoughts? No, I echo what you said, John. I think maybe to be specific and give you some confidence here, as John said, I think in some categories we have not been able to maintain the level of superiority that we know we need in order to grow the category and grow within the category. But we also know that when we do that, the business quickly reaccelerates and picks up. So if you take baby care, for example, while the premium end of the lineup has been growing consistently because we've innovated consistently on spotless, on cruises 360, etc., the lower end, the value tier had not delivered.
More about them. Uh, as early as the back to school conference in September,
Under any other thoughts know, I could what you said John. I think the maybe to be specific and give you some uh confidence here. Um, as John said, I think in some categories, we have not been able to maintain the level of superiority that we know we need in order to grow the category and grow within the category.
Andre Schulten: When we put innovation on lofts with platinum protection. The category part re-accelerated, our share re-accelerated, and our organic sales re-accelerated. We have the same opportunity on Olay on the core jobs business. So we know we're not superior. We know we need to adjust and we're on it. But where we have superiority in the Olay lineup, like SuperSerum, we bring in 65% of business via new users. So we grow the category, we grow share within the category. And then we just have a few S-curves that will just fundamentally change the category operates, which is Evo, which will launch in the back half of the year.
But we also know that when we do that, the business quickly, we accelerates and picks up. So if you take baby care, for example, while the premium end of the lineup has been growing consistently, because we've innovated consistently on spotless on cruises 360 Etc. The the lower end the value tier had not delivered. When we put Innovation on Love's with Platinum, uh, protection
The category part, we accelerated our share re-accelerated, and our organic sales re-accelerated.
We have the same opportunity on Olay on the core Jobs business, so we know, we're not Superior. We know, we need to adjust and we're on it.
Um, but where we have superiority in the all-day lineup, like Super Serum, we bring in 65% of business. We are new users, so we grow the category. We grow share within the category.
Andre Schulten: We've got it in the online business right now, but we'll, we firmly plan to expand that further. So there's there's. And plenty of proof. We know what to do. We need to execute brilliantly and we create the fuel to do that with the restructuring and the productivity efforts that you see. The second part I'll leave you with is the new business opportunity of $5 billion that we quote is real. These are underserved and unserved consumers that we can access. But this is only a number on a piece of paper until we allocate resources to it, which is exactly what we're doing and doubling down to ensure that regions, segments, consumer groups that we have not as actively pursued in the US, we are going after with full intention and all the resources.
And then, we just have a few S curves that will just fundamentally change the category operates, which is Evo, uh, which will launch in the back half of, uh, the year. Uh, we've got it in the online business right now. But we'll, uh, we firmly plan to expand that further. So there's there's
And plenty of proof. We know what to do, we need to execute brilliantly and we create the fuel to do that with the restructuring and the productivity efforts that you see.
The second part I'll leave you with is the new business opportunity of 5 billion dollars that we quote is real. These are underserved and unserved consumers that we can access.
And doubling down to ensure that, uh, regions segments, consumer groups that we have. Not as actively, pursued in the US, we are going after with full intention and all the resources we have.
Jon Moeller: And I think, Lauren, as you just... again to the heart of your question on re-accelerating the gap in performance or the advantage in performance. between P&G and the competitors. I mean, one. One thing you need to look at is Who is positioning themselves for the level of investment that we're describing? and I won't speak to others. But we are intent.
And I think, Lauren, as you just, um,
Again, to the heart of your question on.
Re accelerating the Gap in performance, or the advantage in performance.
Uh, between PNG and the competitive set.
Um, I mean, one thing you need to look at is...
Who is positioning themselves for the level of investment that we're describing here?
And I won't speak to others. Uh,
But but we are intent.
Dara Mohsenian: https://www.youtube.com.uk The next question today will come from Dara Mohsenian of Morgan Stanley. Please go ahead. Hey, good morning. So, Jon, congrats on a remarkable run of driving shareholder value and Shailesh on his greater responsibilities.
On ensuring that we're well positioned uh to do exactly what we described.
The next question today will come from darra Meehan of Morgan Stanley. Please go ahead.
Hey, good morning.
So, uh, Jon, congrats on a remarkable run of driving shareholder value, and, uh, Shailesh, on his greater responsibilities.
Dara Mohsenian: Jon, can you discuss how the restructuring you recently announced will enable greater organizational capabilities looking forward, particularly just given the external technology advances that we've seen and how those two points interplay with each other? And on the other piece of big news with the CEO change, all the background on Shailesh's capabilities is very helpful. Just any insight or perspective on the timing of the CEO change? Why is now or technically January the right time to move to new leadership? Thanks. Great.
John, can you discuss how the restructuring you recently announced will enable greater organizational capabilities looking forward? Particularly just given the external technology advancements that we've seen and how those two points interplay with each other. And on the other piece of big news with the CEO.
Change. All the background on Shy Lesh's capabilities was very helpful. Just any insight or perspective on the timing of the CEO change. Why is now, or technically January, the right time to move to new leadership? Thanks.
Jon Moeller: I'm going to start with the last part of your question, Dara, and usually when I do that you'll have to repeat the first part. In terms of why now? And you said technically January 1st. It's not technically January 1st. It's actually January 1st. And the only reason I emphasize that is because of the next observation I'm going to make. As of January 1st, I will have served this company for 38 years. My wife worked for this company in a senior executive capacity until she retired when I became CEO. Between the two of us, we'll have served this company for seven decades, almost three-quarters.
uh,
Great. Um, I'm going to start with the last part of your question, Dara. And usually when I do that, you'll have to repeat the first part, but...
um, in terms of, uh, why now
Um, and you said technically January 1st, it's not technically January 1st, it's actually January 1st.
Um, and the only reason I emphasize that is because uh, of the next observation, I'm going to make, um, as of January 1st, I will have served this company for 38 years.
Um, my wife worked for this company in a senior executive capacity until she retired, when I became CEO.
Uh, between the 2 of us will have uh served this company for 7 decades, almost 3 quarters of a century.
Jon Moeller: The results that you referred to and that have been delivered give me comfort in the The strength of the strategy, the sustainability of the strategy, if you go back to when we completed. The Articulation of the Strategy and Began Executing Against It, which was seven years ago. of this team. has built, has created $17.5 billion in incremental... This puts us at the 84th percentile of the S&P 500. The same time they generated $6 billion in incremental profit, which puts us at the 92nd percentile. Yes. Brady and as you referenced Significant market cap growth of $180 billion, more value creation.
The results that you referred to and then have been delivered. Uh uh give me comfort in the uh strength of the strategy, the sustainability of the strategy. If you go back to when we uh completed
uh, the articulation of the strategy and began executing against it, which was 7 years ago,
And 2018.
Uh, this team.
Um, has built uh, has has created 17 and a half billion dollars in incremental sales.
Which puts us at the um, 84th percentile of the S&P 500.
At the same time they've generated 6 billion dollars in incremental profit, which puts us at the 92nd percentile of the S&P 500.
Jon Moeller: then all but one of our competitors have created over their entire one and two century histories as a company so seven years vis-a-vis one or two centuries you And in the process, the team has built the 18th most valuable US publicly traded company. 21st Most Valuable in the World. So we...
Grading as you referenced, um, significant market cap growth of $180 billion, more value creation than all but one of our competitors have created over their entire one- and two-century histories as a company. So, seven years versus one or two centuries.
And in the process, the team has built the 18th most valuable publicly traded company in the U.S.
The 21st most valuable, um, in the world.
Jon Moeller: Embark on our next chapter from a position of strength. both from a strategic standpoint and from an execution point of view. We've recently, and Andrea mentioned, we've described this first at the Deutsche Bank conference. Paris in June. Strengthened the execution of that strategy, which gives me further comfort that we'll be able to to execute against. And as I mentioned, we have a very strong team. Inclusive of Shailesh. And so I just look at all of this and say, this is the right time. to make a transition as we lap the fiscal year, and I'm very confident we'll be able to do that.
So we we, we
Embark on our next uh chapter from a position of uh strength.
Both from a strategic standpoint and from an executional standpoint.
We've recently, um, and Andrea mentioned we, you know, described this, uh, first at the Deutsche Bank conference in Paris in June.
uh, strengthened the execution of that strategy, which gives me further Comfort uh that that we'll be able to
To execute against that. And as I mentioned, we have a very strong, uh, Team inclusive of uh of shy leche.
And so I just look at all of this and say, this is the right time.
Jon Moeller: in a very constructive way.
Uh, to make the transition. As we lap the fiscal year, I'm very confident we'll be able to do that.
Jon Moeller: In terms of the timing of the cadence that you asked about. In terms of when these tailwinds that we're creating for ourselves bear fruit, as you would expect, there's an executional period, there's a planning period that has to occur. There's an executional phase and then we get to end. So that will build as we go through the fiscal year. Oh, sorry. You always ask very complex questions.
in terms of when these Tailwinds that we're creating for ourselves bear fruit,
Um, as you would expect, there's an executional period that has there's a planning period that has to occur.
there's an executional phase uh and and then we get to uh to impact so that will build as we go through uh, the fiscal year and it's the next
Jon Moeller: So my team here has reminded me that I've, as is typical, overlooked one of your key questions, and it's a very important one. Which is, how is, you know, how are we thinking about the organization design and why do we, why does that give us confidence? Many of you have probably heard me talk about this before. It's one of my pet topics to talk about because I think there's so much. There, there. You know, industry broadly defined has operated over the last 100 years. in a very SILOED, HEAVILY FUNCTIONAL ORGANIZATION MODEL. but the world is.
Oh sorry. You always ask very complex questions there. So my team here has reminded me that I have as a typical uh uh overlooked 1 of your key questions. And it's it's a very important 1.
Which is uh how is, you know, how are we thinking about the organization design and and why do we, why does that give us confidence? Uh, and what Tailwind does that create? Um,
Many of you have probably heard me talk about this, uh, before. It's one of my pet topics to talk about because I think there's so much.
uh, their their um,
you know, industry broadly defined as operated over the last 100 years.
Nah. Uh, very um,
Siloed heavily functional organization model.
um,
Jon Moeller: and and the world isn't. Thinking about things that way. And so I think there is immense opportunity to tear down some of those silos and in the process. build better and quicker decision making. More Efficient Work Process. and a much higher employee value proposition, each one of those things by themselves. would make a significant difference in terms of the creation of tailwinds that we've been talking about. Together, I think they're extraordinarily powerful, and that expands across the activity system of the enterprise. So the potential there is enormous. is significant.
but the world has changed.
and and uh, the world isn't
thinking about things that weigh.
um,
And so, I think there is immense opportunity to tear down some of those silos, and in the process,
Build better.
And quicker decision making.
More efficient work processes.
Um and a much higher uh employee value, proposition each 1 of those things by themselves.
It would make a significant difference in terms of the creation of the tailwinds that we've been talking about together. I think they're extraordinarily powerful, and that expands across the activity system of the enterprise. The potential there is, is...
Jon Moeller: So I'm highly well, one last thing, because you you also referred to this. That would have been a very, very difficult. at www.thevenusproject.com Without the advent of some of the technology that we have available to us. So now's the time to utilize those tools. and Empower the Organization to Move Forward, each one of those functional silos that I referred to. largely, historically, and even currently had has their own Data Repository. and there are people within. Each of those functions, and I mean each and every. whose job is to create, maintain, extract, translate all of that data.
It is significant. Um, so, uh, I'm
Um, highly well 1 last thing. Um, because you you also referred to this
um,
that would have been a very, very difficult.
Task or reality to get your arms wrapped around.
Um, without the advent of some of the technology that we have available to us now.
So so Now's the Time uh, to utilize those tools.
and empower the organization to move forward, each 1 of those functional silos that I referred to
Largely historically, and even currently, has had their own.
Data Repository.
And there are people within.
Each of those functions. And I mean each and every.
Jon Moeller: And our objective is to make that seamlessly available to everybody on an end-to-end basis. Not siloed just like the organizations are siloed, not hard to access. and obviously utilizing the analytical and even predictive tools that are increasing. Sorry for the long answer, but when you ask the long question...
Um, uh, whose job is to, uh, create, maintain, extract, translate, uh, all of that, uh, data.
And our objective is to make that seamlessly available to everybody on an end-to-end basis.
Not siloed. Just like the or organizations are siloed. Not hard to access.
And obviously utilizing um the analytical and and and even predictive tools that are increasingly available. Sorry for the long answer. But when you ask a long question, you get a long answer.
Bonnie Herzog: Our next question today will come from Bonnie Herzog of Goldman Sachs. Please go ahead. All right. Thank you. And congratulations from me too to both Shailesh and Jon. And Jon, we're really all going to miss seeing you, especially at Cagney, but of course, you're always welcome.
Bonnie Herzog: So, I just had a few questions on your FY26 guidance. First, your ranges are quite a bit wider than they've been historically. Now, I certainly recognize there's a fair amount of volatility and uncertainty. But is there any other reason, you know, maybe why you have less visibility on your business right now? And then also, your guidance does imply the leverage at the midpoint. So, maybe help us to understand the puts and takes of this. And then finally, how are you thinking about phasing in the year? Should we assume, you know, EPS growth will be back half-weighted?
Our next question today will come from Bonnie Herzog of Goldman Sachs. Please, go ahead. All right thank you and congratulations from me too to both shy lash and John and and John, we're really all going to miss seeing you, especially at Kagney, but of course, you're always welcome.
So I just had a few questions on your FY. Okay my team just my team just frowned Bonnie. Oh no we we smiled. Does that does that mean they want your?
Oh, we love to keep seeing you want the space. So
Bonnie Herzog: Thanks.
Waiting thanks.
Andre Schulten: I'll take a run at this and Jon, please jump in here, morning Bonnie, just for the record, we were smiling, not trying. On the top line, I think the reality that we're seeing is simply a lack of clarity on where the category growth is going to go. Our midpoint assumes that growth rates in the U.S. and in Europe stay about where we see them today. which is around 2%, maybe a little bit lower in the most recent weekly data. China continuing on its path to growth, not quite there. And Latin America and enterprise markets in general, remaining at around 5-6% of category.
I'll take a run at this and John, uh, please jump in here, uh, morning, Bonnie. Um, just for the record. We were smiling not running, um, on the top line. Um, I think the reality that we're seeing is simply um,
A lack of clarity on where the category growth is going to go.
Um our midpoint um assumes that growth rates in the US and in Europe stay about where we see them today.
Uh, which is around 2%. Um, maybe a little bit lower in the most recent uh, weekly data.
um,
China continuing on its path to uh, growth. Uh
Not quite there. Um, and Latin America and enterprise markets in general.
Andre Schulten: So if that holds true, we think we can be at the midpoint or slightly higher. There is a scenario where the categories re-accelerate to historical growth rates. Europe and the U.S. return to 3-4%, China accelerates, Latin America re-accelerates beyond 6%. And that's the upper end of the range. The lower end of the range is the opposite. We see the deceleration that we saw over the last few months continue in Europe and in the U.S. China Not Really Gaining Positive Trajectory and Enterprise Markets Remain Muted Specifically in the Asia-Middle East-Africa Region. Then you move to the EPS line, and it's, first of all, an outcome of where we think we're going to be on the top line.
Remaining at around 5% to 6% of category growth.
So if that holds true, we think we can be at the midpoint of slightly higher.
There is a scenario where the categories re accelerate to historical growth rates Europe and the US returned to 3 to 4 percenter rates, uh Latin America re accelerates Beyond 6 and that's the upper end of the range. The lower end of the range is the opposite. Um, we see the deceleration that we saw over the last few months continuing in Europe and in the US.
China, not really gaining positive trajectory and Enterprise markets, remain muted specifically in the Asia, Middle East, Africa region. So that's just the reality we're looking at and it's very hard to say where in that range we're going to be so we find it prudent to give you transparency on where the range uh is on the top line.
Andre Schulten: But then you have incremental volatility coming from tariff negotiations that are ongoing. And again, you saw from Deutsche Bank to today, we saw a $400 million increase in tariff exposure. With the EU trade deal over the weekend, we saw a $100 million decrease. So there's a lot of swing here from a tariff standpoint. You then have to assume what can you pass on in terms of pricing after we maximize productivity and how much of that pricing is going to be sticking in the market. And you have foreign exchange and commodity volatility that you always have.
Then you move to the EPS line and its, first of all, an outcome of where we think we're going to be on the top line. But then you have incremental volatility coming from, uh, tariff negotiations that are ongoing
And again, you saw from Deutsche Bank to today, we saw a $400 million increase in tariff exposure with the EU trade deal over the weekend. We saw a $100 million decrease, so there's a lot of swing here from a tariff standpoint.
Andre Schulten: So you layer all of that on top and you can see easily between the top line and those effects how the range is wider than we typically have. In any case, be assured our objective is to firmly be at the upper end of the range. And we work and do everything we can to be in the middle of upper range.
You then have to assume. What can you pass on in terms of pricing after we maximize productivity? Uh and how much of that pricing is going to be uh, sticking in the market and you have foreign exchange and commodity volatility that you always have. So you layer all of that on top and you can see easily between the top line and those effects, how the range is wider than we typically uh have
Andre Schulten: But again, there's many factors on the macro side, which we don't control, which we have to take into John reminds me on the quality timing. It is going to be an upward trajectory on EPS, as you can appreciate. Some of the pricing recovery of the tariffs will come later in the year. The category acceleration is expected to happen later in the year. So it will be an upward trajectory from quarter one upwards. Right, and the savings as well are coming. Obviously, the restructuring savings are coming in the second...
In any case, be assured. Our objective is to firmly be at the upper end of the range. Uh and and we work and do everything we can to be in the middle of upper range. But again, there's many factors on the micro site which we don't control
Which we have to take into account.
What are they timing?
John reminds me of the quality timing. Um,
it, it is going to be an upward trajectory, um,
On EPS, as you can appreciate.
Uh, some of the, uh, pricing recovery of the tariffs will come later in the year.
Um, the category acceleration is expected to happen later in the year. So it will be an upward trajectory from
Right. And the savings as well, uh are coming up with the restructuring. Savings are coming in the second half of the year.
Peter Grom: Our next question will come from Peter Grom of UBS. Please go ahead. Thanks, Operator. Good morning, guys. Jon, Shailesh, congratulations from my end as well. Jon, we're definitely going to miss you.
Our next question will come from Peter, Graham of UBS. Please go ahead.
Peter Grom: So I kind of wanted to pick up on that last point, Andre. I wanted to get some perspective from actually for both of you, just in terms of category growth, and kind of this trend line that we've seen over the last few months and how that compares to what you were expecting. And I know the team's long expressed confidence in the category growth returning to historical averages, but the timing has been a bit of a wild card. But I guess just going back to the last call, category growth was running at two and a half percent.
Andre Schulten: Andre, I think you mentioned it's now running, you know, closer to one and a half. Can you maybe just unpack what's really happening, the drivers of the slowdown? And I guess, is it evolving, as you would have expected? And then I guess just when you think about the guidance of flat 3% growth, your commentary to Bonnie's question was really helpful. But how realistic is it to expect? category growth to decelerate further. Is that simply, you know, you're embedding some cushion here? Or do you think that's a realistic outcome? Thanks.
Thanks operator. Good morning, guys. Um, John, should I ask congratulations from my end as as well, uh, John, we're definitely going to miss you. So I, I kind of wanted to pick up on on that last Point. Andre, I, I, I wanted to get some perspective from actually for both of you just in terms of category growth, and and kind of this trend line that we've seen over the last few months and how that compares to what you were expecting. And I, I know the teams long expressed confidence in the category, growth returning to, to historical averages, but the timing were has been a bit of a wild card, but I guess just going back to the last call category of growth was running at 2 and a half percent. Andre, I think you mentioned it's now running you know closer to to 1 and a half. Can you maybe just unpack
What's really happening with the drivers of the slowdown, and I guess is it evolving as you would have expected? And then I guess just...
think about
guidance of flat to 3% growth, your your commentary to Bonnie's. Question was really helpful, but how realistic is it to expect?
Category growth to to decelerate further is that simply uh you know, you are embedding some cushion here or do you think that's a realistic outcome? Thanks.
Andre Schulten: Morning, Peter. Look, the reason why we have a wide guidance range on the top line is exactly because it's very hard to predict where the category growth line is going to go. What we are observing is that the consumer on both ends of the spectrum, the lower income consumer and the higher income consumer, they are reacting to the current volatility they are seeing and they are observing. And we see consumption trends consistently decelerating, not significantly, but we see a deceleration in the US, we see a deceleration in Europe. And those are the biggest regions that have an immediate impact on the global category growth numbers.
Look. Um the reason why we have a wider guidance range on the top line is exactly because it's very hard to predict where the category growth line is going to go.
Um, what we are observing is that, the consumer, um, on both ends of the spectrum, the the lower, uh, income consumer and the higher income consumer, they are reacting to the current volatility. They are seeing and they are observing and we see consumption Trends. Um, consistently decelerating not not uh significantly but we we see a deceleration in the US. We see a deceleration in Europe.
Andre Schulten: The volatility the consumer is seeing, I think, is maybe not necessarily grounded in their current reality, but more on what to expect for the future. So consumers are a bit more careful in terms of consumption. They are using up pantry inventory, and they are looking for value either in smaller packs and promotions or in larger pack sizes in the club channel and online. That's a behavior we've been outlined before, but it's not stopped. It continues. So the trajectory here could be that we've reached the low point and the consumer gains confidence, the labor market is stable, inflation doesn't pick up, and therefore we see category growth returning to 3-4%.
Um and those are the biggest regions that have an immediate impact on uh the global category growth numbers.
The um, volatility the consumer is seeing I think is is maybe not necessarily grounded, in their current reality, but more on what to expect for the future.
Um, so consumers are a bit more careful in terms of consumption. They are using up a pantry inventory, and they are looking for value, either in smaller packs and promotions or in larger pack sizes in the club channel and online.
Uh, that's a behavior we've been outlined before, but it's not stopped it continued.
So the um the uh trajectory here could be that we've reached the low point and the consumer gains confidence. The labor market is stable inflation. Doesn't pick up.
Andre Schulten: or not. And that's exactly the reason why we have a guidance range that is relatively wide. Our job in all of that, and that's why I come back to where Jon started, our job is to create our own tailwinds, our job is to create category growth, create an incentive for the consumer to return to the category and find value in our propositions every day. And these categories, even though the consumer slows down for a period of time, they don't stop doing their laundry, they don't stop washing their hair, they don't stop using diapers. That's why we're exactly in these categories.
uh, and therefore, uh, we see category growth returning to 324%
or not. And that's exactly the reason why we have a guidance range that is, that is relatively wide our job in all of that. And that's why I come back to where John started, our job is to create our own Tailwind. Our job is to create category growth.
Create an incentive for the consumer to return to the category and find Value in our propositions, uh, every day. And these categories, even though the consumer slows down for a period of time,
Andre Schulten: So overall, I feel good about the portfolio, I feel very good about the innovation, but there is a level of baseline uncertainty that we reflect in the guidance.
Jon Moeller: And just to build on that a little bit, we've talked about this before, but You know, to the extent that people are frustrated, and I would say understandably frustrated, with the lack of certainty and the breadth of the range, trust me, there's no one more frustrated with that than I. But as you look at the predictability and you think about what's the impact of immigration status and immigration policy? on Shifts, and Portfolio Shifts over time. If you look at a place, what's the impact of inflation, what's the impact of interest rates? We talked about the acceleration of growth in China.
They don't stop doing their laundry. They don't stop washing their hair; they don't stop using diapers. Um, that's why we're exactly in these categories. So overall, I feel good about the portfolio. I feel very good about the innovation, but there is a level of baseline uncertainty that we reflect in the guidance range. Just to build on that a little bit, um, we've talked about this before but...
um,
you know, to the extent that people are frustrated and I would say understandably frustrated with the the the lack of certainty.
Um and the um, breadth of the range. Uh, trust me. There's there's no 1 more frustrated with that than I but as you as you look at the predictability. Um, and you think about things, like, you know, what's the impact of
Immigrant immigration status and immigration policy.
on uh, consumption uh, over time
What is the impact of tariffs and related issues? Uh,
Both pricing and potential supply chain.
Shifts and portfolio. Shifts over time.
Um, if you look at a place, um, you know, what's the? What's the impact of uh, inflation? What's the impact of interest rates?
Jon Moeller: But that comes largely driven by the month of June, which is a heavy promotion period in China. I don't know how much of that went into inventory and how much was actually consumed. So there's just all those uncertainties that are out there, and as Andre... Rightfully said, we're just trying to give you the benefit of that aggregated perspective in terms of what outcomes might And, you know, our job is. to wake up each morning, put both feet on the floor, empower our head to do the best that we can in creating.
Um, we talked about the acceleration of growth in in China.
But that comes largely driven by the month of uh June which is a heavy promotion period in China.
I don't know how much of that uh, went into inventory and how much was actually consumed.
Um, so there are just all those uncertainties that are out there, and as Andre...
Rightfully said, uh, we're just trying to give you the benefit of that aggregated perspective in terms of what outcomes might be.
Um, and uh, you know, our job is to wake up each morning, put both feet on the floor, and power ahead to do the best that we can in creating.
Jon Moeller: And just one last point, I just want to reassure you that the strategy has not changed. We will push as hard as we can to generate category growth because we believe that's the only way to sustainably create value and regain share momentum. The easy answer would be to react to strong promotions we're seeing in the market with equal promotion response. That would protect share in the short term, but it would protect share of a contracting category. So you will not see us go there. You will see us continue to innovate, drive market growth. You kind of heard the story in the beginning of the call.
The tailwinds that we've described and seen that impact the market, and that's what we're committed to do.
And just 1. Last point, I just want to reassure you the the strategy has not changed. We will push as hard as we can to generate category growth because we believe that's the only way to sustainably create value and regain share momentum. The easy answer would be, uh, to react to strong promotions, we're seeing in the market, uh, with equal promotion response.
Jon Moeller: So that ties right into why we are where we are, independent of where we see the category going. And to that end. Every time that I interact with our organization.
Jon Moeller: I remind them that our job in the face of uncertainty is to step forward, not back down. We will do that. I think the restructuring is.
That would protect share in the short term but it would protect share of a Contracting category so you will not see us go there, you will see us continue to innovate Drive market growth and you kind of heard the story in the beginning of the call. Um, so that ties right into why we are where we are independent of where we see the category going and to that end. Um, every time that I interact with um, our organization,
I remind.
Step forward.
Not backward.
Uh, we will do that. I think the restructuring is a reflection of our commitment to do to do that.
Peter Galbo: Our next question today will come from Peter Galbo of Bank of America. Please go ahead. Hi, good morning. Thanks for the question. And congrats to Jon and to Shailesh as well. Andrea, I wanted to ask maybe one clarification and then one follow up. I believe, in response to Bonnie's question, you mentioned that maybe the billion dollar tariff had moved down by about 100 million after this past weekend with Europe. So I just wanted to clarify that as a first piece. And then secondly, on the 600 million within the tariff buckets that you kind of said of the rest of the world, just a bit broader, but as we continue to get kind of more trade announcements, just can you help us identify how much flexibility there maybe is in that?
Our next question today will come from Peter, galbo of Bank of America. Please go ahead.
Hi. Good morning. Uh, thanks for the question, and congrats to to John and to shy lash as well. Um, Andrea, I wanted to ask maybe 1 1 clarinet 1 1 follow up, I, I believe, uh, in response to to Bonnie's question, um, you mentioned that maybe the, the billion dollar tariffs headwind had moved down by about 100 million after this past weekend with Europe. So I just wanted to clarify that as as a first piece and then, secondly, on the 600 million within the Tariff buckets, that you kind of said of the rest of the world, just
Peter Galbo: I don't know if, you know, Brazil isn't really at a 50% rate. Is there flex for that to move just other kind of countries around the world that could impact that? Thanks very much.
A bit broader but as we continue to get kind of more trade announcements just just, can you help us identify how much flexibility there may be? Is in that, I don't know if you know, Brazil isn't really at a 50% rate as their Flex for that to to move. Just other other kind of countries around the world that could impact that. Thanks very much.
Andre Schulten: Thanks for the question, Peter. Yeah, so the tariff announcements over the weekend, indeed, have reduced at face value, the billion dollars to 900 million BT. But we don't fully understand what's in that agreement yet. So I will take that with a grain of salt until we really see the details. And yes, I think there are other it's very hard for us to judge what is real and what is not real. So we're reflecting spot like we do on commodities like we do on FX. So we're just taking every announcement at face value and pricing it out from a terrorist I would caution us to be too optimistic that future trade agreements will be a significant tailwind.
Thanks for the question Peter. Yeah. The the, so the terrorists announcements, um, over the weekend indeed have reduced, uh, at face value the billion dollars to 900 million BT. But we don't fully understand what's in that agreement yet. So I would take that with a, uh, with a grain of salt until we really see the details.
Um, and yes, I think there are it's it's very hard for us to judge what is real, and what is not real. So we're reflecting spot like we do on Commodities like we do on FX. So we're just taking every announcement at face value and pricing it out from a terrorist standpoint.
Andre Schulten: The other question here is how much of the pricing that we're taking will actually remain in market if that turns into a tailwind from a tariff perspective. So I would see the two as equalizing. So I would not view, and that's what we're telling our organization, don't assume you're getting tailwind from decreased tariffs, because if the tariffs come down, most likely the pricing will not sustain in the market. So I would see those two as moving in parallel.
I would caution us to be too optimistic, that future trade agreements will uh be a significant Tailwind.
The the other question here is how much of the pricing that we're taking will actually, uh, remain in Market? If that turns into a Tailwind from a tariff perspective. So I would see the 2 as equalizing
So, I would not view—and that's what we're telling our organization. Don't assume you're getting tailwind from decreased tariffs, because if the tariffs come down, most likely, the pricing will not sustain in the market. Um, so I would see those two as moving in parallel.
Jon Moeller: Just to give you even additional perspective on the difficulty here and to encourage you not to spend a ton of time on it. There are, I'll just give you two examples of three examples of the uncertainty that exists currently, and this isn't a judgment or a criticism. It's just a reflection of reality. We don't, as Andre said, really have details for these agreements, so it's hard to analyze exactly how they would impact our business. The second, there's a whole round of work that's going on under the heading of what's referred to as 232. Investigations which are headed by the Commerce Department.
Just to give you even additional perspective on the difficulty here and to encourage you not to spend a ton of time on it.
Um,
There. I'll just give you 2 examples of of 3 examples of the uncertainty that exists currently and and this isn't a judgment or a criticism it's just a reflection of reality.
Um, we don't, as Andre said, uh,
Really have details, uh, for, uh, these agreements. So it's hard to analyze exactly how
They would impact our business.
The second point is that there’s a whole round of work that’s going on under the heading of what’s referred to as 232.
Jon Moeller: and that work hasn't been completed. It's designed to assess the The strategic risk that's imposed by over-dependence on imports of certain goods and products, so for example metals, but also inclusive of oil. Within that wood pulp, within that there's the whole question Exemption from tariffs for USMCA-compliant... Materials. We don't know if that's going to hold under the new policy. The last piece I would mention is also very, very difficult to get your arms around, which is... The Potential for Retaliatory Tariffs. What, uh, these will be tariffs imposed by other countries on the U.S. That's the situation we have right now with Canada.
Uh, investigations which are headed by the Commerce Department.
Um, and um, that that work hasn't been completed.
It's designed to assess the, um, the Strategic risk. That's imposed by overdependence on, on Imports of certain goods, and, uh, products. So, for example, Metals, but also inclusive of Pulp.
Within that wood, pulp within that. Uh, um, there there's the whole question of, uh,
Um, exemption from tariffs for USMCA compliant. Um,
Uh, materials.
We don't know if those if those uh if that's going to hold under uh the new policies.
The last piece I would mention is, um, also very, very difficult to get your arms around, which is.
Uh, the potential for retaliatory tariffs.
Jon Moeller: who's imposed 25% tariffs on imports of products from the U.S. into Canada. In our case that ends up being a big impact which I'm ready reference in his remarks because most of our Canadian business is sourced. from the U.S.
What uh these would be tariffs imposed by other countries on the US. That's the situation we have right now with Canada.
Uh, who's imposed the 25% tariffs on imports of, uh, products from the U.S. into Canada?
Jon Moeller: So that just gives you, again, a little bit of a picture of the degree of uncertainty that's in there. There's upside potential within that. Um, though I think Andre's caution is, is, is rightly. And there's just a range of outcomes that we're all going to have to get managing with and the best thing I know to do in that situation again is step forward on those things we can control. This is exactly what we're doing with restructuring. This is exactly what we're doing with spending portfolios. This is exactly what we're doing... Innovation.
And in our case, that ends up being a big impact, which on the ray, uh, reference in his remarks because most of our Canadian businesses sourced uh from the U.S.
So that just gives you, again, a little bit of a picture of the degree of uncertainty that's in there. There's upside potential within that.
Um and there's uh but there's just a range of outcomes that we're all going to have to get comfortable uh managing within the best thing I know to do in that situation again is step forward on those things. We can control
Which is exactly what we're doing with restructuring. It's exactly what we're doing with spending portfolios is exactly what we're doing with.
Jon Moeller: I'm not out there asking our innovation team.
Um, innovation. I'm not out there asking our innovation teams to slow anything down; quite the contrary.
Filippo Falorni: Our next question today will come from Filippo Falorni of Citi. Please go ahead. Hi, good morning, everyone.
Our next question today will come from felipo ferni of City. Please go ahead.
Filippo Falorni: I also wanted to extend my congratulations to Shailesh and John on your new roles. So for my question, I wanted to zoom in on the U.S. market, your largest market. Clearly, we've talked about some of the consumption slowdown, but from a reporter's standpoint, we've also seen the impact of the inventory, the stocking that you talked about. I'm just curious, why do you think we've seen this more pronounced deceleration over the last two quarters? Because some of the comments you made about the China, they're growing faster, having lower inventory, those have been going on for a while.
Hi, good morning, everyone. I also wanted to extend my congratulations to Shai Lash and Jon on your new year olds.
Filippo Falorni: But really, over the last two quarters, we've seen a much bigger negative impact from the stocking. So maybe can you give us a sense of what is happening at the retailer level? Are there certain categories that are getting impacted? And do you think that negative impact in the U.S. will continue in the first half of 26 until you cycle some of the impact in Q3 of next year?
Um, so for my question, I wanted to zoom in on the US market your largest market. Um, clearly we've talked about some of the consumptions slow down, but from a reported standpoint, we've also seen the impact of the inventory. The stock in that you talked about, uh, I'm just curious. Why do you think we've seen these more pronounced deceleration over the last 2 quarters because some of the the comments you made about uh the China. They're growing faster having lower inventory, those have been going on for a while, but really over the last 2 quarters, we've seen a much bigger negative impact from this talking. So maybe you can give us a sense of what is happening at the retailer level. Are there certain categories that are getting impacted?
Andre Schulten: Thank you. Good morning, Filippo. You're right. I think the channel shifting has been an effect that we've observed for a number of months, but it also is an effect that isn't stopped. So we continue to see strength in the online channel. We continue to see strength in Walmart, in Costco, in Club in general, in Amazon. And obviously, as that trend continues, those retailers are more inventory efficient. So that will continue to be a headwind until that trend changes.
Acted. Do you think that the negative impact in the U.S. will continue in the first half of '26 until you cycle? Some of the impact in Q3 of next year. Thank you.
Good morning filipo. Um,
You're right. I think the channel is shifting. Um,
There has been, uh, an effect that we've observed for a number of months, um, but it also is an effect that isn't stopping.
Uh, we continue to see strength in the online channel. We continue to see strength in Walmart and Costco, in club in general, and in Amazon.
And obviously, as that trend continues, those retailers are more inventory efficient, so that will continue to be.
Andre Schulten: When and if that changes is a question I can't answer. The other point I think that is clear. Retailers have to deal with tariff impacts as well as they allocate cash in inventory. And as tariff impacts become real and hit their cash availability, they have to make choices. We are fast turning categories. The easiest way to make a choice and reallocate cash is in all categories. So if you need to free up cash for other general merchandise, you go to CPG because we have the fastest turn. So you free up the fastest amount of cash, which is the second driver.
A headwind until that trend changes when, and if that changes, is a question I can't answer.
The other point I think that, um, is clear.
Retailers have to deal with tariff impacts, as well as they allocate cash and inventory.
And as tariff impacts become real and hit their cash availability, they have to make choices.
Uh, we are fast-tracking categories. The easiest way to make a choice and reallocate cash is in all categories.
Andre Schulten: I think the third driver is if consumption slows. A retailer would react with reducing the inventory because you don't quite need as many turns as you would in a fast-growing consumer environment, so all of those effects coming together. None of them give us certainty on to what degree this inventory contraction will continue or if inventory actually would come back over the next few quarters. I can tell you what our assumption is. Our assumption is relatively stable inventory levels going forward. But we've not made any assumption on returning inventory levels. And it's not just the US.
So if you need to free up cash for other general merchandise, you go to cpg because we have the fastest current. So you free up the fastest amount of cash which is the second driver.
I think the third driver is if consumption slows.
A retailer would react by reducing inventory because you don't quite need as many turns as you would in a fast-growing consumer environment. So, all of those effects coming together.
Um, none of them give us certainty on, uh, to what degree this inventory contraction will continue.
uh or if inventory actually would come back over the next few quarters, I can tell you what our assumption is, our assumption is relatively stable, inventory levels,
Are going forward.
Um, but we've not, uh, made any, uh, assumptions on returning inventory levels.
Andre Schulten: In Brazil, for example, we saw a 10 point inventory effect between consumption and organic sales growth. So these effects are visible not only in the US, but also in other parts of the of the world. And again, introduce a level of variability which is reflected in our guidance. And just to be clear, I'm not suggesting that you were suggesting otherwise. but in general. Lower inventory. throughout the system is a good. Leads to More Efficient Operations of the Entire Operating System. Supply Chain from our suppliers, through to our inventory, through to the retail inventory. All of which has a cost associated.
And it's not just the U.S. in Brazil. For example, we saw a 10-point inventory effect between consumption and organic sales growth.
Um, so these effects are visible, not only in the US but also in other parts of the of the world.
Um, and again, introduce a level of variability.
Which is reflected in our guidance range.
And just to be clear, I'm not suggesting that you were suggesting otherwise. Um,
but in general,
lower inventory.
Throughout the system is a good thing.
That leads to more efficient operations of the entire operation. Uh,
Supply chain.
From our suppliers, through to our inventory, through to retail inventory.
Andre Schulten: So this is...
Um, all of which has a cost associated with it.
Andre Schulten: There's a silver lining.
Um, so this is uh there there's there's a silver lining in this as well.
Christopher Carey: Our next question will come from Chris Carey of Wells Fargo Securities. Please go ahead. Hi. Good morning, everyone. I wanted to ask about China specifically. Andrea, I think you characterized it as another quarter of sequential improvement with 618 being relatively strong. Can you talk about just the durability of the trends that you're seeing? 618 is obviously more of a, you know, annual, seasonal event, but really sort of underlying durability that you may or may not be seeing in the market. And I think there is this dynamic where P&G and your peers are still waiting to assess the impact of tariffs on the economy and what it means for the Chinese consumer in the months ahead.
Our next question will come from Chris Carey of Wells Fargo Securities. Please go ahead.
Christopher Carey: And as such, you're perhaps a bit more, you know, measured on, you know, carrying through this improvement that you've seen in the market, you know, into out-quarters. And so can you just contextualize, again, the, you know, the durability versus the one-time nature that we may have seen in the quarter and just, you know, how we would see the medium term in the context of what will be, you know, an evolving consumer landscape in China? Thanks. Everything you said is accurate. But there are some things that are encouraged. I'll give you two of those. One is.
Wanted to ask about China's specifically uh Andre. I think you characterized it as another quarter of sequential improvement with 618 being relatively strong. Um, can you talk about just the durability of the trends that you're seeing? 618 is obviously more of a, you know, annual seasonal event. But really sort of underlying durability that you may or may not be seeing in the market. And I think there is this Dynamic where, uh, PNG and and your peers are still waiting to assess the the impact of tariffs on the economy. And and, and what it means for the Chinese consumer, uh, in in in in the months ahead and and um, and and as such you're you're perhaps a bit more uh, you know, measured on, you know carrying through this Improvement that you've seen in the market, you know, into into out quarters and so can can you just uh, can
Contextualize again, the, you know, the durability versus the 1 time nature that we, that we may have seen in the quarter and just, um, you know, how, how we would see the medium-term in the context of what will be, um, you know, involving consumer landscape in China. Thanks,
um,
Everything you said is, uh, accurate.
um,
but there are some things that are that are
encouraging.
I'll give you two of those. One is, um,
Jon Moeller: The trend continues to be more positive. That does an offer. Any Definitive Perspective on what the future is going to hold. But it's not like this thing is bouncing all around. Generally improving. Second, the Chinese consumer continues to be very responsive. I gave you two examples, and I'll prepare them on the next slide. very, very strong. So it comes back to our activity system and what we do. to ensure that The best propositions are available, the best values. Chinese Consumers as the most important. Certain ways to control our destiny, which we're very. But, you know, I don't see anything.
Uh, the trend continues to be more positive.
That doesn't offer.
You know, any definitive perspective on what the future's going to hold.
But it's not like this thing is bouncing all around. It's generally improving.
Um,
Second the, uh, Chinese consumer continues to be very responsive to innovation.
I gave you two examples in our prepared remarks.
Or Pampers is growing at 20% or sk2 is growing. Uh, very, very strong, uh, double digits.
So it comes back to our activity system and what we do to ensure that the best propositions are available at the best value.
Uh, to Chinese consumers as the most important.
In certain ways to control our destiny, which we're very focused on.
Um,
Jon Moeller: Personally, the Pause this meeting.
But, uh, you know, I don't see anything. Um, personally, that...
Jon Moeller: © The Bulletproof Executive 2013 But I haven't foreseen those in the past. I feel very encouraged about the picture in China right now. The market, as Jon says, hasn't returned to growth, but its trajectory is positive. It's more balanced across channels than we've seen in the past. It's less pronounced on key consumption periods, more in line with consumption patterns. All of those are good things. It doesn't look great in aggregate yet, but it's getting better. But the most encouraging thing I'll tell you is the progress our team is making on the ground. They have literally, Jasmine and her team, have changed every element of the business model to adopt to a different reality.
causes me, you know, concern of another shock in the system so to speak.
But I haven't foreseen those in the past.
Um,
Andre any perspective from your know? I think I think you're right. I think the the so a few I I'm I feel very encouraged about the picture in China right now, the market as John says hasn't returned to growth, but its trajectory is positive.
Um it's more balanced across channels than we've seen in the past. It's less pronounced by the consumption periods. More in line with consumption patterns, all of those are good things.
It doesn't look great in aggregate yet, but it's getting better.
Jon Moeller: They have changed the go-to-market model, including the entire distributor lineup to ensure that our propositions show up in stores better, more consistently than they ever have in the past. That is showing progress. We have adopted our media model. We've adopted our innovation model. We've adapted our customer value creation model. All those things start to show progress, which I think I like to believe is part of the 2% growth we were able to generate. And in pockets, like Jon said, SK2 up 23%, now admittedly on a lower base, but also baby care consistently growing. We see pockets of real strength in China emerging.
But the most encouraging thing. I'll tell you is the progress. Our team is making on the ground. They have literally Jasmine and her team have changed every element of the business model to adopt to a different reality.
They have uh changed the go-to market model, including the, the entire distributor lineup to ensure that our propositions show up in stores, uh better more consistently than they ever have in the past that is showing progress.
Uh, we have adopted our media model, we've adopted our innovation model, we've adapted our customer value creation model. All those things start to show progress, which I think, uh, I like to believe is part of the 2% growth we were able to generate.
Jon Moeller: So that in aggregate makes me feel better than I felt about China in the long term.
Jon Moeller: And this is kind of neither here nor there, but.
And In Pockets, like John said, sk2 up 23% uh now admittedly on a lower base but also baby care. Consistently growing. Um we we see pockets of real strength in China emerging. Um so that in aggregate makes me feel better than I felt about China in a long time.
Jon Moeller: I lived and worked in China for a while, admittedly, a long time ago. Stay very close to that market and that. And you can, to Andre's point, you can, I can tell within five minutes walking into one of our facilities. I just talked to Shailesh earlier this week, who returned from China last week. and the indications from an organization standpoint. Significantly and sequentially improved, so that's very encouraging.
and this is kind of neither here nor there, but, um,
I lived and worked in China for a while. Admittedly a long time ago in the late 90s.
But I stayed very close to that market and that organization, um, partially as a result of that.
And you can, to Andre's point, I can tell within 5 minutes of walking into one of our facilities.
Um, how things are going, uh, both, you know, immediately and more broadly.
This week, who returned from China last week?
Um, the indications from an organization standpoint and their confidence have significantly and sequentially improved.
Um, so that's very encouraging.
Kevin Grundy: Our next question today will come from Kevin Grundy of BNP Paribas. Please go ahead. Great, thanks. Morning, everyone.
Our next question today will come from Kevin Grundy of BNP Paribas. Please go ahead.
Kevin Grundy: Jon, Shailesh, I actually want to extend my congratulations to both of you as well. Jon, much to be proud of, given your remarkable career. I wanted to pick up on elements of Lauren and Peter's question, though, specifically on consumer trade down risk, given what remains the more premium price portfolio at Procter. So, you know, the context, of course, the company's made significant progress extending pricing ladders going back to the global financial crisis, tied simply in Fabricare would be just one example of that. And while private label share is not accelerating, we are seeing some level of trade down, like US Fabricare would be another example of that, where your key competitor leads with a value price offering, and we're seeing share pick up there.
Kevin Grundy: So, you know, it doesn't seem like it may be a brand superiority issue, in all cases, rather more sort of a commoditization, if you will, of that we're seeing across staples, right, where consumers are making decisions, and increasingly, the kind of weighing on category growth in certain cases for Procter, weighing on market share performance. So can you comment on that assessment, whether you think that's accurate or not, and then just broadly on implications as you address trade down risk in your categories? I'd appreciate your thoughts there. Thank you.
Great. Uh, thanks morning, everyone, uh, John Celeste, lastly wanted to extend my congratulations to both of you as well. John much to be proud of giving you a remarkable career. Um, I would like to pick up on elements of Lauren and Peter's question though specifically on consumer trade down risk given what Remains the more premium price price portfolio of Proctor. So you know the the context of course the companies make significant progress extending pricing, ladders going back to the global financial crisis side, simply and fabric. Care would be just 1 example of that. And while private labels share is not accelerating, we are seeing some level of trade down, but us fabric here would be another example of that, where your key competitor with leads, with a, a, a value price offering and we're, we're seeing share pick up there. So, you know, it doesn't seem like it may be a, a brand superiority issue in all cases, rather more sort of a commoditization, if you will of of that we're seeing across Staples, right? We're consumers are making decisions and and increasingly this is
Kind of waiting on category growth in certain cases for Procter & Gamble on market share performance. So can you comment on that assessment? Whether you think that's accurate or not? And then just broadly on the implications as you address trade-down risk in your categories. I'd appreciate your thoughts there. Thank you.
Andre Schulten: Morning, Kevin. Um, let me start with a few numbers. And then I'll go into the more strategic part of that question. I think We see. I think some level of pressure. to drive trade down because of price promotional behavior. So private labor, for example, volume share flat, but value share down, both in Europe and in the U.S. That indicates more aggressive pricing from a retailer standpoint on retailer brands. That doesn't result in share growth, but it's certainly an attempt to drive volume and traffic into a lower-priced part of the portfolio. We also see significant promo levels in mid-tier laundry.
Morning, Kevin. Um,
Let me start with a few numbers, and then I'll go into the more strategic part of that question. I think, um,
We see.
I think, uh, some level of pressure.
To drive trade down because of price, promotional behavior.
Um, so private label, for example, volume share is flat but value share is down, both in Europe and in the U.S. That indicates more aggressive pricing from the retailer standpoint on the retail of brands that doesn't result in share growth.
But it's certainly an attempt to drive volume and traffic into a lower price part of the portfolio.
Andre Schulten: which is driving some of the some of the trade down. As I've indicated before, we don't think that's a winning strategy. It doesn't generally return value share growth. It might return volume share growth in the short term, but it certainly compresses the category. We also see some trade-down in our portfolio. Jon mentioned this earlier from Tide into maybe a Tide Simply or a Gain. But that is part of our strategy, as you said, to serve the consumer across the price ladder and across the value tier that we choose to play in. And we need to innovate across all of those value tiers, be it Loves and Baby Care or be it Gain and Tide Simply in Laundry.
We also see significant promotional levels in mid-tier laundry.
Um, which is driving some of the traitors. As I've indicated before, we don't think that's a winning strategy.
Uh it it doesn't generally uh, return value, share growth. It it might return volume share growth in the short term but it's certainly compresses the category.
Um, we also see some trade-down in our portfolio. Jon mentioned this earlier, tying it into maybe a tight supply or a gain.
Andre Schulten: I think the most important point to your question, are we concerned about commoditization? I don't think so. If you look at our categories, the consumer satisfaction in our categories is still remarkably low. Only 25% of consumers believe that they are or are happy with their laundry detergent performance in the wash. It doesn't come off clean enough, it doesn't come off smelling nice enough. 50% of diapers still fail and leak. Only 30% of women are happy with their protection during that period. So there's dissatisfaction, and I firmly believe, and I think we all do, that the path of better innovation, better performance...
Um, but that is part of our strategy, as you said, to serve the consumer, the price ladder, and the value tier that we choose to play in. We need to innovate across all of those value tiers, be it Love's and Baby Care, or be it Gain and Tide, simply in laundry.
I think the most important point to your, uh, question: are we concerned about commoditization? I don't think so.
If you look at our categories, consumer satisfaction in our categories is still remarkably low.
Uh, only 25% of consumers believe that they are, uh,
Uh, customers are not happy with their laundry. Uh, detergent performance in the wash doesn't come out clean enough. It doesn't come out smelling nice enough.
Andre Schulten: At adequate value is an enormous opportunity to not only grow the category but grow our share within the category. I think a great example of that is the test market results we've talked about on Tidevo in Colorado. where the market is growing. Ahead of the Balance of Geography. where our share within that is growing. So there's true incrementality to the proposition at a 50% premium to the average cost. for Laundry Lode. So it's just another indication of the ability. of the Light from a product usage standpoint and performance. & Co., Title Microsoft Office Word Microsoft, Inc.
Um, 50% of diapers still fail and leak. Uh, only 30% of women are happy with their protection during their period. So, there is dissatisfaction, and I firmly believe—and I think we all do—that the path of better innovation is better performance.
At adequate value, there is an enormous opportunity to not only grow the category, but to grow our share within the category.
I think a great example of that is, uh, the test market results we've talked about on tide ego and Colorado.
Uh, where the market, uh, is growing.
Um, ahead of the balance of, uh, geography, um, where our share within that is growing.
Um, so there's true incrementality to the proposition.
Uh, at a 50% premium to the average cost per laundry load.
From a product usage standpoint and performance against a specific job to be done.
Andre Schulten: Title Microsoft Office Word Document MSWordDoc Word.Document.8 Communication of the Benefits of that Innovation and the Value of that Innovation. You know, I would much rather spend a dollar on those things every day than a dollar of There's nothing proprietary. So, there's no long-term advantage that's conveyed. That's different than... Innovation. Just to double down on coming full circle, we always prepare a list of our upcoming innovation, just to get ourselves confident as we go into these calls.
Uh, that drives, uh, the category in terms of competitors. You know, investing and those kinds of things. Innovation, uh, communication of the benefits of that in a patient, and a value of that innovation.
You know, I would much rather spend a dollar on those, uh, things every day.
Than a dollar a promotion. Uh, there's nothing proprietary in promotion.
Um, so there's no long-term advantage that's uh, that's, that's conveyed, uh, that's different than, um, than than um, Innovation driven. Uh, growth.
Andre Schulten: And I am very confident that we have both the technology, the commercialization ideas, the innovation that allows us to capture that dissatisfaction that consumers still have in our categories and make incremental progress that allows us to regain both momentum on category growth but also share.
And just to double down on incoming full circle, we always prepare a list of our upcoming innovations just to get ourselves confident as we go into these calls.
I am very confident that we have both the technology and the commercialization ideas, as well as the innovation that allows us to capture the dissatisfaction that consumers still have in our categories. This will enable us to make incremental progress that allows us to regain both momentum on category growth and also share.
Nick Modi: Our next question today will come from Nick Modi of RBC Capital Markets. Please go ahead. Yeah, thank you. Good morning, everyone. And Jon and Shailesh, congratulations from me as well. Just one clarification and one question. On the clarification, any perspective on which categories we're experiencing the destocking during the quarter? If you could just, you know, help give us some frame there. And then the question is just kind of piggybacking on Dara's question. You know, if you can give us some kind of specific outcomes that you saw in the test markets that you have kind of deployed this new organizational design, you know, anything specific you can provide us just so we can kind of understand, you know, what the broader implications be for the entire company.
Our next question today will come from Nick Modi of RBC Capital Markets. Please go ahead.
Nick Modi: Thank you.
Yeah, thank you. Good morning everyone. And and John and sheesh. Congratulations from me as well. Um, just uh, 1 Clarion and 1 question on the clarification. Any perspective on which categories, uh, were experiencing the destocking during the quarter. If you could just, you know, help, give us some frame there and then the, the question is just kind of piggybacking on dar's question. You know, if you can give us some kind of specific outcomes that you saw in the test markets, um that you have kind of deployed, this new organizational design. Um you know anything specific, you can provide us just so we can kind of understand. You know what? The broader implications could be for the for the entire company. Thank you.
Nick Modi: Hey, Nick, I'll start with your de-stalking question. It's broad based, there's no specific category. And I think the only insight I'll give you the faster the turn in the category, the faster the impact, but it's broad based. So no, no differentiation across categories, I would call out You know, each of the businesses is different across categories and across markets. So I hesitate to deploy a learning from a test market, but there is some commonality in what we've learned. One is that we can operate at significantly lower cost. Each of the pilots has identified the opportunity.
Hey, Nick. Um, I'll start with your, uh, desktop in question. It's broad-based. There's no specific category, and I think, um, the only insight I'll give you is that the faster the turn in the category, the faster the impact. Um, but it's broad-based, so no differentiation across categories. I would call out.
had um,
You know, each of the businesses is different across categories and across markets, so I hesitate to deploy.
Uh, a learning from a test market, but there is some commonality in what we've learned.
Andre Schulten: and we've yet to supply them with the... The IT tools that I talked about, which will drive that event. further. There hasn't been an experience that we've had in a market or a category where this hasn't been true and isn't felt with conviction. which is why the leadership team as we went through this during primarily the month of May was confident signing up for the restructuring. Opportunity that we all felt that we have. There's another commonality. Which is that, and this was always one of the primary drivers for me. is that people are... are thrilled.
1 is that, uh, we can operate at significantly lower cost. Each of the pilots has identified the opportunity to do that.
And we've yet to supply them with the, um,
Uh, the IT tools that I talked about, which will drive that even further, there hasn't been an experience that we've had in a market or a category where this hasn't been true and isn't felt with conviction.
Which is why the leadership team, as we went through this during, primarily, the month of May.
Uh, I was confident signing up for the restructuring. Um,
Opportunity that we all felt we have as a result of this.
There's another commonality.
Uh, which is that, and this was always one of the primary drivers for me.
Andre Schulten: with the opportunity to have a wider impact, to have a wider scope. to be more end to end decision makers than, you know, components of Cogs in a factory that are trying to reach a decision in a very expensive and costly way. There are, of course, there's a degree of concern within the organization, which is understandable in terms of just simply because we're looking to change. causes a degree of uncertainty. But, you know, if you just look at those two things alone, if you knew that you could operate at a significantly lower cost, and by the way, the business results in these tests have have been strong.
Um, people are thrilled.
With the opportunity to have a wider impact, to have a wider scope.
Um, uh, to be more end-to-end decision makers, uh, than, you know, components of.
A cog in a factory that is trying to reach a decision in a very expensive and costly way.
Um, um, there are, of course, there's, there's a degree of concern within the organization, which is understandable, in terms of just simply because we're we're looking to change things and change, um, causes uh, a degree of uncertainty.
But, you know, if you just look at those two things alone, if you knew that you could operate at a significantly lower cost, and by the way, the business results in these tests have been strong.
Andre Schulten: So there's little risk in that regard. If you could operate at lower cost. If you could make decisions better and faster... and a people. place more value. and and the relationship they had with the company. Those are strong motivations to push forward, which is exactly what we're doing. The specific implementation of role-by-role you know serial number by serial number will be driven by the individual leader. We will share with them the learnings we have shared with them the learnings that we've gained from the pilot.
um,
Uh, so there's little risk in that regard. If you could operate at lower costs, if you could make decisions better and faster.
and if people,
Uh, Place more value.
Inn in the relationship they had with the company.
Andre Schulten: We have a year end, what we call our year end meeting is an annual meeting of our leadership team here in Cincinnati. early part of September. And one of the things we'll be featuring in that leadership team meeting is presentations from each of the pilot leaders to the balance of the 250 people that lead the team. on what they.
Um, uh, you know, serial number by serial number will, will will be driven by the individual leaders of those businesses. We will share with them, the learnings we have shared with them. The learnings that we've gained, from the pilots.
We have a, a year end. Uh, what we call our year, end meeting is an annual meeting of our leadership team here in Cincinnati in, uh, in the early part of September,
And 1 of the things we'll be featuring in that leadership. Team meeting is uh as presentation from each of the pilot leaders to the balance of the 250 people that lead this company.
On, uh, on what I think is possible.
Kaumil Gajrawala: Our next question today will come from Kaumil Gajrawala of Jeffreys. Please go ahead. Everybody, good morning. Congratulations. And thank you for all your help over the over the decades. John, congratulations to Shailesh.
Our next question today will come from Cayo Godhra Walla of Jeffrey. Please go ahead.
Kaumil Gajrawala: A question on that, maybe a little bit following up on some earlier questions was often the timing of a change like this, which is related to, you know, maybe a small or maybe a large pivot in what the world is going to look like over the coming three to five years. And so curious of whether it's data that you had mentioned, whether it's M&A, is there a bit of a philosophical pivot or shift in any way that would be related to the timing of this? And then the second question more related to sort of the business right now is the commentary on losing or not having the superiority position that you want in some categories.
Uh, hey everybody. Good morning. Uh, congratulations and thank you for all your help over the decades. John, congratulations to Shyish. Um, a question on that, maybe a little bit following up on some earlier questions was...
Often the timing of uh, a change like this or just related to, you know, maybe a small or maybe a large pivot in um what the world is going to look like over the coming, you know, 3 to 5 years and so curious, if you know whether its data that you had mentioned, whether it's m&a is there you know a bit of a philosophical pivot or shift in any way that um would be related to the timing of this. And then the second question,
Jon Moeller: To what degree is that, you know, in many ways just related to the last five years have been have been complicated for a whole host of things. And did that maybe limit the ability to execute this playbook, which has been in place for quite some time? Or is there something else that maybe led to the lagging within those categories for where you want to be? Thanks. Thank you. You know, one example of what's occurred that will hopefully provide some specificity. China built a market. Supply. that anticipated a lot of growth within that. The reverse has happened.
question more related to sort of the business right now is the commentary on losing or not having this appear already positioned that you want in some categories to what degree is that, you know, in many ways just related to
The Last 5 Years have been have been complicated for a whole host of things and did that maybe limit the ability to, you know, execute this Playbook which has been, you know, in place for quite some time or is there something else that maybe led to the, you know, lagging within those categories for where you want to be? Thanks.
Um,
You know, one example of what's occurred that will hopefully provide some specificity.
um,
trying to build a market.
Uh, Supply system.
That anticipated a lot of growth within that market.
Uh, the reverse has happened.
Jon Moeller: That supply is not going to go unused. So we see it showing up in various markets around the world, including the U.S. and to their credit, product quality is very high. So it's produced at a lower cost, at very high quality, all of a sudden overnight. We have a superiority gap that we... But we're actively monitoring those situations. We're actively strong innovation plans designed to restore superiority across all prices. So that's an example, much more so than an internal dynamic. Thank you! And, you know, the reality is, and it's a good thing. We operate in a very competitive industry.
That supply is not going to go unutilized.
So we see it showing up in various markets around the world, including the U.S.
And, uh, to their credit, the product quality is very high.
Um, um, so it's produced at a lower cost at very high quality all of a sudden, overnight.
We have a superiority gap that we need to close.
So, we're actively monitoring those situations. We're actively, uh, with strong innovation plans designed to restore superior superiority across all price tiers. But that's an example, uh, much more so than an internal dynamic of.
You know, too much difficulty in complexity. I don't see that being the primary driver here.
Um and you know the reality is um and it's a good thing.
Jon Moeller: We have strong competitors who are good at what they do. And again, that's a market-constructed dynamic, which I... Welcome and it pushes us to be better. I don't think there is anything limiting us from an internal standpoint or even from an It's part of who we are, it's part of what we do. and has become much more so over the last number of years. I forget. for exploring the question. Any pivot in direction that will.
We operate in a very competitive industry. We have strong competitors who are good at what they do.
Uh and again that's a market constructed Dynamic which I uh welcome and it pushes us to be better every day.
um, which is a good thing but I don't I don't think there's anything limiting us from an internal
standpoint or even for, um,
you know, an external complexity standpoint in terms of continuing to execute this model that you rightly, uh,
Refer to, um it's it's part of who we are. It's part of what we do.
Um, and it has become much more so over the last number of years.
I forget.
the first part of the question is any, uh,
Any pivot in direction that drove the CEO change.
Jon Moeller: Not to my knowledge. Good.
Coming out of the CEO change. Not my knowledge. Good.
Olivia Tong: Our next question today will come from Olivia Tong with Raymond James. Please go ahead. Great, thank you. And congrats to Shailesh and Jon. Jon, thank you. And you'll be missed. We've talked a bunch about the challenge state of the consumer. And yet you're still seeing positive price, positive mix this quarter, this year.
Our next question today will come from Olivia Tom. With Raymond James, please go ahead.
Great. Thank you. And congrats to Shyla and John John, thank you and you'll be missed. Um
Olivia Tong: So three questions there. First, are you surprised that consumers are still mixing up and willing to accept price despite their current challenge state? Can you characterize your confidence and ability to price next year some color on where you see the most need because of the tariffs or increasing costs? And then just on the fiscal 26 outlook, your view on contribution from focus versus enterprise markets. Thanks. Maybe I'll start with us and Andre can jump in. I'm not surprised by the consumer dynamics that you described. It was inherently part of the decision we made when we concentrated our portfolio into daily use categories where performance drives brand choice, performance being a significant contributor to value.
Up and willing to accept price, despite their current challenge State. Um, can you characterize your confidence and ability to price next year some color on where you see the most need because of the tariffs or increasing costs and then just on the fiscal 26. Outlook your view on contribution. Uh from Focus versus Enterprise markets. Thanks so much.
Maybe I'll start with this and Andre can kind of jump in. Um,
um,
I'm not surprised by the consumer dynamics that you described.
Um,
Olivia Tong: Value holistically defined is much more than price. And I expected that as we made these moves and this shift. That would be even... and continued to innovate, that would be even more resilient, which largely has The second is, if you just look at price as a component of our top line growth. Over long periods of time. We've been, price has been a positive contributor to that top line growth. I think Close to 19 out of 20 of the last year. The combination of price and mix has been a positive contributor. The same occurs at the quarterly level.
it was inherently part of the decision. We made, when we concentrated our portfolio into daily use categories, where performance drives brand Choice, performance, being a significant contributor to value.
Value is holistically defined as much more than...
than price.
um, and I expected that as we made these moves, and this, this shift,
Um, that we'd be even uh and and continue to innovate that we'd be even more resilient which largely has occurred.
um, uh the second is um, if you just look at price as a component of our Topline growth,
Over long periods of time. Um,
we've been, uh, price has been a positive contributor to that Topline growth so I think
It's close to 20 1 9.
Jon Moeller: So this is part of a model of an innovation machine. that operates in categories where performance drives value. I'm in terms of future pricing, you know, given that past history, given our commitment to innovation, given what Andre described in the innovation pipeline. I don't see any reason why historical patterns don't play themselves forward. And, you know, if you think about something like Tide Evo, there are many other examples. If you just look at the growth. of both ends of the Oral-B business, the high-end IO10 and the entry price point on IO2. which is a significant step up in terms of price versus a manual brush.
The combination of price in Mexico has been a positive contributor. The same occurs at the quarterly level. So, this is part of the model of an innovation machine.
uh, that operates in categories where performance drives, um, uh,
Value. Um,
um,
I am in terms of future pricing, you know, given that past history. Given our commitment to Innovation given what Andre described in The Innovation, uh, pipeline.
Like, I don't see any reason why, uh, historical patterns don't play themselves forward.
um, and you know, if you
think about something like tied Evo, but there are many other examples. Have you just look at the growth?
Of both ends of the Oral B business. The high-end, uh, iot 10.
and the entry price point, uh,
On io2.
Jon Moeller: and then to IOTAN as a even more significant price. Participate. and that product site. They're growing extraordinarily well. So I don't ever like to overly simplify things, but I really, I really, really, really believe that superiority in terms of product, package, communication, go-to-market, value holistically defined. As long as we do that well and better than others, we're going to be in great shape and we'll be serving consumers at a very high level. If we fail to do that, then all bets are off. Which is why you see us being very proactive on creating the financial flexibility to continue to do exactly exactly that So that's, that's how I look at this.
Uh they're which is a significant Step Up in terms of price versus a manual brush.
And then to IoT 10, is, uh, is a, even more significant, uh, price, uh, to participate, uh, in that product segment.
Uh, they're growing.
Extraordinarily. Well,
So I don't ever like to overly simplify things but I really I really, really, really believe.
that superiority in terms of product package communication, go-to-market value, holistically defined.
um, is is primary um, and um
Uh, as long as we do that well and better than others, we're going to be in great shape. Um, and we'll be serving.
Uh, consumers at a very high level.
If we fail to do that, uh, then all bets are off.
Uh, which is why you see us being very proactive uh on uh creating the financial flexibility to continue to do exactly exactly that.
um,
Jon Moeller: Dynamic. I think we're better positioned than almost any other company. I don't really think about it that way on a daily basis. I think about, are we better positioned today than we were yesterday, and will we be better positioned tomorrow? I feel good about all of that. If that doesn't mean there won't be challenges, you've seen challenges. It doesn't mean that competitors won't. out-compete us in certain categories and certain markets and certain days and months and quarters. But it's pretty strong reassurance in our commitment to that approach. should be pretty strong reassurance that this should be.
so that's that's how I look at this. Um, uh,
Dynamic. I think we're better positioned than almost any other company.
Uh, I don't really think about it that way on a daily basis. I think about are we better positioned today than we were yesterday, and will we be better positioned tomorrow?
I feel good about all of that.
Uh, that doesn't mean there won't be challenges you. You've seen challenges.
It doesn't mean that competitors won't.
Uh, output us uh, in certain categories, and certain markets and certain days and months and quarters.
Um, but it's it's pretty strong, reassurance that our commitment to that approach.
Should be pretty strong. Reassurance that this should be manageable.
Andre Schulten: Second part of your question will be our enterprise markets versus focus markets. At aggregate level, I expect both to perform similarly in terms of top line growth and bottom line growth in the year. Obviously, within the enterprise market bucket, there's a lot of variability between markets. Turkey has returned to 17% organic sales growth, India still growing at five, still significant challenges in the Middle East. So, you know, but you allowed me to do it at aggregate level. At aggregate level, we should be fairly consistent between the two segments, focus markets.
Second part of your question, will be our Enterprise markets versus Focus markets at aggregate level? I expect both to perform similarly in terms of Topline growth and and bottom line growth in the year.
Obviously, within the Enterprise market bucket, there's a lot of variability between markets turkey has returned to 17% organic sales growth. India are still growing at 5 still significant challenges in the Middle East, so
You, you know, but you allowed me to do it at aggregate level at aggregate level. We should be fairly consistent between the 2 segments, Focus markets, and Enterprise markets.
Robert Ottenstein: Our next question today will come from Robert Ottenstein of Evercore ISI.
Robert Ottenstein: Please go ahead. Thank you very much and congratulations all around for myself and Javier Escalante. Most of my questions have been answered, but one thing I would like to drill down into a little bit is kind of the difference between value and affordability. Obviously, the superiority emphasis makes all the sense in the world. You want to give consumers more value and that has worked. You've touched on affordability, but I guess the question is, number one, is this a consumer that really wants and needs more affordability? And there were some comments around that and some, I guess, behavior suggesting that.
Will come from Robert Odin of evercore isi. Please go ahead.
Thank you very much and uh, congratulations all around for myself and and Javier Escalante. Um, my uh, most of my questions have been answered uh, but 1 thing, I, I would like to drill down and do into a little bit is, um, you know, kind of the difference, you know, between value and affordability. Um, you know, obviously the the superiority uh emphasis makes all the sense in the world, you want to give consumers more value and and that has worked um you know you've touched on affordability. But I guess the the question is number 1. Um, is this a consumer that
Robert Ottenstein: And then I guess the most important question is, do you believe that as an organization and how you look at the markets, look at the consumer, look at your innovation, that perhaps you need to or it would make sense to focus a little bit more on providing superiority that is more affordable for consumers. Thank you.
Um, really wants and needs more affordability. And, and there was some comments around that and some, I guess Behavior suggesting that. And then, the, I guess the most important question is, is, do you believe that as an organization and how you? Um, look at the markets, look at the consumer. Look at your Innovation that perhaps you need to, or it would make sense to focus a little bit more on, you know, providing superiority. That is more affordable for consumers. Thank you.
Jon Moeller: Make a couple comments there, Robert. Thank you for the question. I think it's an important Affordability is a relevant concern. We get at that in a couple ways. One is making sure that we have. that meets, you know, dollar outlay. at the consumer level, and that becomes even more important in the environment that we live in. So, in that context, an over-dependence on large sizes, large pack sizes, can be a problem. So we're very excited.
Make a couple comments. Robert, thank you for the question. I think it's an important 1.
um,
affordability is uh, a relevant concern.
Um, we get at that in a couple of ways. One is making sure.
Um, that we have a pack size.
That meets, uh, you know, dollar outlay.
Um, uh, capacity.
At the consumer level. Um, and that that becomes even more important in in the environment that we're in.
Um, so in in that context and overdependence on large sizes, large pack sizes, can can be a problem at work against you from affordability standpoint. So we're very attentive to that
Jon Moeller: The second is... Once we get beyond dollar outlay and the capacity to outlay that dollar, it really does come down to an understanding of the benefits. that I receive to understand why this. and it's all a relative comparison across categories. So ensuring that we have clarity. You know, we talk about advertising, for example, and by advertising, I mean that in a broadly defined way. In other words... Advertising Package Shelf Communication in-store or online. We're trying to emphasize two things, performance and value. and I'm not really interested in the current environment given that the Accurate Situation You Describe.
um, the second is um, uh, uh
Once you get Beyond uh dollar outlay, and the capacity to to outlay that dollar, it really does come down to an understanding of the benefit.
That I receive to understand whether something is quote, affordable or not.
And it's all a relative comparison across categories across uh uh brands.
So, ensuring that we have, uh, clarity.
You know, as we talked about uh, advertising for example and by advertising, I mean that in the broadly defined way. In other words,
Advertising package shelf communication, in-store or online? Communication.
We're trying to emphasize 2 things.
Performance and value.
Um, and I'm not really interested in the current environment given the, the the accurate situation. You described
Jon Moeller: Entertainment and a lot of other things we have. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES right to the heart of the matter of performance and value. The third thing is, yes, you're right. We should be, and are, Aggressively looking at ways to create more affordability through the and that's true on package. And we identify formulas that are more efficient from a cost standpoint but still deliver, ideally, and deliver higher levels. Can we... Are there opportunities from a package? that allow us to reduce. Are there opportunities from a manufacturing...
um of, you know, entertainment and a lot of other things we had that we want our ads to be as entertaining as they can be, but not to the extent that they compromised if
Uh, you know.
Right to the heart of the matter, performance and value message.
Um, the third thing is. Yes. Uh, you're right. Uh, we should be and are um uh aggressively looking at ways to
Um, to create more affordability through the innovation, uh, lines, and that's true on package.
Identify a formulas that are more efficient from a cost standpoint but still deliver ideally and deliver higher levels of performance.
Um, can we uh um are there opportunities from a packaging standpoint?
Jon Moeller: that allow us to... All of those things were very, very actively focused.
That allow us to reduce cost, are there opportunities from a manufacturing standpoint?
That allow us to reduce cost.
All of those things were very, very actively. Uh,
Jon Moeller: I think there's a misperception that occurs sometimes, which is our fault. That when we talk about superiority, we're talking about That's not how we think about it. We think about it as having the best offer. and the price tiers in which we choose to compete. and someone earlier mentioned the pricing ladders. We're very intentional in trying to fill out those ladders so that there isn't. Thanks again for asking.
Focused on and will continue to be. I think there's a misperception that occurs sometimes, which is our fault.
That when we talk about superiority, we're talking about premium.
That's not how we think about it. We think about it as having the best offer.
In the price tiers in which we choose to compete.
Uh and uh someone earlier mentioned, the pricing ladders were very intentional in, trying to fill out those ladders. So that there is an affordable proposition
Um uh for different groups of consumers. So thanks again for asking that question. It's a very important 1.
Andrea Teixeira: Our next question will come from Andrea Teixeira with J.P. Morgan. Please go ahead. Thank you, everyone. And, John, you will be missed, and congratulations to you and Shailesh and their respective families. As you correctly pointed out, this is a family company to families. Impressive results all over these years. I have a question and two specific clarifications on Fiscal 26 Guide for both of you. I guess, John, starting over the years, my question is like more stepping back from a strategic standpoint. You mentioned that consumer health is an area that you felt P&G was punching below its weight.
Our next question will come from Andrea Tara with JP Morgan. Please go ahead.
Andrea Teixeira: Did that change? And if not, would that, would the growth be organically mostly or M&A-based? And then second on the clarification side, within your Fiscal 26 EPS Guide, are you adding back any tariff mitigation efforts to the $800 million headwind after taxes? And would that mitigation become the upside for the midpoint if that's not included? And related to that, the two-year restructuring savings, were it added to the Fiscal 26 or will it be mostly felt on an artifact on the Fiscal 27? Thank you.
Uh, thank you everyone and John, uh, you will be missed and congratulations to you and shash. Uh, and the respective families as you correctly, pointed out, this is a family company to families. Uh, impressive results, all of these years, um, I have a question and 2 specific clarifications on Cisco. 26 guide. Uh, for both of you, I guess John starting over the years. My question is like more stepping back from a strategic standpoint. You mentioned that uh, consumer health is an area that you felt PNG was punching below its weight. Uh, did that change? And if not would that would be the growth be organically? Mostly or, I mean based
And then second on the correct clarification side, uh within your Cisco 26. If you guys guide, are you adding back, any type of mitigation efforts to the 800 million dollar headwind after taxes and um, would that mitigation become the upside, uh, for the midpoint, if that's not included, uh, and related to that, the 2-year, restructuring savings was where it added to the fiscal 26. So it will be mostly felt, uh, on a net effect on the fiscal 27. Thank you.
Andre Schulten: So I'll let Andre handle those last two questions, Andrea, and then I'll come back to your question about personal health care. So, Andrea, I think the short answer is... The midpoint of headwinds and mitigation is included in the midpoint of the guidance range. and on the on the productivity savings they will materialize beginning second half of the fiscal year. But we're working through the program details, and as you can appreciate, execution will have to be diligently planned. So as we gain more visibility to the CPS by market, by legal entity, by project, we will give you more visibility to the timing of those savings.
Well, I'll let Andre handle those last 2 questions. Uh Andrea and then I'll come back to your question about personal Healthcare.
So, Andre, I think the short answer is, uh, the midpoint of headwinds and mitigation is included in the midpoint of the guidance range.
Um and on the um on the productivity savings, they will uh materialize beginning second, half of the fiscal year.
Um, but we're working through the program details, and as you can appreciate, execution will have to be diligently planned. Um, so as we gain more visibility to the CPS by market, by legal entity, by project,
Andre Schulten: Rough cut would say building up towards the second half of the year. And on your question on personal health care, that continues to be a strong focus area for us. It's been a business that's performed extraordinarily well, even in the context of a A Light Cough Cold Seizure. We have been... Clear that there is significant opportunity for organic growth within that portfolio. And the last several years, you know, double-digit growth has been driven by organic innovation and geographic. So that will continue. We also have been...
we will give you more visibility to the timing of those savings. Rough cut would say building up towards the second half of the year.
And on your question on personal health care, that continues to be uh, strong Focus area for us. It's been a business. That's performed extraordinarily. Well, uh, even in the context of a, um, a light cough cold season in in, in the most recent year,
um, we have been, uh,
Clear that there are significant opportunity for organic growth within that portfolio.
And the last several years, um, you know, double digit growth has been driven uh by uh organic Innovation and Geographic expansion.
So, that will continue.
um, we also have uh, been
Andre Schulten: All right. Thank you. and acquisitions that they offer an opportunity to significantly That's what we did when we purchased the German Merck portfolio of OTC products. We're very happy with that acquisition. It's paid out extremely well. It's built capability, both from a supply standpoint and a commercial standpoint. So we'll continue analyzing opportunities that are presented to us. I expect that the future of personal health care will be bright and it will be driven both organically and financially. Some level.
Clear that there are a couple of categories that we currently compete in where we might be interested.
In, um, and Acquisitions. If they offer an opportunity to significantly,
Uh, improve the growth rate of the margin structure through both revenue and cost synergies.
That's what we did. When we purchased the German Merc portfolio of OTC products. We're very happy with that acquisition. Uh, it's paid out extremely well. It's built capability. Uh, both from a supply standpoint and a and um, a commercial standpoint.
Um, so we'll continue, um, analyzing opportunities that are, uh, presented to us.
I expect that the future of personal healthcare will be bright, and it will be driven both organically and opportunistically through some level of acquisition.
Robert Moskow: And your final question today will come from the line of Robert Moskow with TD Cowan. Please go ahead. Okay, we're going to finish strong here. Congrats, John. But I'm hoping to ask the same question everyone's asking a little more directly about the U.S. Are you going to be raising prices more this year in the U.S. than you did in fiscal 25? I would think it would be a necessity, given the tariffs. And then secondly, you know, there's a very wide range in your guidance for the top line. Is there also a wide range of scenarios on the pricing embedded in that?
And your final question today will come from the line of Robert Moscow with TD Cowen. Please go ahead.
Okay, we're going to finish strong here. Um, congrats Jon. Um,
Robert Moskow: I would think that would be where there would be a high degree of uncertainty, given the moving target on tariffs. Thanks. Hey, Robert. So the pricing on those Jews that are impacted by terrorists, largely in combination with innovation, is mid-single digits in the U.S. And that's about 25% of our SKUs that are impacted. That is not. vastly different from what we typically take with innovation, a couple of points higher to account for the tariff impact that we can't offset with productivity. If you average out the pricing across the entire portfolio, we're looking at about 2.5%, broadly aligned with where inflation is trending, so also not too disruptive.
But, uh, I, I'm hoping to ask, uh, the same question. Everyone's asking a little more directly about the US? Um, are you going to be raising prices more this year in the US than you did in fiscal 25? I, I would think is the necessity given the tariffs and then, secondly, you know, there's a very wide range in your guidance for Top Line because there are also a wide range of scenarios on the pricing. It it embedded in that I would think that would be where there would be a high degree of uncertainty. Um, given given the the moving Target on tariffs. Thanks.
Hey Robert. Um, so the the pricing
In large part, this is in combination with, uh, innovation.
Is mid single digits in the US.
Um, and that's about 25% of our skus that are impacted.
That is not.
Vastly different from what we typically take with Innovation a couple of points higher, um, to account for the Tariff impact that we can't offset with productivity.
If you average out the price of the entire portfolio, we're looking at about 2 and a half percent broadly in line with where inflation is trending. So also not too disruptive.
Andre Schulten: And as I mentioned before, the variability on the pricing is part of the range on the top line. If the pricing is holding, if the pricing is supported by the tariffs actually being implemented, then that supports the upper end of the guidance range. If the pricing needs to be rescinded or spent back because the tariffs are coming in differently, or for other reasons, that would lead to the lower end of the guidance range. So it's built in. I don't think it's the biggest variability in the top line. I think it's one factor. I think the underlying consumer strength is still the biggest unknown that we're dealing with here.
Um, and uh, as I mentioned before, the variability on the pricing is part of the range on the top line. Um, if the pricing, uh, uh, uh, is holding, if the pricing is supported by the terrorists, actually being implemented, then that supports the upper end of the guidance range. If the Porsche, if the pricing needs to be rescinded, or spent back because the tariffs are coming in differently,
Uh, or for other reasons, that would lead to the lower end of the guidance range. So it's it's built in
Um, I don't think it's the biggest variability in the top line. I think it's one factor. I think the underlying consumer strength is still the biggest unknown that we're dealing with here.
Jon Moeller: All right, I think that brings us to a close here. I want to just make a couple of comments. Reflecting on the conversations that we've just had. First, as Andre already said, but I just want to make sure it's registered, our ambition is to deliver at the midpoint to the high point of these guidelines. I believe... I've always been guilty of this, that there are more opportunities than there are challenges. And that's both in the near term, but certainly in the long term. I tell our board of directors all the time, this company has never faced more challenges than it currently does.
All right, I think that brings us to a close here. Um, I want to just make a couple of comments, uh, reflecting on the conversations that we've just had.
Um, uh, first, as Andre already said, I just want to make sure it's registered our ambition.
Uh, is to deliver at the midpoint uh, to the high point of these uh, guidance ranges.
um, uh, I believe, um,
So, I've always been guilty of this: there are more opportunities than there are challenges.
Um, and that's both, uh, in the near term. But certainly in the long term, I, uh, tell our Board of Directors all the time this company has never faced more challenges than it currently does.
Jon Moeller: That's the bad news. The good news is we've never had more opportunities than we currently do. Getting ahead of ourselves in that regard in month one of twelve. Particularly given how things developed through last fiscal year is probably.
That's the bad news. The good news is we've never had more opportunities than we currently do.
Um, getting ahead of ourselves, uh, in that regard, in month 1 of 12.
Jon Moeller: Produced by the U.S. Department of State So that's kind of the summation. of this overall discussion. We'll stay closed. and make sure that you're learning as we're learning. and we have many opportunities to do that. I have tremendously enjoyed, in most instances... My interactions with each of you and your constituents, you play a very important role um and uh helping people make very important decisions in their lives. and you're a steward in many cases. for the resources that they utilize. So I thank you. There's been a lot of thanks and congratulations extended my way, but I offer them.
Uh, particularly given, um, how things developed through last fiscal years, is probably not.
A prudent approach and probably doesn't serve you. Well, uh, so that's that's kind of the, the, the summation.
Of this overall discussion, we'll stay close.
And, um, uh, make sure that, uh, you're learning as we're learning.
Um, and we have many opportunities to do that as, as the year progresses.
I have, uh, tremendously enjoyed and most instances.
Um, my interactions uh, with each of you and your constituents uh you play a very important role.
Um, in, uh, helping people, um, make very important decisions in their lives.
Um, and um, you're a steward in many cases.
For the resources that they utilize to support their families.
Unknown Executive: I'm going to turn and we all look forward to. Interacting with you, hopefully narrowing these ranges as we learn more. having a very good, a good year. Thanks a lot.
So, I thank you. Um, there's been a lot of uh, thanks and congratulations extended my way, but I I I offer the same
Return. And um, we all look forward to
interacting with you, uh, hopefully narrowing these ranges as we learn more and, uh, uh
Having a very good, a good year in the process.
Thanks a lot.
Unknown Executive: That concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.
That concludes today's conference. Thank you for your participation.
You may now disconnect. Have a great day.