Kimberly Clark Q4 2025 Kimberly Clark Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Kimberly Clark Corp Earnings Call
Speaker #1: Greetings. Welcome to the Kimberly-Clark Q4 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the opening remarks.
Operator: Greetings! Welcome to the Kimberly-Clark Q4 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the opening remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Jakubik, Vice President of Investor Relations. Chris, you may begin.
Operator: Greetings! Welcome to the Kimberly-Clark Q4 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the opening remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Jakubik, Vice President of Investor Relations. Chris, you may begin.
Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Chris Jakubik, Vice President of Investor Relations.
Speaker #1: Chris, you may begin.
Speaker #2: Thanks so much, and good morning, everyone. This is Chris Jakubik, Head of Investor Relations at Kimberly-Clark, and thank you for joining us. I would like to remind everyone that during our comments today, we will make some forward-looking statements that are based on how we see things today.
Christopher Jakubik: Thanks so much, and good morning, everyone. This is Chris Jakubik, Head of Investor Relations at Kimberly-Clark, and thank you for joining us. I would like to remind everyone that during our comments today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures during these remarks, and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. You can find the GAAP and non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com.
Chris Jakubik: Thanks so much, and good morning, everyone. This is Chris Jakubik, Head of Investor Relations at Kimberly-Clark, and thank you for joining us. I would like to remind everyone that during our comments today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC.
Speaker #2: Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC. We will also discuss some non-GAAP financial measures during these remarks, and these non-GAAP financial measures should not be considered a replacement for, and should be read together with, GAAP results.
We will also discuss some non-GAAP financial measures during these remarks, and these non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. You can find the GAAP and non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com.
Speaker #2: You can find the GAAP and non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com. Finally, I will apologize in advance if there are issues with the quality or delays in our audio today because we are all working remotely due to the winter storms.
Christopher Jakubik: Finally, I will apologize in advance if there are issues with the quality or delays in our audio today, because we are all working remotely due to the winter storms. So, with that, I'll turn it over to Mike for a few opening comments.
Finally, I will apologize in advance if there are issues with the quality or delays in our audio today, because we are all working remotely due to the winter storms. So, with that, I'll turn it over to Mike for a few opening comments.
Speaker #2: So with that, I'll turn it over to Mike for a few opening remarks.
Speaker #2: comments. All right.
Michael Hsu: All right. Thank you, Chris. 2 years ago, we launched Power and Care to unlock Kimberly-Clark's next chapter of growth, building on our 150-year legacy. Now, since then, we've made tremendous progress and accelerated our momentum across the board. Our execution of Power and Care is driving strong results, even amidst a dynamic external environment. In 2025, we continued to advance our volume plus mix growth model, delivering an 8th consecutive quarter of solid volume plus mix performance in Q4. We gained enterprise weighted share, and we marked a 2nd straight year of industry-leading productivity, with our 4th quarter being the strongest of the year. The energy across our company is palpable. We are introducing consumer-directed, science-based innovation and breakthrough marketing across brands and markets faster than ever before.
Mike Hsu: All right. Thank you, Chris. 2 years ago, we launched Power and Care to unlock Kimberly-Clark's next chapter of growth, building on our 150-year legacy. Now, since then, we've made tremendous progress and accelerated our momentum across the board. Our execution of Power and Care is driving strong results, even amidst a dynamic external environment.
Speaker #3: Thank you, Chris. Two years ago, we launched Powering Care to unlock Kimberly-Clark's next chapter of growth, building on our 150-year legacy.
Speaker #3: Now, since then, we've made tremendous progress and accelerated our momentum across the board. Our execution of Powering Care is driving strong results, even amidst a dynamic external environment.
Speaker #3: In 2025, we continue to advance our volume-plus-mix growth model, delivering an eighth consecutive quarter of solid volume-plus-mix performance in Q4. We gained enterprise-weighted share, and we marked a second straight year of industry-leading productivity, with our fourth quarter being the strongest of the year.
In 2025, we continued to advance our volume plus mix growth model, delivering an 8th consecutive quarter of solid volume plus mix performance in Q4. We gained enterprise weighted share, and we marked a 2nd straight year of industry-leading productivity, with our 4th quarter being the strongest of the year. The energy across our company is palpable. We are introducing consumer-directed, science-based innovation and breakthrough marketing across brands and markets faster than ever before.
Speaker #3: The energy across our company is palpable. We are introducing consumer-directed, science-based innovation and breakthrough marketing across brands and markets faster than ever before. We're exercising cost discipline and deploying our greatest capabilities across the enterprise to optimize our margin structure, and we rewired our organization for growth, including strengthening our bench of exceptional leaders and pivoting our portfolio to higher-growth, higher-margin personal care categories.
Michael Hsu: We're exercising cost discipline and deploying our greatest capabilities across the enterprise to optimize our margin structure. And we've wired our organization for growth, including strengthening our bench of exceptional leaders and pivoting our portfolio to higher growth, higher margin personal care categories. We've hit the ground running in 2026 and are energized by the opportunity ahead. We've built a robust, achievable plan focused on further differentiating our trusted brands and ensuring we have healthy levels of investment across our value chain. We expect pressure on the consumer and a focus on value to persist. We're confident in our strategy and committed to giving our brands the fuel to thrive. Power and Care has put Kimberly-Clark on a virtuous cycle of growth and positioned this great American company for a better future....
We're exercising cost discipline and deploying our greatest capabilities across the enterprise to optimize our margin structure. And we've wired our organization for growth, including strengthening our bench of exceptional leaders and pivoting our portfolio to higher growth, higher margin personal care categories. We've hit the ground running in 2026 and are energized by the opportunity ahead.
Speaker #3: We've hit the ground running in 2026, and our energized by the opportunity ahead. We've built a robust, achievable plan focused on further differentiating our trusted brands, and ensuring we have healthy levels of investment across our value chain.
We've built a robust, achievable plan focused on further differentiating our trusted brands and ensuring we have healthy levels of investment across our value chain. We expect pressure on the consumer and a focus on value to persist. We're confident in our strategy and committed to giving our brands the fuel to thrive. Power and Care has put Kimberly-Clark on a virtuous cycle of growth and positioned this great American company for a better future....
Speaker #3: We expect pressure on the consumer and a focus on value to persist. We're confident in our strategy and committed to giving our brands the fuel to thrive.
Speaker #3: Powering Care has put KIMBERLY CLARK on a virtuous cycle of growth and positioned this great American company for a better future. We have the right foundation and a proven playbook to capitalize on our pending acquisition of Kenvue.
Michael Hsu: We have the right foundation and a proven playbook to capitalize on our pending acquisition of Kenvue. Acquiring Kenvue is a powerful next step in our transformation that will compound our momentum. It will advance our trajectory toward higher growth, higher margin spaces, and create a global health and wellness leader positioned to serve consumers at every stage of life. We're excited to seize the vast opportunity ahead and confident we will create significant value for our consumers, our partners, and our shareholders. So with that, let's open the line for questions.
We have the right foundation and a proven playbook to capitalize on our pending acquisition of Kenvue. Acquiring Kenvue is a powerful next step in our transformation that will compound our momentum. It will advance our trajectory toward higher growth, higher margin spaces, and create a global health and wellness leader positioned to serve consumers at every stage of life. We're excited to seize the vast opportunity ahead and confident we will create significant value for our consumers, our partners, and our shareholders. So with that, let's open the line for questions.
Speaker #3: Acquiring Kenvue is a powerful next step in our transformation that will compound our momentum. It will advance our trajectory toward higher growth, higher margin spaces, and create a global health and wellness leader positioned to serve consumers at every stage of life.
Speaker #3: We're excited to seize the vast opportunity ahead, and confident we will create significant value for our consumers, our partners, and our shareholders. So with that, let's open the line for questions.
Speaker #3: questions. Thank you.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. In the interest of time, we ask that participants limit themselves to one question on today's call. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions. The first question today is coming from Bonnie Herzog from Goldman Sachs. Bonnie, your line is live.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. In the interest of time, we ask that participants limit themselves to one question on today's call. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker #1: At this time, we will be conducting a question-and-answer session. In the interest of time, we ask that participants limit themselves to one question on today's call.
Speaker #1: If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker #1: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker #1: One moment, please, while we pull for questions. And the first question today is coming from Bonnie Herzog from Goldman Sachs. Bonnie,
One moment please, while we pull for questions. The first question today is coming from Bonnie Herzog from Goldman Sachs. Bonnie, your line is live.
Speaker #1: your line is live. All
Speaker #4: Right. Thank you. Good morning. So, I guess I was hoping to hear some color on the state of the consumer, and what you're doing differently in this environment.
[Analyst] (Goldman Sachs): All right, thank you. Good morning. So I guess I was hoping to hear some color on the state of the consumer and what you're doing different in this environment. Mike, I ask because you're growing volumes, whereas this really has been challenging for others. And then how are you thinking about this going forward? And you guided organic sales growth to be in line to ahead of the category in 2026. So hoping you could share, you know, what your expectations are for category growth this year and whether it will accelerate from the 2% growth currently. I guess, essentially, do you need end market, you know, growth to improve to hit your mid-single to high single digit EBIT growth guidance? Thanks.
Bonnie Herzog: All right, thank you. Good morning. So I guess I was hoping to hear some color on the state of the consumer and what you're doing different in this environment. Mike, I ask because you're growing volumes, whereas this really has been challenging for others. And then how are you thinking about this going forward?
Speaker #4: Mike, I ask because you're growing volumes, whereas this really has been challenging for others. And then, how are you thinking about this going forward?
And you guided organic sales growth to be in line to ahead of the category in 2026. So hoping you could share, you know, what your expectations are for category growth this year and whether it will accelerate from the 2% growth currently. I guess, essentially, do you need end market, you know, growth to improve to hit your mid-single to high single digit EBIT growth guidance? Thanks.
Speaker #4: Are you guiding organic sales growth to be in line with or ahead of the category in '26? So, I was hoping you could share what your expectations are for category growth this year, and whether it will accelerate from the 2% growth currently.
Speaker #4: I guess, essentially, do you need end-market growth to improve to hit your mid-single to high-single digit EBIT growth guidance? Thanks.
Speaker #2: Okay. Hey, Bonnie, great question. Thanks for that. I'll open, and I think Russ has a lot more texture that he's raring to inform you all of.
Michael Hsu: Okay. Hey, Bonnie, great question. Thanks, thanks for that. I'll open, and then I think Russ has a lot more texture that he's raring to inform you all of. And then we might even ask Nick, Nelson to cover a little bit about how it affects the outlook. But one, and I think, you know, you—I think you raised the point that, you know, we are growing, and it's a tough environment out there. However, you know, I think the big thing is that maybe two and a half years ago, Bonnie, we did see that pressure in almost all markets was gonna increase on the consumer, and especially in North America, kinda given the state of the middle-class consumer.
Mike Hsu: Okay. Hey, Bonnie, great question. Thanks, thanks for that. I'll open, and then I think Russ has a lot more texture that he's raring to inform you all of. And then we might even ask Nick, Nelson to cover a little bit about how it affects the outlook. But one, and I think, you know, you—I think you raised the point that, you know, we are growing, and it's a tough environment out there.
Speaker #2: And then I might even ask Nick Nelson to cover a little bit about how it affects the outlook. But, one, and I think you raised the point that we are growing and it's a tough environment out there.
Speaker #2: However, I think the big thing is that maybe two, two and a half years ago, Bonnie, we did see that pressure in almost all markets was going to increase on the consumer, and especially in North America.
However, you know, I think the big thing is that maybe two and a half years ago, Bonnie, we did see that pressure in almost all markets was gonna increase on the consumer, and especially in North America, kinda given the state of the middle-class consumer.
Speaker #2: Given the state of the middle-class consumer, what we started to focus on was delivering superior propositions at what we said is every rung of the good, better, best ladder.
Michael Hsu: And so, you know, we started to focus on was delivering superior propositions at what we said is every rung of the good, better, best ladder, right? And so we've worked really hard to do that, and we continue to see ample opportunity to do that and do that better, and also continue to elevate and expand our categories globally. A couple additional comments. You know, we feel consumers remain interested in better performing products, and that's at all price tiers. In this environment, as it's, you know, I think you're pointing out, Bonnie, you know, strong value proposition is the paramount thing. And so we're growing because what we're doing is strengthening our offerings at every rung, and that means we're continuing to bring great innovation at the top end, and then we are rushing that innovation through into our value tiers.
And so, you know, we started to focus on was delivering superior propositions at what we said is every rung of the good, better, best ladder, right? And so we've worked really hard to do that, and we continue to see ample opportunity to do that and do that better, and also continue to elevate and expand our categories globally.
Speaker #2: Right? And so we've worked really hard to do that, and we continue to see ample opportunities to do that—and do that better. And also continue to elevate and expand our categories globally.
A couple additional comments. You know, we feel consumers remain interested in better performing products, and that's at all price tiers. In this environment, as it's, you know, I think you're pointing out, Bonnie, you know, strong value proposition is the paramount thing. And so we're growing because what we're doing is strengthening our offerings at every rung, and that means we're continuing to bring great innovation at the top end, and then we are rushing that innovation through into our value tiers.
Speaker #2: A couple of additional comments. We feel consumers remain interested in better-performing products, and that's at all price tiers. In this environment, as I think you're pointing out, Bonnie, a strong value proposition is the paramount thing.
Speaker #2: And so we're growing because what we're doing is strengthening our offerings at every rung, and that means we're continuing to bring great innovation at the top end.
Speaker #2: And then we are rushing that innovation through into our value tiers, and I think our consumers are really noticing that. We've really worked hard to deliver superiority at a very, very competitive cost.
Michael Hsu: I think our consumers are really noticing that. You know, we've really worked hard to deliver superiority at a very, very competitive cost. So, you know, we see further opportunity to expand our categories, expand penetration, and premiumize over time. And so, you know, we've developed a robust pipeline of innovation that the world hasn't seen yet. You know, I will tell you parenthetically, I'm more excited about our next three years of innovation than what we've done in our past three. And so we're really excited about what the company's been working on. So with that, maybe I'll kick it to Russ, and maybe you can provide a little texture.
I think our consumers are really noticing that. You know, we've really worked hard to deliver superiority at a very, very competitive cost. So, you know, we see further opportunity to expand our categories, expand penetration, and premiumize over time. And so, you know, we've developed a robust pipeline of innovation that the world hasn't seen yet.
Speaker #2: So we see further opportunity to expand our categories, expand penetration, and premiumize over time. And so we've developed a robust pipeline of innovation that the world hasn't seen yet.
You know, I will tell you parenthetically, I'm more excited about our next three years of innovation than what we've done in our past three. And so we're really excited about what the company's been working on. So with that, maybe I'll kick it to Russ, and maybe you can provide a little texture.
Speaker #2: I will tell you, parenthetically, I'm more excited about our next three years' innovation than what we've done in our past three. And so we're really excited about what the company's been working on.
Speaker #2: So with that, maybe I'll kick it to Russ, and maybe you can provide a little—
Speaker #2: So with that, maybe I'll kick it to Russ, and maybe you can provide a little texture. Yeah.
Russell Torres: Yeah. Thanks, Mike. Hi, Bonnie. Yeah, you're right. I don't think we are expecting, as Mike noted, the consumer focus on value to change, you know, anytime soon. And as Mike noted, I really think our mantra has been to meet consumers, you know, where they need us, and that's with a combination of innovation, marketing, and activation. And like other categories, we are seeing consumers demand shift across channels. They're looking for different pack sizes, purchase frequency in some parts of the world, especially internationally and in developing markets, you know, is being impacted a little bit, and that's clearly led to more choppy month-to-month consumption data. So in terms of your question, I think Mike nailed it.
Russ Torres: Yeah. Thanks, Mike. Hi, Bonnie. Yeah, you're right. I don't think we are expecting, as Mike noted, the consumer focus on value to change, you know, anytime soon. And as Mike noted, I really think our mantra has been to meet consumers, you know, where they need us, and that's with a combination of innovation, marketing, and activation.
Speaker #1: Thanks, Mike. Hi, Bonnie. Yeah, you're right. I don't think we are expecting, as Mike noted, the consumer focus on value to change anytime soon.
Speaker #1: And as Mike noted, I really think our mantra has been to meet consumers where they need us. And that's where the combination of innovation, marketing, and activation comes in.
And like other categories, we are seeing consumers demand shift across channels. They're looking for different pack sizes, purchase frequency in some parts of the world, especially internationally and in developing markets, you know, is being impacted a little bit, and that's clearly led to more choppy month-to-month consumption data. So in terms of your question, I think Mike nailed it.
Speaker #1: And like other categories, we are seeing consumers' demand shift across channels. They're looking for different pack sizes and purchase frequency, and some parts of the world, especially internationally and in developing markets, are being impacted a little bit.
Speaker #1: And that's clearly led to kind of more choppy month-to-month consumption data. So, in terms of your question, I think Mike nailed it. I would just add a little bit more texture on it, that we're really focused on serving consumers on every rung.
Russell Torres: You know, I would just add a little bit more texture on it, is that, you know, we're really focused on serving consumers on every rung with a compelling value proposition. I think that's the reason why we're growing volumes right now. We have made a number of targeted price pack adjustments, as well as, you know, paying extra special attention to channel participation and ensuring we have really compelling offerings at the good tier, as well as the better and the best tier. And we've put an extraordinary effort into driving elevated benefits on the trade-up side to maintain that category growth. And, you know, I think, you know, in North America, if you pick that as an example, that's really helped us on the volume side.
You know, I would just add a little bit more texture on it, is that, you know, we're really focused on serving consumers on every rung with a compelling value proposition. I think that's the reason why we're growing volumes right now. We have made a number of targeted price pack adjustments, as well as, you know, paying extra special attention to channel participation and ensuring we have really compelling offerings at the good tier, as well as the better and the best tier.
Speaker #1: With a compelling value proposition, I think that's the reason why we're growing volumes right now. We have made a number of targeted price pack adjustments as well as paying extra special attention to channel participation, and ensuring we have really compelling offerings.
Speaker #1: At the good tier, as well as the better and the best tier, we put an extraordinary effort into driving elevated benefits on the trade-up side to maintain that category growth.
And we've put an extraordinary effort into driving elevated benefits on the trade-up side to maintain that category growth. And, you know, I think, you know, in North America, if you pick that as an example, that's really helped us on the volume side.
Speaker #1: And I think in North America, if you pick that as an example, that's really helped us on the volume side. In Q4, as you saw from our results, our volume mix was up 1.7%.
Russell Torres: You know, in Q4, as you saw from our results, our volume mix was up 1.7%, but on a two-year stack basis in Q4, it was up 3.6%. And then the full year basis in North America, volume mix was up in Q4 2.1%, and on a two-year stack basis, it was up 4.1%. And I agree with Mike, 2026 should probably be one of our best years for innovation, and we're gonna continue executing that strategy, and are optimistic we'll continue to be able to deliver what consumers are looking for.
You know, in Q4, as you saw from our results, our volume mix was up 1.7%, but on a two-year stack basis in Q4, it was up 3.6%. And then the full year basis in North America, volume mix was up in Q4 2.1%, and on a two-year stack basis, it was up 4.1%. And I agree with Mike, 2026 should probably be one of our best years for innovation, and we're gonna continue executing that strategy, and are optimistic we'll continue to be able to deliver what consumers are looking for.
Speaker #1: But on a two-year stack basis in Q4, it was up 3.6%. And then, on a full-year basis in North America, volume mix was up in Q4 2.1%.
Speaker #1: And on a two-year stack basis, it was up 4.1%. And I agree with Mike—'26 should probably be one of our best years for innovation.
Speaker #1: And we're going to continue executing that strategy, and we're optimistic we'll continue to be able to deliver what consumers are looking for.
Speaker #2: Yeah. And then, Bonnie, just to follow up on the final part of your question, I think our '26 kind of implies our category outlook's around 2% globally, plus or minus.
Michael Hsu: ... Yeah, and then Bonnie, just to follow up on your, on the final part of your question. I think our 26 kind of implies, you know, our category outlook's around 2% globally, ±. And you know, there's been a little choppiness around that if you looked at the last 4 quarters. But you know, if you look specifically at our categories, we tend to be more resilient, and demand tends to be a little bit more stable because of the categories that we're in.
Mike Hsu: ... Yeah, and then Bonnie, just to follow up on your, on the final part of your question. I think our 26 kind of implies, you know, our category outlook's around 2% globally, ±. And you know, there's been a little choppiness around that if you looked at the last 4 quarters. But you know, if you look specifically at our categories, we tend to be more resilient, and demand tends to be a little bit more stable because of the categories that we're in.
Speaker #2: And there's been, if you looked at the last four quarters, there's been a little choppiness around that. But if you look specifically at our categories, we tend to be more resilient, and demand tends to be a little bit more stable because of the categories that we're in.
Speaker #2: in. All right.
[Analyst] (RBC Capital Markets): All right. Thank you. I'll pass it on.
Bonnie Herzog: All right. Thank you. I'll pass it on.
Speaker #4: Thank you. I'll pass it
Speaker #4: Thank you. I'll pass it on. Thank you.
Operator: Thank you. The next question will be from Lauren Lieberman from Barclays. Lauren, your line is live.
Operator: Thank you. The next question will be from Lauren Lieberman from Barclays. Lauren, your line is live.
Speaker #3: The next question will be from Lauren Lieberman from Barclays. Lauren, your line is live.
Speaker #4: Thanks so much. Just wanted to follow on some of those thoughts, and particularly hone in on price and mix. In North America, we’ve seen pricing take another step back this quarter after being up in Q3.
[Analyst] (Barclays): Thanks so much. Just wanted to follow on some of those thoughts, and particularly honing in on price and mix. In North America, we've seen pricing took another step back this quarter after being up in Q3, and mix persistently negative. I know you look at vol mix, but, you know, price mix is decelerating, not improving. So just wanted you to comment on that, and 'cause you'd mentioned price investments a couple places in the release. Thanks.
Lauren Lieberman: Thanks so much. Just wanted to follow on some of those thoughts, and particularly honing in on price and mix. In North America, we've seen pricing took another step back this quarter after being up in Q3, and mix persistently negative. I know you look at vol mix, but, you know, price mix is decelerating, not improving. So just wanted you to comment on that, and 'cause you'd mentioned price investments a couple places in the release. Thanks.
Speaker #4: And mix persistently negative. I know you look at volume mix, but price mix is decelerating, not improving. So just wanted to get a comment on that.
Speaker #4: And because you'd mentioned price investments a couple of places in the release. Thanks.
Speaker #1: Do you want me to take that one?
Russell Torres: You want me to take that one, Mike?
Russ Torres: You want me to take that one, Mike?
Speaker #2: Yeah, go ahead, Brian.
Michael Hsu: Yeah, go ahead, Russ.
Mike Hsu: Yeah, go ahead, Russ.
Russell Torres: So, yeah. Hey, Lauren, how you doing? Good, good to talk. I would say, you know, there's really three things going on there on the price mix. You know, the first thing that I would say is, there is a promo dynamic. If you recall, in the third quarter call, we talked about the competitive activity in North America in the second half being, you know, some fairly significant promotional activity. And we, as a result of that, rephased some of our planned activation activity around innovation into the fourth quarter. So you're seeing that come through. And specifically, just to remind you, you know, as Mike said, we're in essential categories.
Russ Torres: So, yeah. Hey, Lauren, how you doing? Good, good to talk. I would say, you know, there's really three things going on there on the price mix. You know, the first thing that I would say is, there is a promo dynamic. If you recall, in the third quarter call, we talked about the competitive activity in North America in the second half being, you know, some fairly significant promotional activity. And we, as a result of that, rephased some of our planned activation activity around innovation into the fourth quarter. So you're seeing that come through.
Speaker #1: So yeah, hey Lauren, how are you doing? Good to talk. I would say there's really three things going on there on the price mix.
Speaker #1: The first thing that I would say is, there was a promo dynamic, if you recall, in the third quarter call. We talked about the competitive activity in North America in the second half being some fairly significant promotional activity.
Speaker #1: And we, as a result of that, re-phased some of our planned activation activity around innovation into the fourth quarter. So you're seeing that come through.
And specifically, just to remind you, you know, as Mike said, we're in essential categories. We don't believe that promo drives incremental consumption, but we will use it as a tactic to drive trial, especially related to innovation that is really sensorial. And, you know, we did have a strong agenda of innovation in 2025, and you probably saw some of that. For example, we did move some of that programming on Snug & Dry, which we have a great innovation.
Speaker #1: And specifically, just to remind you, as Mike said, we're in essential categories. We don't believe that promo drives incremental consumption, but we will use it as a tactic to drive trial, especially related to innovation that is really sensorial.
Russell Torres: We don't believe that promo drives incremental consumption, but we will use it as a tactic to drive trial, especially related to innovation that is really sensorial. And, you know, we did have a strong agenda of innovation in 2025, and you probably saw some of that. For example, we did move some of that programming on Snug & Dry, which we have a great innovation. It's the softest diaper in the value tier. Our new Generation Two Core, which provides, you know, better protection and more comfort. It was named the number one diaper with Good Housekeeping, disposable diaper, great consumer rating. So we wanted to get that in the hands of consumers to drive trial. We had other innovations as well, and we did that in Q4, and those performed relatively well.
Speaker #1: And we did have a strong agenda of innovation in 2025, and you probably saw some of that. For example, we did move some of that programming on Snug & Dry, which we have a great innovation.
Speaker #1: It's the softest diaper in the value tier. Our new Generation 2 core provides better protection and more comfort. It was named the number one diaper by Good Housekeeping for disposable diapers, with great consumer ratings.
It's the softest diaper in the value tier. Our new Generation Two Core, which provides, you know, better protection and more comfort. It was named the number one diaper with Good Housekeeping, disposable diaper, great consumer rating. So we wanted to get that in the hands of consumers to drive trial. We had other innovations as well, and we did that in Q4, and those performed relatively well.
Speaker #1: So we wanted to get that in the hands of consumers to drive trial. We had other innovations as well, and we did that in the fourth quarter.
Speaker #1: And those performed relatively well. I would say just the last thing on the promo dynamic before I move on is our in-market promotional activity for the year remains below the category and 2019 levels.
Russell Torres: I would say, just last thing on the promo dynamic before I move on, is our in-market promotional activity for the year remains below the category and 2019 levels. And again, we expect that to flow with our innovation. The other two dynamics I'll hit briefly. One is club mix, you know, that's just the consumer, you know, moving channels, and that has come through a little bit in our pricing because they're buying larger pack sizes at a lower price per unit. So you see, you know, more volume, but a little bit of a drag on the pricing piece there. And again, that's our philosophy of just serving consumers in the channel that they want to shop in.
I would say, just last thing on the promo dynamic before I move on, is our in-market promotional activity for the year remains below the category and 2019 levels. And again, we expect that to flow with our innovation. The other two dynamics I'll hit briefly. One is club mix, you know, that's just the consumer, you know, moving channels, and that has come through a little bit in our pricing because they're buying larger pack sizes at a lower price per unit.
Speaker #1: And again, we expect that to flow with our innovation. The other two dynamics I'll hit briefly. One is club mix—that's just the consumer moving channels, and that has come through a little bit in our pricing because they're buying larger pack sizes at a lower price per unit.
Speaker #1: So you see more volume, but a little bit of a drag on the pricing piece there. And again, that's our philosophy of just serving consumers in the channel that they want to shop in.
So you see, you know, more volume, but a little bit of a drag on the pricing piece there. And again, that's our philosophy of just serving consumers in the channel that they want to shop in. And then the last thing is, we did talk about several times making strategic investments in pack sizes, you know, and choices to better align our good, better, best pricing value ladders across the channels, especially ahead of some of the innovation we have coming. And we had made some choices to sharpen the competitiveness of our value proposition.
Speaker #1: And then the last thing is, we did talk about several times making strategic investments in pack sizes and choices to better align our good, better, best pricing value ladders across the channels, especially ahead of some of the innovation we have coming.
Russell Torres: And then the last thing is, we did talk about several times making strategic investments in pack sizes, you know, and choices to better align our good, better, best pricing value ladders across the channels, especially ahead of some of the innovation we have coming. And we had made some choices to sharpen the competitiveness of our value proposition. So over the long term, we're gonna stay focused on maintaining P&L's discipline while growing volume and mix profitably, and that will be led by innovation and the focus on category development. And we have a great lineup in 2026 to that end. So that, you know, that's kind of, you know, the direction we're headed and we're excited about it.
Speaker #1: And we had made some choices to sharpen the competitiveness of our value proposition. So over the long term, we're going to stay focused on maintaining P&L discipline while growing volume and mix profitably.
So over the long term, we're gonna stay focused on maintaining P&L's discipline while growing volume and mix profitably, and that will be led by innovation and the focus on category development. And we have a great lineup in 2026 to that end. So that, you know, that's kind of, you know, the direction we're headed and we're excited about it.
Speaker #1: And that will be led by innovation and the focus on category development. And we have a great lineup in '26 to that end. So that's kind of the direction we're headed.
Speaker #1: And we're excited about it.
Speaker #4: Great. Thanks so
[Analyst] (Barclays): Great. Thanks so much.
Lauren Lieberman: Great. Thanks so much.
Speaker #4: much.
Speaker #3: Thank you. The next question will be from Nick Mody from Orbi Sea Capital Markets. Nick, your line is live.
Operator: Thank you. The next question will be from Nik Modi, from RBC Capital Markets. Nik, your line is live.
Operator: Thank you. The next question will be from Nik Modi, from RBC Capital Markets. Nik, your line is live.
Speaker #1: Yeah, thank you. Good morning, everyone. Just a quick clarification—I didn't see anything in the release regarding any updates on closing timing or regulatory filing timing.
[Analyst] (RBC Capital Markets): Yeah, thank you. Good morning, everyone. Just, Mike, a quick clarification. I didn't see anything in the release regarding any updates on closing timing or regulatory filing timing, so if you can provide any clarity on that, that would be helpful. But my main question is really just the state of the US diaper category, especially the dynamics at play at Costco, you know, given Procter is now entering after decades of exclusivity for Huggies. So if you could provide any kind of thoughts on that. Is that kind of embedded in your outlook? You know, how are you going to respond? Et cetera, et cetera. Thank you.
Nik Modi: Yeah, thank you. Good morning, everyone. Just, Mike, a quick clarification. I didn't see anything in the release regarding any updates on closing timing or regulatory filing timing, so if you can provide any clarity on that, that would be helpful. But my main question is really just the state of the US diaper category, especially the dynamics at play at Costco, you know, given Procter is now entering after decades of exclusivity for Huggies. So if you could provide any kind of thoughts on that. Is that kind of embedded in your outlook? You know, how are you going to respond? Et cetera, et cetera. Thank you.
Speaker #1: So if you can provide any clarity on that, that would be helpful. But my main question is really just the state of the U.S. diaper category, especially the dynamics at play at Costco.
Speaker #1: Given Procter is now entering after decades of exclusivity for Huggies, can you provide any thoughts on that? Is that kind of embedded in your outlook?
Speaker #1: How are you going to respond, etc., etc.? Thank you.
Speaker #1: How are you going to respond, etc., etc.? Thank you. Okay.
Michael Hsu: Okay. Morning, Nick. Maybe I'll ask Russ, maybe you can talk about the US diaper category, and then I'll come back, Nick, and answer your questions on the acquisition.
Mike Hsu: Okay. Morning, Nick. Maybe I'll ask Russ, maybe you can talk about the US diaper category, and then I'll come back, Nick, and answer your questions on the acquisition.
Speaker #2: Morning, Nick. Maybe I'll ask Russ, maybe you can talk about the U.S. diaper category, and then I'll come back, Nick, and answer your questions on the acquisition.
Speaker #1: Yeah, sure. Hey Nick, how are you doing? In terms of diapers, again, we're growing by driving innovation and brand building that grows the category, and cascading that to all tiers.
Russell Torres: Yeah, sure. Hey, Nick, how you doing? Yeah, in terms of diapers-
Russ Torres: Yeah, sure. Hey, Nick, how you doing? Yeah, in terms of diapers-
[Analyst] (RBC Capital Markets): Great.
Russell Torres: You know, again, you know, we're growing by driving innovation and brand building that grows the category and cascading that, you know, to all tiers. And that model has worked well for us around the world, you know, in the United States. Before I get to the US, I'll just, you know, hit a couple highlights. You know, around the world in Q4, you know, we grew share in many of our key markets, including China, up 210 basis points, Korea up 30 basis points, Brazil up 50 basis points, Indonesia up 230 basis points. So that strategy that we're executing is working in North America as well. In Q4, we grew share about 100 basis points, and we've grown share in diapers two years in a row.
Nik Modi: Great.
Russ Torres: You know, again, you know, we're growing by driving innovation and brand building that grows the category and cascading that, you know, to all tiers. And that model has worked well for us around the world, you know, in the United States. Before I get to the US, I'll just, you know, hit a couple highlights.
Speaker #1: And that model has worked well for us around the world. In the United States—before I get to the US, I'll just hit a couple of highlights around the world in the fourth quarter.
You know, around the world in Q4, you know, we grew share in many of our key markets, including China, up 210 basis points, Korea up 30 basis points, Brazil up 50 basis points, Indonesia up 230 basis points. So that strategy that we're executing is working in North America as well. In Q4, we grew share about 100 basis points, and we've grown share in diapers two years in a row.
Speaker #1: We grew share in many of our key markets, including China, up 210 basis points; Korea, up 30 basis points; and Brazil, up 50 basis points.
Speaker #1: Indonesia up 230 basis points. So that strategy that we're executing is working in North America as well. In the fourth quarter, we grew share about 100 basis points.
Speaker #1: And we've grown share in diapers two years in a row. But just with respect to the club situation, the way we look at it is, we're really focused on providing consumers with differentiated brand value propositions no matter what channel they're shopping in.
Russell Torres: But with, you know, just with respect to the club situation, you know, the way we look at it is, you know, we're really focused on providing consumers with differentiated brand value propositions no matter what channel they're shopping in. And we're widely available, you know, so is our competition. However, you know, we did see a major club player has moved away from, you know, branded exclusivity in our category. And so we'll see, you know, partial loss of diapers and pull-ups distribution in the North America club channel, and that'll start, you know, in Q1 here. And this is incorporated to your question in our full year expectation of growing, as Nelson mentioned, you know, in line or to better than weighted average category growth.
But with, you know, just with respect to the club situation, you know, the way we look at it is, you know, we're really focused on providing consumers with differentiated brand value propositions no matter what channel they're shopping in. And we're widely available, you know, so is our competition. However, you know, we did see a major club player has moved away from, you know, branded exclusivity in our category.
Speaker #1: And we're widely available. So is our competition. However, we did see a major club player has moved away from branded exclusivity in our category.
Speaker #1: And so we'll see partial loss of diapers and pull-ups distribution in the North America club channel, and that'll start in the first quarter here.
And so we'll see, you know, partial loss of diapers and pull-ups distribution in the North America club channel, and that'll start, you know, in Q1 here. And this is incorporated to your question in our full year expectation of growing, as Nelson mentioned, you know, in line or to better than weighted average category growth.
Speaker #1: And this is incorporated through your question in our full-year expectation of growing. As Nelson mentioned, in line with or better than weighted average category growth.
Speaker #1: So we're focused on continuing to execute the strategy. And there might be some ebbs and flows over time, but we're very confident in the long term we're going to continue to move in the right direction, as our current performance indicates.
Russell Torres: So we're focused on continuing to execute the strategy, and there might be some ebbs and flows over time, but we're very confident in the long term. We're gonna continue to move in the right direction as our current performance indicates.
So we're focused on continuing to execute the strategy, and there might be some ebbs and flows over time, but we're very confident in the long term. We're gonna continue to move in the right direction as our current performance indicates.
Michael Hsu: Okay, thanks, Russ.
Speaker #2: And thanks, Russ. Go ahead, Nelson. Sorry.
Nelson Urdaneta: Okay, thanks, Russ.
Russell Torres: Oh, go ahead, Nelson.
Russ Torres: Oh, go ahead, Nelson.
Michael Hsu: Sorry. Just to clarify for what's built into the forecast, Nick, we, as Russ mentioned, expect this distribution loss to commence in Q1. It is reflected in our full year outlook, and it's a headwind of around 60 basis points for the full year. Okay. And then, Nick, just regarding the Kenvue process. You know, we, the shareholder vote is on the 29th, this Thursday. You know, I will tell you, you know, I expect the vote to reflect the very positive feedback we've heard from our investors. And so through yesterday, pretty good chunk of shareholders have already voted, and it's well in the, you know, in excess of 90% in favor. So we feel good about that.
Nelson Urdaneta: Sorry. Just to clarify for what's built into the forecast, Nick, we, as Russ mentioned, expect this distribution loss to commence in Q1. It is reflected in our full year outlook, and it's a headwind of around 60 basis points for the full year.
Speaker #1: Just to clarify for what's built into the forecast, Nick, as Russ mentioned, we expect this distribution loss to commence in Q1. It is reflected in our full-year outlook.
Speaker #1: And it's a headwind of around 60 basis points for the full year.
Speaker #1: year. Okay.
Mike Hsu: Okay. And then, Nick, just regarding the Kenvue process. You know, we, the shareholder vote is on the 29th, this Thursday. You know, I will tell you, you know, I expect the vote to reflect the very positive feedback we've heard from our investors. And so through yesterday, pretty good chunk of shareholders have already voted, and it's well in the, you know, in excess of 90% in favor. So we feel good about that.
Speaker #2: And then, Nick, just with regard to the Kenview process, the shareholder vote is on the 29th, this Thursday. I will tell you, I expect the vote to reflect the very positive feedback we've heard from our investors, and so, through yesterday.
Speaker #2: A pretty good chunk of shareholders have already voted, and it's well in excess of 90% in favor. So we feel good about that.
Speaker #2: And then, with regard to timing of close, we still expect somewhere in the back half. I think the regulatory process is on track and consistent with our initial expectations.
Michael Hsu: And then with regard to timing of close, you know, we still expect, you know, somewhere in the back half. I think the regulatory process is on track and consistent with our initial expectations. And maybe you didn't ask this part, but I will tell you, our IFP transaction remains on track for a mid-year closing this year, still subject to regulatory approvals. And then we worked closely with Kenvue to file shortly after announcing the transaction, submitted a US antitrust filing, and will complete filing all applicable international jurisdictions by early February. And so again, I think we're on track to close in the second half of this year.
And then with regard to timing of close, you know, we still expect, you know, somewhere in the back half. I think the regulatory process is on track and consistent with our initial expectations. And maybe you didn't ask this part, but I will tell you, our IFP transaction remains on track for a mid-year closing this year, still subject to regulatory approvals.
Speaker #2: And maybe you didn't ask this part, but I will tell you: our IFP transaction remains on track for a mid-year closing this year, still subject to regulatory approvals.
Speaker #2: And then we worked closely with Kenview to file shortly after announcing the transaction, submitted the U.S. antitrust filing, and will complete filing in all applicable international jurisdictions by early February.
And then we worked closely with Kenvue to file shortly after announcing the transaction, submitted a US antitrust filing, and will complete filing all applicable international jurisdictions by early February. And so again, I think we're on track to close in the second half of this year.
Speaker #2: And so, again, I think we're on track to close in the second half of this.
Speaker #2: year. Excellent.
Christopher Jakubik: Excellent. Thank you. I'll pass it on.
Nik Modi: Excellent. Thank you. I'll pass it on.
Speaker #1: Thank you. I'll pass it on.
Speaker #2: All right. Thank you,
Michael Hsu: All right. Thank you, Nick.
Mike Hsu: All right. Thank you, Nick.
Speaker #3: Thank you. The next question will be from Steve Powers from Deutsche Bank. Steve, your line is
Speaker #3: Thank you. The next question will be from Steve Powers from Deutsche Bank. Steve, your line is live. Great.
Nelson Urdaneta: Thank you. The next question will be from Steve Powers from Deutsche Bank. Steve, your line is live.
Operator: Thank you. The next question will be from Steve Powers from Deutsche Bank. Steve, your line is live.
[Analyst] (Deutsche Bank): Great. Good morning, everybody. Thank you. Maybe just to round out the top line conversation a bit, just maybe a little bit more precision around how you expect the overall 2% category growth to shake out North America versus rest of world. And I guess in light of the Q4 dip that you noted and the overall choppiness we've seen, do you see that 2% backdrop existing pretty steadily in 2026, I guess, inclusive of the Q1, or will it-- are you assuming that it takes more time to ramp? That'd be helpful. And if I could, I know I'm supposed to have one question, but I'm gonna try to get two.
Steve Powers: Great. Good morning, everybody. Thank you. Maybe just to round out the top line conversation a bit, just maybe a little bit more precision around how you expect the overall 2% category growth to shake out North America versus rest of world. And I guess in light of the Q4 dip that you noted and the overall choppiness we've seen, do you see that 2% backdrop existing pretty steadily in 2026, I guess, inclusive of the Q1, or will it-- are you assuming that it takes more time to ramp? That'd be helpful. And if I could, I know I'm supposed to have one question, but I'm gonna try to get two.
Speaker #4: Good morning, everybody. Thank you. Maybe just to round out the top-line conversation a bit, just maybe a little bit more precision around how you expect the overall 2% category growth to shake out—North America versus rest of world.
Speaker #4: And I guess, in light of the Q4 dip that you noted, and the overall choppiness we've seen, do you see that 2% backdrop existing pretty steadily in '26, I guess inclusive of the first quarter, or are you assuming that it takes more time to ramp?
Speaker #4: That'd be helpful. And if I could, I know I'm supposed to have one question, but I'm going to try to get two. Nelson, in the prepared remarks, you talked about visibility and achieving that 40% future adjusted gross margin before the end of the decade.
[Analyst] (Deutsche Bank): Nelson, you know, in the prepared remarks, you talked about visibility and achieving that, you know, 40% future adjusted gross margin before the end of the decade. I'm assuming that's, you know, that target existed before Kenvue, so it's independent of Kenvue contributions. I guess, maybe just an update on how you're seeing the primary drivers shaking out there, and then just how much progress roundabout you think you might be able to make in 2026. Thanks very much.
Nelson, you know, in the prepared remarks, you talked about visibility and achieving that, you know, 40% future adjusted gross margin before the end of the decade. I'm assuming that's, you know, that target existed before Kenvue, so it's independent of Kenvue contributions. I guess, maybe just an update on how you're seeing the primary drivers shaking out there, and then just how much progress roundabout you think you might be able to make in 2026. Thanks very much.
Speaker #4: I'm assuming that target existed before Kenview, so it's independent of Kenview's contributions. I guess maybe just an update on how you're seeing the primary drivers shaking out there, and then just how much progress, roughly, you think it might be able to make in '26.
Speaker #4: Thanks very
Speaker #4: much. Okay.
Michael Hsu: Okay. Thanks, Steve. Hey, let me just open with maybe just an overall comment on the sales outlook, you know, and then, and then, Nelson, kind of will give you more, a little more texture on the pacing, and then we can hit the margin thing, Steve. But one, I just wanted to kind of emphasize that our volume momentum, and I think Bonnie noted it, that, you know, the volumes were, in our minds, you know, performing well. The volume momentum, really, this year in twenty- or last year in 25, really reflects, I think, the compelling offering that we have. And, and, you know, as I mentioned earlier, we're even more bullish on our innovation and marketing initiatives this year. And so, you know, I think, I think it...
Mike Hsu: Okay. Thanks, Steve. Hey, let me just open with maybe just an overall comment on the sales outlook, you know, and then, and then, Nelson, kind of will give you more, a little more texture on the pacing, and then we can hit the margin thing, Steve.
Speaker #2: Thanks, Steve. Hey, let me just open with maybe just an overall comment on the sales outlook. And then Nelson will give you a little more texture on the pace, and then we can hit the margin thing, Steve.
Speaker #2: But one, I just wanted to kind of emphasize that our volume momentum—and I think Bonnie noted that the volumes were, in our minds, performing well.
But one, I just wanted to kind of emphasize that our volume momentum, and I think Bonnie noted it, that, you know, the volumes were, in our minds, you know, performing well. The volume momentum, really, this year in twenty- or last year in 25, really reflects, I think, the compelling offering that we have. And, and, you know, as I mentioned earlier, we're even more bullish on our innovation and marketing initiatives this year. And so, you know, I think, I think it...
Speaker #2: The volume momentum, really this year in ’20 or last year in ’25, really reflects, I think, the compelling offering that we have. And as I mentioned earlier, we’re even more bullish on our innovation and marketing initiatives this year.
Speaker #2: And so, I think our focus on strengthening the value propositions at every tier has been very, very important. We have a very strong pipeline coming this year.
Michael Hsu: You know, our focus on strengthening the value propositions at every tier has been very, very important. You know, we have a very strong pipeline coming this year, and so we expect a meaningful step up as we get through the year to support our, our new launches. And so we feel very good about the plan for this year. But I'll, I'll let Nelson, you may wanna come in a little bit more on the pacing.
You know, our focus on strengthening the value propositions at every tier has been very, very important. You know, we have a very strong pipeline coming this year, and so we expect a meaningful step up as we get through the year to support our, our new launches. And so we feel very good about the plan for this year. But I'll, I'll let Nelson, you may wanna come in a little bit more on the pacing.
Speaker #2: And so, we expect a meaningful step up as we get through the year to support our new launches. And so, we feel very good about the plan for this year.
Speaker #2: But I'll let Nelson—you may want to comment a little bit more on the pacing.
Speaker #5: Sure, Mike. So, a few things, Steve, and I'll unpack a little bit of Q4. But to start with, for 2026—as Mike mentioned in his prepared remarks—I mean, we have a very strong, and I'd say the strongest, pipeline of innovation and activation programs that we've had in quite a few years, across all of our markets.
Nelson Urdaneta: Sure, Mike. So, a few things, Steve, and I'll unpack a little bit Q4. But to start with, you know, for 2026, as Mike mentioned in his prepared remarks, I mean, we have a very strong and I'd say, you know, the strongest pipeline of innovation and activation programs that we've had in quite a few years, across all of our markets. And we are, our plan is to continue to build the momentum on volume plus mix-led growth that we saw play out in 2024, with an acceleration in 2025. Now, as you rightfully mentioned, for Q4 2025, on the surface, weighted global average category growth dropped to around 0.6%.
Nelson Urdaneta: Sure, Mike. So, a few things, Steve, and I'll unpack a little bit Q4. But to start with, you know, for 2026, as Mike mentioned in his prepared remarks, I mean, we have a very strong and I'd say, you know, the strongest pipeline of innovation and activation programs that we've had in quite a few years, across all of our markets. And we are, our plan is to continue to build the momentum on volume plus mix-led growth that we saw play out in 2024, with an acceleration in 2025. Now, as you rightfully mentioned, for Q4 2025, on the surface, weighted global average category growth dropped to around 0.6%.
Speaker #5: And our plan is to continue to build the momentum on volume plus mix-led growth that we saw play out in 2024, with an acceleration in 2025.
Speaker #5: Now, as you rightfully mentioned, for the fourth quarter of 2025, on the surface, weighted global average category growth dropped to around 0.6%. And that compares to about 2% that we were staring at right around between Q1 and Q3 of last year.
Nelson Urdaneta: And that compares to about 2%, that we were staring at right around between Q1 and Q3 of last year. And there were a few discrete factors that weighed on this drop, particularly in North America. And as you know, we had the impact in 2024 of Hurricane Helene, the port strikes, panic-related buying, and to a lesser extent, in 2025, there was a little bit of pantry loading in North America diapers in Q3 of 2025. So that all kind of played out into the weighted average growth of 0.6% for the category in the last quarter.... For the full year, as I mentioned, category grew weighted right around 2%, and our categories have remained resilient.
And that compares to about 2%, that we were staring at right around between Q1 and Q3 of last year. And there were a few discrete factors that weighed on this drop, particularly in North America. And as you know, we had the impact in 2024 of Hurricane Helene, the port strikes, panic-related buying, and to a lesser extent, in 2025, there was a little bit of pantry loading in North America diapers in Q3 of 2025. So that all kind of played out into the weighted average growth of 0.6% for the category in the last quarter....
Speaker #5: And there were a few discrete factors that weighed on this drop, particularly in North America. And as you know, we have the impact in '24 of Hurricane Helene, the port strikes, panic-related buying, and to a lesser extent in 2025, there was a little bit of pantry loading in North America diapers in Q3 of '25.
Speaker #5: …played out into the weighted, so that all kind of average growth of 0.6% for the category in the last quarter. For the full year, as I mentioned, the category grew weighted right around 2%.
For the full year, as I mentioned, category grew weighted right around 2%, and our categories have remained resilient. As we think about the last four weeks data that we've got, we're hovering around that 2%. So we think that a good starting point for weighted average category the category growth for the start of the year is around that level.
Speaker #5: And our categories have remained resilient. As we think about the last four weeks, data that we've got, we're hovering around that 2%. So, we think that a good starting point for weighted average category growth for the start of the year is around that level.
Nelson Urdaneta: As we think about the last four weeks data that we've got, we're hovering around that 2%. So we think that a good starting point for weighted average category the category growth for the start of the year is around that level. We are maintaining our disciplined approach to growing the categories and the brands through the innovation, the differentiation, and we expect both North America and our international personal care business to grow in line or ahead of the categories for the full year. In terms of net sales, we expect both the first half and the second half to be roughly 50/50, so pretty even.
We are maintaining our disciplined approach to growing the categories and the brands through the innovation, the differentiation, and we expect both North America and our international personal care business to grow in line or ahead of the categories for the full year. In terms of net sales, we expect both the first half and the second half to be roughly 50/50, so pretty even.
Speaker #5: We are maintaining our disciplined approach to growing the categories and the brands through innovation and differentiation, and we expect both North America and our international personal care business to grow in line with or ahead of the categories for the full year.
Speaker #5: In terms of net sales, we expect both the first half and the second half to be roughly 50/50, so pretty even. But when you look at the growth in terms of quarterly pacing, we are planning for the innovation and the brand support to ramp up as we progress through the first quarter and then into Q2 and the balance of the year.
Nelson Urdaneta: But when you look at the growth in terms of quarterly pacing, we are planning, you know, for the innovation and the brand support to ramp up as we progress through the first quarter and then into Q2 and the balance of the year. So I would expect, as we built our outlook, to see organic growth to accelerate in the back half versus the first half of the year. As it relates to the visibility of achieving the 40% before the end of the decade and, you know, the drivers and the progress, a couple of things. I mean, as we've stated, margin progression is not gonna be linear quarterly or year-on-year. However, we've made very strong progress over the last two years.
But when you look at the growth in terms of quarterly pacing, we are planning, you know, for the innovation and the brand support to ramp up as we progress through the first quarter and then into Q2 and the balance of the year. So I would expect, as we built our outlook, to see organic growth to accelerate in the back half versus the first half of the year.
Speaker #5: So I would expect, as we build our outlook, to see organic growth accelerate in the back half versus the first half of the year.
Speaker #5: As it relates to the visibility of achieving the 40% before the end of the decade, and the drivers and the progress, a couple of things.
As it relates to the visibility of achieving the 40% before the end of the decade and, you know, the drivers and the progress, a couple of things. I mean, as we've stated, margin progression is not gonna be linear quarterly or year-on-year. However, we've made very strong progress over the last two years.
Speaker #5: I mean, as we've stated, margin progression is not going to be linear, quarterly or year on year. However, we've made very strong progress over the last two years.
Speaker #5: We took a little bit of a step back on gross margin in 2025, and that partly was impacted by, one, the inflationary elements that we were dealing with.
Nelson Urdaneta: We took a little bit of a step back on gross margin in 2025, and that partly was impacted by, one, the inflationary elements that we were dealing with. As a reminder, we had around $200 million of input costs that we dealt with last year, and that included the headwinds which were unexpected, related to tariffs. As we go into this year, though, we're not expecting that. I mean, we're expecting costs actually to be largely flat. So that's one. Secondly, we are expecting to deliver very strong productivity in the year. You know, another year that'll hover around 6%, building on what we achieved in 2024 and 2025.
We took a little bit of a step back on gross margin in 2025, and that partly was impacted by, one, the inflationary elements that we were dealing with. As a reminder, we had around $200 million of input costs that we dealt with last year, and that included the headwinds which were unexpected, related to tariffs. As we go into this year, though, we're not expecting that. I mean, we're expecting costs actually to be largely flat. So that's one. Secondly, we are expecting to deliver very strong productivity in the year. You know, another year that'll hover around 6%, building on what we achieved in 2024 and 2025.
Speaker #5: As a reminder, we had around $200 million of input costs that we dealt with last year. And that included the headwinds, which were unexpected, related to tariffs.
Speaker #5: As we go into this year, though, we're not expecting that. I mean, what we're expecting is costs to actually be largely flat. So that's one.
Speaker #5: Secondly, we are expecting to deliver very strong productivity in the year. Another year that'll hover around 6%, building on what we achieved in 2024 and 2025.
Speaker #5: So, all in, we expect to expand margins—both gross and operating profit margins—in the year. In 2026, putting us well on pace to achieve our objectives of at least 40% before the end of the decade for gross margin, and at least 18% to 20% in operating profit before 2030.
Nelson Urdaneta: So all in, we expect to expand margins, both gross and operating profit margins, in the year, in 2026, putting us well on pace to achieve our objectives of at least 40% before the end of the decade for gross margin and at least 18% to 20% in operating profit before 2030. So well on pace to deliver that, and again, that excludes, any, you know, any favorability or impact as we carry out the integration of Kenvue. Steve?
So all in, we expect to expand margins, both gross and operating profit margins, in the year, in 2026, putting us well on pace to achieve our objectives of at least 40% before the end of the decade for gross margin and at least 18% to 20% in operating profit before 2030. So well on pace to deliver that, and again, that excludes, any, you know, any favorability or impact as we carry out the integration of Kenvue. Steve?
Speaker #5: So, well on pace to deliver that. And again, that excludes any favorability or impact as we carry out the integration at Kenvue.
Speaker #5: Steve. Perfect.
[Analyst] (Deutsche Bank): Perfect. Thank you both. Very, very clear. Appreciate it.
Steve Powers: Perfect. Thank you both. Very, very clear. Appreciate it.
Speaker #1: Thank you both, very, very clear. Appreciate it.
Speaker #6: Thank you. The next question will be from Chris Kerry from Wells Fargo Securities. Chris, your line is open.
Operator: Thank you. The next question will be from Chris Carey from Wells Fargo Securities. Chris, your line is live.
Operator: Thank you. The next question will be from Chris Carey from Wells Fargo Securities. Chris, your line is live.
Speaker #6: live.
Christopher Carey: Hi, everybody.
Chris Carey: Hi, everybody.
Speaker #2: Hey, Hi, everybody.
Nelson Urdaneta: Hey, Chris.
Nelson Urdaneta: Hey, Chris.
Speaker #2: Chris. Hope you're
Christopher Carey: Hope you're well. You gave some information just about the model from 2026 kind of through 2028, you know, with phasing and, you know, obviously implied in there some medium-term growth expectations as well. You also established some of these expectations in the S-4, and can you just help reconcile or clarify whether, you know, there's been any evolution in the expectations, you know, as of the S-4 relative to, you know, where we are today?
Chris Carey: Hope you're well. You gave some information just about the model from 2026 kind of through 2028, you know, with phasing and, you know, obviously implied in there some medium-term growth expectations as well. You also established some of these expectations in the S-4, and can you just help reconcile or clarify whether, you know, there's been any evolution in the expectations, you know, as of the S-4 relative to, you know, where we are today?
Speaker #7: Well, you gave some information just about the model from 2026 kind of through 2028, with phasing, and obviously implied in there is some medium-term growth expectations as well.
Speaker #7: You also established some of these expectations in the S4. And can you just help reconcile or clarify whether there's been any evolution in the expectations as of the S4 relative to where we are today?
Speaker #7: And maybe, just because so much of this medium-term KEGR is anchored to an acceleration in 2028, just help us understand the visibility that you have and the confidence that you have that you can achieve those outcomes a few years from now.
Christopher Carey: And maybe just because so much of this, you know, medium-term CAGR, you know, is anchored to an acceleration in 2028, just help us, you know, understand the visibility that you have and the confidence that you have that you can achieve those outcomes in a few years from now. Thank you.
And maybe just because so much of this, you know, medium-term CAGR, you know, is anchored to an acceleration in 2028, just help us, you know, understand the visibility that you have and the confidence that you have that you can achieve those outcomes in a few years from now. Thank you.
Speaker #7: Thank
Speaker #7: you. Sure.
Nelson Urdaneta: Sure. So from a modeling standpoint, let me walk you through what we had in the S-4 and what we have for 2026, and to your point, our visibility and confidence in getting to, you know, our ambitions before the end of the decade. Firstly, I mean, a couple of things. We've built into the outlook for this year the momentum that we've got based on the innovation and all the activation plans that we've been building on through 2025 and what we have in place as we commence this year. There are two factors that are coming into the picture as we speak for the outlook for the year, and they've come up in the past couple of months.
Nelson Urdaneta: Sure. So from a modeling standpoint, let me walk you through what we had in the S-4 and what we have for 2026, and to your point, our visibility and confidence in getting to, you know, our ambitions before the end of the decade. Firstly, I mean, a couple of things. We've built into the outlook for this year the momentum that we've got based on the innovation and all the activation plans that we've been building on through 2025 and what we have in place as we commence this year.
Speaker #2: So, from a modeling standpoint, let me walk you through what we had in the S4 and what we have for 2026. And to your point, our visibility and confidence in getting to our ambitions before the end of the decade.
Speaker #2: So, firstly, I mean, a couple of things. We've built into the outlook for this year the momentum that we've got, based on the innovation and all the activation plans that we've been building on through 2025, and what we have in place as we commence this year.
There are two factors that are coming into the picture as we speak for the outlook for the year, and they've come up in the past couple of months. The first one is we've had a bit of softer than anticipated fourth quarter in the demand in North America and enterprise markets, and this resulted in a lower base of volumes and EBITDA for 2025, and that's reflected in the outlook. The second bit is really around the partial loss of the diapers and training pants distribution in the North America club channel that we just talked about, both Russ and myself, which we are not able to fully offset in 2026.
Speaker #2: There are two factors coming into the picture as we speak for the outlook for the year, and they've come up in the past couple of months.
Speaker #2: The first one is, we've had a bit of softer-than-anticipated fourth quarter in the demand in North America and enterprise markets. And this resulted in a lower base of volumes and EBITDA for 2025.
Nelson Urdaneta: The first one is we've had a bit of softer than anticipated fourth quarter in the demand in North America and enterprise markets, and this resulted in a lower base of volumes and EBITDA for 2025, and that's reflected in the outlook. The second bit is really around the partial loss of the diapers and training pants distribution in the North America club channel that we just talked about, both Russ and myself, which we are not able to fully offset in 2026. As I mentioned, that'll be a headwind of around 60 basis points of growth on the year. That is reflected in our outlook, and that, of course, will be a difference that you would see versus what we would have had in the S-4.
Speaker #2: And that's reflected in the outlook. The second bit is really around the partial loss of the diapers and training pants distribution in the North America club channel.
Speaker #2: That we just talked about, both Russ and myself, which we are not able to fully offset in 2026. And, as I mentioned, that'll be a headwind of around 60 basis points of growth on the year.
As I mentioned, that'll be a headwind of around 60 basis points of growth on the year. That is reflected in our outlook, and that, of course, will be a difference that you would see versus what we would have had in the S-4. That said, our ongoing business is well positioned to deliver results, consistent with the long-term algorithm that we laid out in March of 2024, and these two factors are reflected in the outlook. On the top line, we, based on all the innovation plans that we have, the commercial plans, we expect to deliver growth that's at or above global weighted average category growth globally.
Speaker #2: That is reflected in our outlook. And that, of course, will be a difference that you would see versus what we would have had in the S4.
Speaker #2: That said, our ongoing business is well positioned to deliver results consistent with the long-term algorithm that we laid out in March of 2024. And these two factors are reflected in the outlook.
Nelson Urdaneta: That said, our ongoing business is well positioned to deliver results, consistent with the long-term algorithm that we laid out in March of 2024, and these two factors are reflected in the outlook. On the top line, we, based on all the innovation plans that we have, the commercial plans, we expect to deliver growth that's at or above global weighted average category growth globally. We are aiming for operating profit growth that's at the higher end of our mid to high single digit range.
Speaker #2: On the top line, based on all the innovation plans that we have, the commercial plans, we expect to deliver growth that's at or above global weighted average category growth globally.
We are aiming for operating profit growth that's at the higher end of our mid to high single digit range. And, you know, as we support a significant step up in new product activation across key markets, in another year of gross productivity, that will approach 6% of cost of goods sold, and we will maintain, you know, our discipline on SG&A savings, that you've seen flow through in the last couple of years, through our Power and Care transformation.
Speaker #2: We are aiming for operating profit growth that's at the higher end of our mid- to high-single-digit range. And as we support a significant step-up in new product activation across key markets, in another year of gross productivity that'll approach 6% of cost of goods sold, we will maintain our discipline on SG&A savings that you've seen flow through in the last couple of years.
Nelson Urdaneta: And, you know, as we support a significant step up in new product activation across key markets, in another year of gross productivity, that will approach 6% of cost of goods sold, and we will maintain, you know, our discipline on SG&A savings, that you've seen flow through in the last couple of years, through our Power and Care transformation. If you look at Adjusted EPS, you know, we expect to be in line with 2025 levels on a constant currency basis, Chris, and, you know, this will reflect two things.
Speaker #2: Through our Power and Care transformation, if you look at adjusted EPS, we expect to be in line with 2025 levels on a constant currency basis.
If you look at Adjusted EPS, you know, we expect to be in line with 2025 levels on a constant currency basis, Chris, and, you know, this will reflect two things. One, the underlying growth, which will be consistent with our long-term algorithm, but there will be an offset, and that's because of the reduction in income from discontinued operations, which we expect to be roughly half of what we saw in 2025 levels, with a mid-year projected close of the IFP transaction.
Speaker #2: Chris, and this will reflect two things. One, the underlying growth, which will be consistent with our long-term algorithm. But there will be an offset.
Nelson Urdaneta: One, the underlying growth, which will be consistent with our long-term algorithm, but there will be an offset, and that's because of the reduction in income from discontinued operations, which we expect to be roughly half of what we saw in 2025 levels, with a mid-year projected close of the IFP transaction.
Speaker #2: And that's because of the reduction in income from discontinued operations, which we expect to be roughly half of what we saw in 2025 levels, with a mid-year projected close of the IFP
Speaker #2: Transaction. Got it. And then, Chris, I think you may not have asked this specifically, but I would say from the Kenvue perspective, I'll tell you, and we've been getting knee-deep into the integration management process.
Michael Hsu: Got it. And then, Chris, you know, I think, you know, you may not have asked this specifically, but I would say from the Kenvue perspective, you know, I'll tell you, you know, and we've been getting knee-deep into the integration management process. You know, I would tell you, we haven't seen anything that would change our view on the potential of this combination. You know, Kenvue's, they're gonna be set to report the results on their usual timing, I think, which is early to mid-February. And then, you know, if you looked at the S-4 pretty hard, we did take a fairly or a somewhat more conservative view of their outlook and near midterm financial profile. You know, we plan to make pretty good investments into their brands and their portfolio and capabilities.
Mike Hsu: Got it. And then, Chris, you know, I think, you know, you may not have asked this specifically, but I would say from the Kenvue perspective, you know, I'll tell you, you know, and we've been getting knee-deep into the integration management process. You know, I would tell you, we haven't seen anything that would change our view on the potential of this combination. You know, Kenvue's, they're gonna be set to report the results on their usual timing, I think, which is early to mid-February.
Speaker #2: I would tell you we haven't seen anything that would change our view on the potential of this combination. Kenvue, they're going to be set to report the results on their usual timing, I think, which is early to mid-February.
Speaker #2: And then, if you looked at the S4 pretty hard, we did take a fairly—or a somewhat—more conservative view of their outlook near mid-term financial profile.
And then, you know, if you looked at the S-4 pretty hard, we did take a fairly or a somewhat more conservative view of their outlook and near midterm financial profile. You know, we plan to make pretty good investments into their brands and their portfolio and capabilities.We still see, you know, a generational value creation opportunity by putting these two companies together. You know, what our focus is on making sure that both companies have, you know, great earnings capacity over the long term.
Speaker #2: We plan to make pretty good investments into their brands and their portfolio and capabilities. And so we still see generational value creation opportunity by putting these two companies together.
Michael Hsu: We still see, you know, a generational value creation opportunity by putting these two companies together. You know, what our focus is on making sure that both companies have, you know, great earnings capacity over the long term.
Speaker #2: What our focus is on making sure that both companies have great earnings capacity over the long term.
Speaker #3: Okay. Thank you
Nelson Urdaneta: Okay.
Nelson Urdaneta: Okay.
Christopher Carey: Thank you both for-
Chris Carey: Thank you both for-
Nelson Urdaneta: Just to close-
Nelson Urdaneta: Just to close-
Christopher Carey: Yeah. Yep, go. Keep, keep going.
Chris Carey: Yeah. Yep, go. Keep, keep going.
Speaker #7: Yep. Keep going.
Nelson Urdaneta: Yeah, you have the question on the visibility? Yeah, you have the question on the visibility, and, and I'll reiterate-
Nelson Urdaneta: Yeah, you have the question on the visibility? Yeah, you have the question on the visibility, and, and I'll reiterate-
Speaker #2: Yeah, I both have a question on the visibility. Yeah, you had the question on the visibility, and I'll reiterate that we have strong visibility into our plans on the productivity front to achieve the margin expansion and fund the brand investments that we have for the following years.
Christopher Carey: Yeah
Chris Carey: Yeah
Nelson Urdaneta: ... that we have strong visibility into our plans on the productivity front, to achieve the margin expansion and fund the brand investments that we have for the following years, as well as on the top line, you know, our ability to grow at or ahead of the categories, largely driven by the very strong innovation pipeline that we've got for the next few years, as well as, you know, our executional plans across the globe.
Nelson Urdaneta: ... that we have strong visibility into our plans on the productivity front, to achieve the margin expansion and fund the brand investments that we have for the following years, as well as on the top line, you know, our ability to grow at or ahead of the categories, largely driven by the very strong innovation pipeline that we've got for the next few years, as well as, you know, our executional plans across the globe.
Speaker #2: As well as on the top line, our ability to grow at or ahead of the categories is largely driven by the very strong innovation pipeline that we've got for the next few years, as well as our executional plans across the globe.
Speaker #3: Okay. Thank you
Christopher Carey: Okay. Thank you both.
Chris Carey: Okay. Thank you both.
Speaker #3: both. All
Speaker #2: right. Thanks, Chris.
Michael Hsu: All right. Thanks, Chris.
Mike Hsu: All right. Thanks, Chris.
Speaker #8: Thank
Speaker #8: You. The next question will be from Mike Lavery from Piper Sandler. Mike, your line is live.
Operator: Thank you. The next question will be from Mike Lavery from Piper Sandler. Mike, your line is live.
Operator: Thank you. The next question will be from Mike Lavery from Piper Sandler. Mike, your line is live.
[Analyst] (Piper Sandler): Thank you. Good morning. I just wanna follow up a little bit, I guess, on Steve's bonus question on the, on the margins. Just would love to understand, you, you called out the significant reinvestment that you're expecting post deal. Just maybe how... You know, you said, of course, that, that it's not linear, but maybe, maybe how bumpy does it get? And, and we know some of the synergy pacing and how that plays out, but, it, you know, kind of just maybe how much more can you unpack the path to, to 40% gross margins and, and 18% EBIT?
Speaker #4: Thank you. Good morning. I just want to follow up a little bit, I guess, on Steve's bonus question on the margins. Just would love to understand.
Mike Lavery: Thank you. Good morning. I just wanna follow up a little bit, I guess, on Steve's bonus question on the, on the margins. Just would love to understand, you, you called out the significant reinvestment that you're expecting post deal. Just maybe how... You know, you said, of course, that, that it's not linear, but maybe, maybe how bumpy does it get? And, and we know some of the synergy pacing and how that plays out, but, it, you know, kind of just maybe how much more can you unpack the path to, to 40% gross margins and, and 18% EBIT?
Speaker #4: You called out the significant reinvestment that you're expecting post-deal. Just maybe how you said, of course, that it's not linear, but maybe how bumpy does it get?
Speaker #4: And we know some of the synergy pacing and how that plays out, can you unpack the path but kind of just maybe how much more to 40% gross margins and 18% EBIT?
Speaker #2: Yeah. Well, hey, Michael, thanks for the question. Just a comment—I would say, and I'm presuming you're talking about kind of our standalone on that, our path to 40.
Michael Hsu: Yeah, well, hey, Michael, thanks for the question. Just to comment, you know, I would say, and I'm presuming you're talking about, you know, kind of our standalone, you know, on that, our path to 40. You know, I think we're overall, we feel like we're making strong progress. We have good, very good visibility into our path to the 40% and 18% to 20% operating ROS aspiration by 2030. In fact, I think we're probably pacing slightly ahead of what we originally planned. Just to confirm or reiterate, Michael, you know, these margin targets are milestones, not a destination. And so, you know, we expect to kind of, you know, exceed that when we can.
Mike Hsu: Yeah, well, hey, Michael, thanks for the question. Just to comment, you know, I would say, and I'm presuming you're talking about, you know, kind of our standalone, you know, on that, our path to 40. You know, I think we're overall, we feel like we're making strong progress. We have good, very good visibility into our path to the 40% and 18% to 20% operating ROS aspiration by 2030. In fact, I think we're probably pacing slightly ahead of what we originally planned.
Speaker #2: I think we're overall, we feel like we're making strong progress. We have good, very good visibility into our path to the 40% and 18 to 20 percent OPROS aspiration by 2030.
Speaker #2: In fact, I think we're probably pacing slightly ahead of what we originally planned. Just to confirm or reiterate, Michael, these margin targets are milestones not a destination.
Just to confirm or reiterate, Michael, you know, these margin targets are milestones, not a destination. And so, you know, we expect to kind of, you know, exceed that when we can. And then, you know, you'll note that the IFP transaction does create a one-time impact and a, you know, and a better business for both businesses longer term, you know, and we'll update you on that as we get closer to close. But, you know, I, again, I think, you know, we feel very good about our productivity delivery.
Speaker #2: And so we expect to kind of exceed that when we can. And then you'll note that the IFP transaction does create a one-time impact and a better business for both businesses longer term.
Michael Hsu: And then, you know, you'll note that the IFP transaction does create a one-time impact and a, you know, and a better business for both businesses longer term, you know, and we'll update you on that as we get closer to close. But, you know, I, again, I think, you know, we feel very good about our productivity delivery. We feel very good about the innovation that we have in the pipeline that's enabling us to drive positive mix and premiumize at the top end of the category, and then, and then grow volume by cascading, you know, those features down through the tiers. So I'll pause there. I don't know if there's anything else you want to click on there.
Speaker #2: And we'll update you on that as we get closer to close. But again, I think we feel very good about our productivity delivery we feel very good about the innovation that we have in the pipeline that's enabling us to drive positive mix and premiumize at the top end of the category.
We feel very good about the innovation that we have in the pipeline that's enabling us to drive positive mix and premiumize at the top end of the category, and then, and then grow volume by cascading, you know, those features down through the tiers. So I'll pause there. I don't know if there's anything else you want to click on there.
Speaker #2: And then grow volume by cascading those features down through the tiers. So I'll pause there. I don't know if there's anything else you want to click on
Mike Lavery: No, that's, that's really helpful. Yeah, thank you.
Speaker #4: helpful. Yeah. Thank you.
Speaker #2: Okay. Thanks, Michael.
Michael Hsu: Okay. Thanks, Michael.
Mike Hsu: Okay. Thanks, Michael.
Speaker #8: Thank you. The next question will be from Robert Moscow from TD Cowen. Robert, your line is live.
Operator: Thank you. The next question will be from Robert Moskow from TD Cowen. Robert, your line is live.
Operator: Thank you. The next question will be from Robert Moskow from TD Cowen. Robert, your line is live.
Speaker #9: Hey, thanks for the question. Nelson, the argument for gross margin expanding this year, I think, reflects you had $200 million of input costs last year.
[Analyst] (TD Cowen): Hey, thanks for the question. Nelson, the argument for gross margin expanding this year, I think reflects, hey, you had $200 million of input costs last year you didn't expect, and then it's not gonna happen this year. But if I look back at 2025, I mean, one of the was that pricing turned negative, the environment got a lot more competitive. You know, what, what's to stop that from happening again in 2026? It seems like the environment continues to be really competitive. You know, you're losing some distribution in Costco. You might have to take steps to defend your turf at other retailers. I mentioned the name of the club, I'm just speculating, of course.
Robert Moskow: Hey, thanks for the question. Nelson, the argument for gross margin expanding this year, I think reflects, hey, you had $200 million of input costs last year you didn't expect, and then it's not gonna happen this year. But if I look back at 2025, I mean, one of the was that pricing turned negative, the environment got a lot more competitive. You know, what, what's to stop that from happening again in 2026? It seems like the environment continues to be really competitive.
Speaker #9: You didn't expect it, and then it's not going to happen this year. But if I look back at '25, I mean, one of them was that pricing turned negative?
Speaker #9: The environment got a lot more competitive. What's to stop that from happening again in 2026? It seems like the environment continues to be really competitive.
You know, you're losing some distribution in Costco. You might have to take steps to defend your turf at other retailers. I mentioned the name of the club, I'm just speculating, of course. But, so, you know, how much cushion do you have in the model in case, you know, it does get into that kind of environment again?
Speaker #9: You're losing some distribution and Costco. You might have to take steps to defend your turf at other retailers. I mentioned the name of the club.
Speaker #9: I'm just speculating, of course. But so, how much cushion do you have in the model in case it does get into that kind of environment?
[Analyst] (TD Cowen): But, so, you know, how much cushion do you have in the model in case, you know, it does get into that kind of environment again?
Speaker #9: again? Yeah.
Nelson Urdaneta: Yeah, so, so a few things, there, Rob. First, yeah, as you rightfully say, as you unpack why we expect margins to expand, one, costs are projected to be neutral, year-over-year, versus two years, in which we faced about $200 million of costs. Secondly, productivity, gross productivity is expected to be right around the 6% level, which will be at the high end of our 5 to 6, and again, another record productivity level for us in the year. And then on the pricing bit, I think it's very important to go back to, you know, what we chatted early last year on what Russ mentioned. We, we made some strategic price back architecture and channel price investments, particularly in North America, in towards the end of Q4 of 2024.
Nelson Urdaneta: Yeah, so, so a few things, there, Rob. First, yeah, as you rightfully say, as you unpack why we expect margins to expand, one, costs are projected to be neutral, year-over-year, versus two years, in which we faced about $200 million of costs. Secondly, productivity, gross productivity is expected to be right around the 6% level, which will be at the high end of our 5 to 6, and again, another record productivity level for us in the year.
Speaker #4: So a few things. First, yeah, as you rightfully say, as you unpack why we expect margins to expand, one, costs are projected to be neutral year on year.
Speaker #4: First, two years, in which we faced about $200 million of costs. Secondly, productivity, gross productivity is expected to be right around the 6% level.
Speaker #4: …of our 5 to 6. And again, another record, which will be at the high end productivity level for us in the year. And then on the pricing bit, I think it's very important to go back to what we chatted early last year on what Russ mentioned.
And then on the pricing bit, I think it's very important to go back to, you know, what we chatted early last year on what Russ mentioned. We, we made some strategic price back architecture and channel price investments, particularly in North America, in towards the end of Q4 of 2024. So as you head into 2026, we're gonna be lapping largely that. So that is gonna be something that, again, based on what we've modeled and what we've put together, that is one aspect that'll be different as we go into the year. So that, that changes, year on year, and it's reflected there.
Speaker #4: We made some strategic price-pack architecture and channel price investments, particularly in North America, towards the end of Q4 of 2024. So as you head into 2026, we're going to be lapping largely that.
Nelson Urdaneta: So as you head into 2026, we're gonna be lapping largely that. So that is gonna be something that, again, based on what we've modeled and what we've put together, that is one aspect that'll be different as we go into the year. So that, that changes, year on year, and it's reflected there. The channel mix and all that bit, that'll continue to play out to some extent, but that's factored into the model, Rob. So hence why, you know, we do see a little bit of a difference between 25 and 26 from that end, and why we're, you know, at this stage, confident in our ability to expand margins in 2026, back to where we, you know, had modeled before.
Speaker #4: So, that is going to be something that, again, based on what we've modeled and what we've put together, that is one aspect that will be different as we go into the year.
Speaker #4: So that changes year on year, and it's reflected there. The channel mix and all that bit—that will continue to play out to some extent, but that's factored into the model, Rob.
The channel mix and all that bit, that'll continue to play out to some extent, but that's factored into the model, Rob. So hence why, you know, we do see a little bit of a difference between 25 and 26 from that end, and why we're, you know, at this stage, confident in our ability to expand margins in 2026, back to where we, you know, had modeled before.
Speaker #4: So hence why we do see a little bit of a difference between '25 and '26 from that end. And why we're at this stage confident in our ability to expand margins in 2026 back to where we had modeled before.
[Analyst] (TD Cowen): Okay.
Robert Moskow: Okay.
Speaker #2: And maybe, Nelson, I'll tack on Rob. I think part of it is also, philosophically, we're really not interested in renting share through promotion. And especially—I think Russ mentioned it earlier in the call—which is, it doesn't make sense in a category where consumption is relatively stable or almost fixed.
Michael Hsu: And maybe, Nelson, I'll tack on, Rob. You know, I think part of it is also philosophically, you know, we're, we're really not interested in renting share through promotion. And especially, I think Russ mentioned it earlier in the call, which is, you know, it doesn't make sense in a category where consumption is, you know, relatively stable or almost fixed, you know, in a category like bath tissue or diapers. And so what we're really focused on, and I think we had this in our prepared remarks, is kind of having an operating model and a culture that's driving this notion of the elusive virtuous cycle, which, you know, we think is delivering great results, you know?
Mike Hsu: And maybe, Nelson, I'll tack on, Rob. You know, I think part of it is also philosophically, you know, we're, we're really not interested in renting share through promotion. And especially, I think Russ mentioned it earlier in the call, which is, you know, it doesn't make sense in a category where consumption is, you know, relatively stable or almost fixed, you know, in a category like bath tissue or diapers.
Speaker #2: In a category like that tissue or diapers. And so what we're really focused on, and I think we had this in our prepared remarks, is kind of having an operating model on a culture that's driving this notion of the elusive virtuous cycle.
And so what we're really focused on, and I think we had this in our prepared remarks, is kind of having an operating model and a culture that's driving this notion of the elusive virtuous cycle, which, you know, we think is delivering great results, you know?
Speaker #2: Which we think is delivering great results. And that includes innovating at all rungs of good, better, best, especially the top end, and pulling it through the value tiers.
Michael Hsu: And that includes innovating at all rungs of good, better, best, especially the top end, and pulling it through the value tiers. And then, as you're kind of asking about, making sure that we can invest for impact. And I think we've done a very good job of increasing our investment over the last several years, but also improving our maybe the effectiveness of our advertising and our marketing. And for us, you know, we feel like that's a you know much more powerful lever to pull than trade promotion. And so that's kind of what we've been investing, and we're really seeing great results, and I think that's leading to... That's been a driver over our last couple of years of strong volume plus mix growth.
And that includes innovating at all rungs of good, better, best, especially the top end, and pulling it through the value tiers. And then, as you're kind of asking about, making sure that we can invest for impact. And I think we've done a very good job of increasing our investment over the last several years, but also improving our maybe the effectiveness of our advertising and our marketing.
Speaker #2: kind of asking about making sure that we can And then as you're invest for impact. And I think we've done a very good job of increasing our investment over the last several years but also improving our maybe the effectiveness of our advertising and our marketing.
Speaker #2: And for us, we feel like that's a much more powerful lever to pull than trade promotion. And so that's kind of what we've been investing in, and we're really seeing great results.
And for us, you know, we feel like that's a you know much more powerful lever to pull than trade promotion. And so that's kind of what we've been investing, and we're really seeing great results, and I think that's leading to... That's been a driver over our last couple of years of strong volume plus mix growth.
Speaker #2: And I think that's leading to that's been a driver of our last couple of years of strong volume plus mix growth. And we feel very well positioned for more volume and mix growth in 2026.
Michael Hsu: And, you know, and I, and we feel very well positioned for, you know, more volume and mix growth in 2026. At the same time, you know, to get this virtuous cycle, we have to have leading productivity, which we're delivering, and so we're really proud of. And so I, I, you know, I think that's our focus, and, you know, that's, that's how we're gonna run the play in 2026.
And, you know, and I, and we feel very well positioned for, you know, more volume and mix growth in 2026. At the same time, you know, to get this virtuous cycle, we have to have leading productivity, which we're delivering, and so we're really proud of. And so I, I, you know, I think that's our focus, and, you know, that's, that's how we're gonna run the play in 2026.
Speaker #2: At the same time, to get this virtuous cycle, we have to have leading productivity, which we're delivering and so we're really proud of. And so I think that's our focus and that's how we're going to run the play in
Speaker #2: '26. Yeah.
[Analyst] (TD Cowen): Yeah, I get it. I guess my question is, you know, Nelson, you said that price realization was lower in 2025 because of decisions you made in Q4 of 2024. But from our modeling, the pricing was weaker than expected during the course of 2025 compared to the original guidance. Am I wrong, or was, you know, a down year for pricing always part of the plan? It seems like it was weaker than you thought. That's all I was asking.
Robert Moskow: Yeah, I get it. I guess my question is, you know, Nelson, you said that price realization was lower in 2025 because of decisions you made in Q4 of 2024. But from our modeling, the pricing was weaker than expected during the course of 2025 compared to the original guidance. Am I wrong, or was, you know, a down year for pricing always part of the plan? It seems like it was weaker than you thought. That's all I was asking.
Speaker #9: I get it. I guess my question is, Nelson, you said that price realization was lower in '25 because of decisions you made in the fourth quarter of '24.
Speaker #9: But from our modeling, the pricing was weaker than expected during the course of '25. Compared to the original guidance, am I wrong, or was a down year for pricing always part of the plan?
Speaker #9: It seems like it was weaker than you thought. That's all I was.
Speaker #9: asking. We always factored
Nelson Urdaneta: We always factored into, you know, the plan, one, the, you know, the pricing actions that we were gonna take at the end of the quarter in 2024. And there's always gonna be a little bit of shift in programming, Rob, that plays into the year, and that comes up in actuals. But that was largely it. I mean, there will be a bit of move across channels, as Russ referred to, but overall, you know, based on what we're planning, you-- we wouldn't see what we saw in 2025 at this stage, so.
Nelson Urdaneta: We always factored into, you know, the plan, one, the, you know, the pricing actions that we were gonna take at the end of the quarter in 2024. And there's always gonna be a little bit of shift in programming, Rob, that plays into the year, and that comes up in actuals. But that was largely it. I mean, there will be a bit of move across channels, as Russ referred to, but overall, you know, based on what we're planning, you-- we wouldn't see what we saw in 2025 at this stage, so.
Speaker #4: Into the plan went the pricing actions that we were going to take at the end of the quarter in 2024. And there's always going to be a little bit of shift in programming that plays into the year.
Speaker #4: And that comes up in actuals. But that was largely it. I mean, there will be a bit of move across channels, as Russ referred to.
Speaker #4: But overall, based on what we're planning, we wouldn't see what we saw in '25 at this stage.
Christopher Jakubik: Rob, keep in mind, I think Russ had mentioned earlier that, you know, and we talked about on last quarter's call, where, you know, because of competitive activity, we held back on some of our Q3 programming, and we shifted it into Q4. So that would explain some of what you're looking at on a sequential basis.
Speaker #2: And Rob, keep in mind—I think Russ had mentioned earlier, and we talked about it on last quarter's call—that because of competitive activity, we held back on some of our Q3 programming and we shifted it into Q4.
Chris Jakubik: Rob, keep in mind, I think Russ had mentioned earlier that, you know, and we talked about on last quarter's call, where, you know, because of competitive activity, we held back on some of our Q3 programming, and we shifted it into Q4. So that would explain some of what you're looking at on a sequential basis.
Speaker #2: So that would explain some of what you're looking at on a sequential.
Speaker #2: basis. Thank
Speaker #9: you.
[Analyst] (TD Cowen): Thank you.
Robert Moskow: Thank you.
Nelson Urdaneta: Great. If, if we could take one more question, that'd be great.
Mike Hsu: Great. If, if we could take one more question, that'd be great.
Speaker #2: If we could take one more question, that'd be great.
Speaker #10: And the final question today is coming from Edward Lewis from Rothschild & Co. Edward, your line is live.
Operator: The final question today is coming from Edward Lewis, from Rothschild & Co. Edward, your line is live.
Operator: The final question today is coming from Edward Lewis, from Rothschild & Co. Edward, your line is live.
[Analyst] (Rothschild & Co): Thanks very much, guys. Yes, I guess a quick one, just looking at the international business. So good share gains, you note again, and obviously, a good end to the year there. And as I look at the results through nine months on the international gross margins, there's around about a seven percentage point gap between that and North America. So am I right in thinking that the international gross margin is a big opportunity, and what do you see as the drivers there?
Speaker #9: Thanks very much, guys. Yes, I guess a quick one just looking at the international business. So good share gains note again and obviously a good end to the year there.
Edward Lewis: Thanks very much, guys. Yes, I guess a quick one, just looking at the international business. So good share gains, you note again, and obviously, a good end to the year there. And as I look at the results through nine months on the international gross margins, there's around about a seven percentage point gap between that and North America. So am I right in thinking that the international gross margin is a big opportunity, and what do you see as the drivers there?
Speaker #9: And as I look at the results from nine months on the international gross margins, there's around about a 7 percentage point gap between that and North America.
Speaker #9: The international gross margin is a big—so am I right in thinking that's an opportunity? And what do you see as the drivers?
Speaker #9: there? Yeah,
Michael Hsu: Yeah, hey, Ed, good to hear from you. You know, yes, international margins are an opportunity. It's something we're focused on improving. I'll let Russ talk a little bit more about it. We feel very good about the progress we're making in international, especially our focus markets.
Mike Hsu: Yeah, hey, Ed, good to hear from you. You know, yes, international margins are an opportunity. It's something we're focused on improving. I'll let Russ talk a little bit more about it. We feel very good about the progress we're making in international, especially our focus markets.
Speaker #2: Hey, good to hear from you. Yes, international margins are an opportunity. It's something we're focused on improving. I'll let Russ talk a little bit more about it.
Speaker #2: We feel very good about the progress we're making in international, especially our focus
Speaker #2: markets. Yeah,
Russell Torres: ... Yeah, yeah. Yeah, I would say a few things. First, you know, I do think that a key part to the equation for us growing is to meet consumer demand at every tier. And we've talked a lot about the good and the better, but the best is a big opportunity for us. And we've seen that where we've expanded margins in international geographies is developing that premium segment. And we believe that there's very, very significant upside in that, especially in geographies where the consumer is still developing and GDP growth continues to allow people to have more money to spend. And so that's one.
Russ Torres: ... Yeah, yeah. Yeah, I would say a few things. First, you know, I do think that a key part to the equation for us growing is to meet consumer demand at every tier. And we've talked a lot about the good and the better, but the best is a big opportunity for us. And we've seen that where we've expanded margins in international geographies is developing that premium segment. And we believe that there's very, very significant upside in that, especially in geographies where the consumer is still developing and GDP growth continues to allow people to have more money to spend. And so that's one.
Speaker #9: Yeah. I would say a few things. First, I do think that a key part to the equation for us growing is to meet consumer demand at every tier.
Speaker #9: And we've talked a lot about the good and the better, but the best is a big opportunity for us. And we've seen that where we've expanded margins in international geographies is developing that premium segment.
Speaker #9: And we believe that there's very, very significant upside in that, especially in geographies where the consumer is still developing and GDP growth continues to allow people to have more money to spend.
Speaker #9: And so that's one. I think the second thing is we've had no less of a focus on productivity internationally. And we've come up with some really great ways through the wiring that we've executed to be able to leverage our global scale that we've got in markets like North America and China in other geographies to help drive costs down.
Russell Torres: I think the second thing is we've had no less of a focus on productivity internationally, and we've come up with some really great ways through the wiring that we've executed to be able to leverage our global scale that we've got in markets like North America and China, in other geographies, to help drive costs down. And so that's another big component. And I would just note that we've been growing significantly, and we've seen that sequentially unfold for us in the markets outside of North America and China. You know, Brazil, diapers, organic growth, mid-single digit. South Korea, diapers, positive organic growth. Indonesia, positive organic growth, you know, gaining share in Australia. So, in fem care and adult care.
I think the second thing is we've had no less of a focus on productivity internationally, and we've come up with some really great ways through the wiring that we've executed to be able to leverage our global scale that we've got in markets like North America and China, in other geographies, to help drive costs down. And so that's another big component. And I would just note that we've been growing significantly, and we've seen that sequentially unfold for us in the markets outside of North America and China. You know, Brazil, diapers, organic growth, mid-single digit.
Speaker #9: And so that's another big component that was just note that we've been growing significantly and we've seen that sequentially unfold for us in the markets outside of North America and China: Brazil, diapers, organic growth, mid-single digit, South Korea diapers, positive organic growth, Indonesia positive organic growth, gaining share in Australia.
South Korea, diapers, positive organic growth. Indonesia, positive organic growth, you know, gaining share in Australia. So, in fem care and adult care. So that's another element to it, is just the leverage that we'll get as we continue to scale the business. And looking forward to Kenvue, we think that's another, you know, really big opportunity potentially for us. So that's kind of what I would say.
Speaker #9: So in FinCare and Adult Care. So that's another element to it is just to leverage that we'll get as we continue to scale the business and looking forward to Kenji.
Russell Torres: So that's another element to it, is just the leverage that we'll get as we continue to scale the business. And looking forward to Kenvue, we think that's another, you know, really big opportunity potentially for us. So that's kind of what I would say.
Speaker #9: We think that's another really big opportunity, potentially, for us. So that's kind of what I would say.
Speaker #2: And then I'm excited about our share momentum. I mean, we did see significant growth across IPC markets in 2025. Just to give you a few examples, I mean, overall, our focus markets are top six markets in IPC.
Michael Hsu: And then, Ed, I would, I, I'm excited about our share momentum. I mean, we did see significant growth across IPC markets in 2025. Just to give you a few examples, I mean, overall, our focus markets, our top six markets in IPC, were up about weighted share 50 basis points. China was up 270 basis points on diapers. And then outside China, you know, fem care in Indonesia was up almost 200 basis points. Korea was up 60, Australia up 50, Brazil up 40. And so, I think we're making, you know, very good progress across the board. And then, you know, if you think about international in 2026, you know, we expect to drive positive volume and mix-led growth ahead of the category.
Mike Hsu: And then, Ed, I would, I, I'm excited about our share momentum. I mean, we did see significant growth across IPC markets in 2025. Just to give you a few examples, I mean, overall, our focus markets, our top six markets in IPC, were up about weighted share 50 basis points. China was up 270 basis points on diapers. And then outside China, you know, fem care in Indonesia was up almost 200 basis points. Korea was up 60, Australia up 50, Brazil up 40. And so, I think we're making, you know, very good progress across the board.
Speaker #2: We're up about weighted share 50 basis points. China was up 270 basis points on diapers, and then outside China, FinCare and Indonesia was up almost 200 basis points.
Speaker #2: Korea was up 60, Australia up 50, Brazil up 40. And so I think we're making very good progress across the board. And then if you think about international in '26, we expect to drive positive volume and mix-led growth ahead of the category.
And then, you know, if you think about international in 2026, you know, we expect to drive positive volume and mix-led growth ahead of the category. You know, we are targeting weighted share growth again, along by, you know, led by our strong, you know, innovation and premiumization. And then, expect, you know, operating profit, dollar and margin gains reflecting the strong productivity and overhead management that we're doing. So thanks for the question, Ed.
Speaker #2: We are targeting weighted share growth again, led by our strong innovation and premiumization. And then we expect operating profit dollar and margin gains, reflecting the strong productivity and overhead management that we're doing.
Michael Hsu: You know, we are targeting weighted share growth again, along by, you know, led by our strong, you know, innovation and premiumization. And then, expect, you know, operating profit, dollar and margin gains reflecting the strong productivity and overhead management that we're doing. So thanks for the question, Ed.
Speaker #2: So thanks for the
Speaker #2: question. Thank you.
Operator: Thank you. That does conclude our Q&A session for today. I will now hand the call back to Chris Jakubik for closing remarks.
Operator: Thank you. That does conclude our Q&A session for today. I will now hand the call back to Chris Jakubik for closing remarks.
Speaker #10: And that does conclude our Q&A session for today. I will now hand the call back to Chris Jakubik for closing
Speaker #10: remarks. Great.
Christopher Jakubik: Great. Well, thanks, everybody, for joining us today. For analysts who have follow-up questions, you know, the investor relations team will be around all day to take them. So have a great day, and again, appreciate the interest.
Chris Jakubik: Great. Well, thanks, everybody, for joining us today. For analysts who have follow-up questions, you know, the investor relations team will be around all day to take them. So have a great day, and again, appreciate the interest.
Speaker #2: Well, thanks, everybody, for joining us today. For analysts who have follow-up questions, the investor relations team will be around all day to take them.
Speaker #2: So have a great day and again, appreciate the
Speaker #2: interest. Thank you.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
