Q2 2026 Procter & Gamble Co Earnings Call

January 22, 2026

Speaker #1: Good morning and welcome to PROCTER & GAMBLE's Quarter-End Conference Call. Today's event is being recorded for replay. This discussion will include a number of forward-looking statements.

Operator: Good morning, and welcome to Procter & Gamble's quarter-end conference call. Today's event is being recorded for replay. This discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures. Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website, www.pginvestor.com, a full reconciliation of non-GAAP financial measures. Now, I will turn the call over to P&G's Chief Financial Officer, Andre Schulten.

Speaker #1: If you refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections.

Speaker #1: As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures.

Speaker #1: Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website, www.pginvestor.com, a full reconciliation of non-GAAP financial measures.

Speaker #1: Now, I will turn the call over to P&G's Chief Financial Officer, Andre Schulten.

Q2 2026 Procter & Gamble Co Earnings Call

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Q2 2026 Procter & Gamble Co Earnings Call

Thursday, January 22nd, 2026 at 1:30 PM

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Andre Schulten: Good morning, everyone. Joining me on the call today is Shailesh Jejurikar, Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for the second quarter of fiscal 26, and Shailesh will discuss strategy, innovation, and focus areas as we start calendar year 2026. I'll close with guidance for fiscal 26, and then we'll take your questions. As we expected, second quarter top-line results heavily reflect underlying market trends and impacts from base period dynamics. As a reminder, the base period included trade and consumer pantry loading driven by port strikes and hurricanes in early October and the fear of additional port strikes in late December. The biggest impacts were on the baby, feminine, and family care sector, and the fabric and home care sector. These base period impacts were concentrated in the US market.

Andre Schulten: The balance of the company grew organic sales nearly 3%, with almost all regions outside the US growing or accelerating in the quarter. Bottom-line results followed the top line as we continue to prioritize full investment in the business. We anticipated this would be the softest quarter of the fiscal year, and we remain confident in stronger growth in the back half. So moving to the details, organic sales were in line with prior year. Volume was down 1 point, pricing up 1 point, and mix was flat for the quarter. Seven of ten product categories held or grew organic sales. Hair care grew mid-single digits. Skin and personal care, personal health care, home care, and oral care were each up low single digits. Grooming and fabric care were each in line with year-ago.

The balance of the company grew organic sales nearly 3%, with almost all regions outside the US growing or accelerating in the quarter. Bottom-line results followed the top line as we continue to prioritize full investment in the business. We anticipated this would be the softest quarter of the fiscal year, and we remain confident in stronger growth in the back half. So moving to the details, organic sales were in line with prior year. Volume was down 1 point, pricing up 1 point, and mix was flat for the quarter. Seven of ten product categories held or grew organic sales. Hair care grew mid-single digits. Skin and personal care, personal health care, home care, and oral care were each up low single digits. Grooming and fabric care were each in line with year-ago.

Andre Schulten: Baby care and feminine care were each down low singles, and family care was down approximately 10%, primarily due to the base period dynamics we described. As a side note, organic sales excluding family care were up 1% for the quarter. 7 of 10 regions grew organic sales. Focus markets were down 1%. Organic sales in North America were down 2%. Volume was down 3 points, including a roughly 2-point headwind from the base period trade inventory impacts I mentioned. Price mix added a point of growth. European focus market organic sales were up 1%. Strong growth in France, Spain, and Italy, largely offset by a softer period in Germany. Greater China organic sales grew 3%, another quarter of growth in what remains a challenging consumer environment. Pampers and SK-II led the growth, each up mid-teens or more. Enterprise markets grew mid-single digits for the quarter.

Baby care and feminine care were each down low singles, and family care was down approximately 10%, primarily due to the base period dynamics we described. As a side note, organic sales excluding family care were up 1% for the quarter. 7 of 10 regions grew organic sales. Focus markets were down 1%. Organic sales in North America were down 2%. Volume was down 3 points, including a roughly 2-point headwind from the base period trade inventory impacts I mentioned. Price mix added a point of growth. European focus market organic sales were up 1%. Strong growth in France, Spain, and Italy, largely offset by a softer period in Germany. Greater China organic sales grew 3%, another quarter of growth in what remains a challenging consumer environment. Pampers and SK-II led the growth, each up mid-teens or more. Enterprise markets grew mid-single digits for the quarter.

Andre Schulten: Latin America organic sales were up 8%, with solid growth across Mexico, Brazil, and the balance of smaller markets in the region. Organic sales in the Europe enterprise market region were up 6% versus prior year, and the Asia-Pacific, Middle East, and Africa enterprise region grew 2%. Global ex-U.S. market share was down 20 basis points. 25 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.88, in line with prior year. On a currency-neutral basis, core EPS was $1.85. Core gross margin was down 50 basis points, and operating margin was down 70 basis points versus prior year. Strong productivity improvement of 270 basis points with healthy reinvestment in innovation and demand creation. Currency-neutral operating margin was down 80 basis points.

Latin America organic sales were up 8%, with solid growth across Mexico, Brazil, and the balance of smaller markets in the region. Organic sales in the Europe enterprise market region were up 6% versus prior year, and the Asia-Pacific, Middle East, and Africa enterprise region grew 2%. Global ex-U.S. market share was down 20 basis points. 25 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.88, in line with prior year. On a currency-neutral basis, core EPS was $1.85. Core gross margin was down 50 basis points, and operating margin was down 70 basis points versus prior year. Strong productivity improvement of 270 basis points with healthy reinvestment in innovation and demand creation. Currency-neutral operating margin was down 80 basis points.

Andre Schulten: Adjusted free cash flow productivity was 88%, and we returned $4.8 billion of cash to shareowners this quarter, $2.5 billion in dividends and $2.3 billion in share repurchases. In summary, we've now completed what we fully expected will be the softest quarter of the fiscal year. We have strong innovation and productivity plans for the back half of the year. We continue to invest in creating superior propositions for our consumers and retail partners with relevant innovation, powerful brand campaigns across every touchpoint, and continuously improving in market execution across all channels and platforms. We are fully activated. It's working. So we move with confidence into half two of the fiscal year. And with that, I'll turn it over to Shailesh.

Adjusted free cash flow productivity was 88%, and we returned $4.8 billion of cash to shareowners this quarter, $2.5 billion in dividends and $2.3 billion in share repurchases. In summary, we've now completed what we fully expected will be the softest quarter of the fiscal year. We have strong innovation and productivity plans for the back half of the year. We continue to invest in creating superior propositions for our consumers and retail partners with relevant innovation, powerful brand campaigns across every touchpoint, and continuously improving in market execution across all channels and platforms. We are fully activated. It's working. So we move with confidence into half two of the fiscal year. And with that, I'll turn it over to Shailesh.

Shailesh Jejurikar: Thanks, Andre. Good morning, everyone. I want to start by underscoring the point Andre just made. We are confident the interventions and investments we are making now will improve our near-term performance. Strong innovation supported by sharper consumer communication and retail execution. We are already seeing strong results in parts of the business that have made these near-term interventions. Greater China baby care was one of the first categories to make a step change and continues to lead growth of the premium and super premium segments of the market behind consumer insight-driven innovation and brand communication. Chinese parents want only the best for their baby. Softness and comfort in addition to dryness. The China team created a product that delivers on this insight from first seeing and touching the packaging to feeling the diaper on their baby. They leverage the Chinese history with silk.

Shailesh Jejurikar: The shiny, soft yet strong, luxurious material has been a status symbol for more than 2,000 years. Pampers Prestige is the only leading diaper brand that has real silk ingredients in the product, delivering the ultimate experience of skin comfort and protection. The shiny, soft-feel package conveys superiority at first touch. Reframing our superior premium line has driven Greater China baby care to double-digit organic sales growth over the past 18 months and increased share nearly three points. More recently, our Mexico fabric enhancers team has disrupted a sleepy category through deep consumer understanding. Mexican consumers describe the gold standard smell of clean as rich, tasty, fruity, and floral, like the scents from shampoos. Downy Intense leverages our internal perfume innovation expertise to create the new high-intensity perfume. The packaging highlights the intensity of fragrance blooming on the bottle like a flower.

The shiny, soft yet strong, luxurious material has been a status symbol for more than 2,000 years. Pampers Prestige is the only leading diaper brand that has real silk ingredients in the product, delivering the ultimate experience of skin comfort and protection. The shiny, soft-feel package conveys superiority at first touch. Reframing our superior premium line has driven Greater China baby care to double-digit organic sales growth over the past 18 months and increased share nearly three points. More recently, our Mexico fabric enhancers team has disrupted a sleepy category through deep consumer understanding. Mexican consumers describe the gold standard smell of clean as rich, tasty, fruity, and floral, like the scents from shampoos. Downy Intense leverages our internal perfume innovation expertise to create the new high-intensity perfume. The packaging highlights the intensity of fragrance blooming on the bottle like a flower.

Shailesh Jejurikar: Brand communication drives awareness of an experience of 24/7 smelling like freshly washed hair. In-store execution of impactful displays with stopping power is increasing trial. These deep consumer insights driving innovation and executed with sharper brand communication and retail execution has spurred Mexico fabric enhancer category growth and led Downy to double-digit organic sales growth and over two points of value share growth. Other examples where we've accelerated results include the Brazil haircare business, US Old Spice, and US liquid laundry detergents businesses. Most of these interventions are starting now in the US, the biggest, most impactful part of the business. We'll go deeper on these at the CAGNY conference next month. While we work to improve our near-term results, we've also begun a longer-term reinvention of P&G.

Brand communication drives awareness of an experience of 24/7 smelling like freshly washed hair. In-store execution of impactful displays with stopping power is increasing trial. These deep consumer insights driving innovation and executed with sharper brand communication and retail execution has spurred Mexico fabric enhancer category growth and led Downy to double-digit organic sales growth and over two points of value share growth. Other examples where we've accelerated results include the Brazil haircare business, US Old Spice, and US liquid laundry detergents businesses. Most of these interventions are starting now in the US, the biggest, most impactful part of the business. We'll go deeper on these at the CAGNY conference next month. While we work to improve our near-term results, we've also begun a longer-term reinvention of P&G.

Shailesh Jejurikar: Think of this as the next important phase of constructive disruption that will create and extend our competitive advantages in each element of our strategy. We remain fully committed to the integrated growth strategy that has enabled us to deliver significant growth and value creation over the better part of the past decade, and it will in the future. A portfolio of daily use products in categories where performance drives brand choice. In these categories, P&G is uniquely positioned to deliver irresistible superiority across product, package, communication, retail execution, and value. We will do this to drive market growth and create value for P&G and our retail partners. We will double down on productivity with multi-year visibility to fund capabilities, innovation, and demand creation, and to mitigate cost headwinds while delivering financial results at the levels you and we expect.

Think of this as the next important phase of constructive disruption that will create and extend our competitive advantages in each element of our strategy. We remain fully committed to the integrated growth strategy that has enabled us to deliver significant growth and value creation over the better part of the past decade, and it will in the future. A portfolio of daily use products in categories where performance drives brand choice. In these categories, P&G is uniquely positioned to deliver irresistible superiority across product, package, communication, retail execution, and value. We will do this to drive market growth and create value for P&G and our retail partners. We will double down on productivity with multi-year visibility to fund capabilities, innovation, and demand creation, and to mitigate cost headwinds while delivering financial results at the levels you and we expect.

Shailesh Jejurikar: Constructive disruption to stay ahead of and to create emerging trends and opportunities in our fast-changing industry. We will disrupt ourselves. At the core of it all is our organization. Fully engaged, enabled, and excited to serve consumers and win in the marketplace. These strategies taken alone are just words that any company could say. The words alone have become a point of parity. P&G's point of difference, our competitive advantage, comes from outstanding integrated execution of these strategies across all activity systems in the company and from anticipating what is needed next. We've executed the strategy well for many years. Now we see the landscape around us changing faster than it's ever been in recent memory. Neither we nor our industry in aggregate have adapted as fast as needed. This shows in the growth trends of our categories.

Constructive disruption to stay ahead of and to create emerging trends and opportunities in our fast-changing industry. We will disrupt ourselves. At the core of it all is our organization. Fully engaged, enabled, and excited to serve consumers and win in the marketplace. These strategies taken alone are just words that any company could say. The words alone have become a point of parity. P&G's point of difference, our competitive advantage, comes from outstanding integrated execution of these strategies across all activity systems in the company and from anticipating what is needed next. We've executed the strategy well for many years. Now we see the landscape around us changing faster than it's ever been in recent memory. Neither we nor our industry in aggregate have adapted as fast as needed. This shows in the growth trends of our categories.

Shailesh Jejurikar: Consumer media preferences and information collection are increasingly fragmented with new media platforms, including social media and retail media. Inflation across food, energy, healthcare, and many other areas of spending has taken a toll on consumers and how they assess value. This will continue to evolve. The retail landscape is changing. More concentration, but also brand proliferation. Retailers are becoming media platforms, and media platforms are becoming retailers. In summary, the consumer path to purchase is changing every day, is non-linear, and littered with millions of possible distractions. We expect an even more intense pace of change in the next three to five years. We will adjust to and leap ahead of these disruptions to invent the CPG company of the future. The way to break through consistently is to build the strongest brands in the industry.

Consumer media preferences and information collection are increasingly fragmented with new media platforms, including social media and retail media. Inflation across food, energy, healthcare, and many other areas of spending has taken a toll on consumers and how they assess value. This will continue to evolve. The retail landscape is changing. More concentration, but also brand proliferation. Retailers are becoming media platforms, and media platforms are becoming retailers. In summary, the consumer path to purchase is changing every day, is non-linear, and littered with millions of possible distractions. We expect an even more intense pace of change in the next three to five years. We will adjust to and leap ahead of these disruptions to invent the CPG company of the future. The way to break through consistently is to build the strongest brands in the industry.

Shailesh Jejurikar: P&G has the capabilities and unique opportunity to redefine the brand-building framework to deliver consumer-relevant superiority every day, every week, every month, putting the consumer at the center of everything we do. Leading the consumer-relevant brand-building and superiority at this pace can and will only be delivered by leveraging superior data, superior technology, and superior capabilities to create and extend competitive advantage with consumers and with retail partners. We define our strengths and opportunity here across three areas. First, we know how to build brands rooted in deep connections with consumers and our industry-leading innovation capability. We have an enormous wealth of consumer data and understanding, and we receive a continuous flow of new data every day. Our teams connect with consumers across more touchpoints than anyone in our industry: product research, shopper research, connected homes, ratings and reviews, social media posts, brand fan websites, and many more.

P&G has the capabilities and unique opportunity to redefine the brand-building framework to deliver consumer-relevant superiority every day, every week, every month, putting the consumer at the center of everything we do. Leading the consumer-relevant brand-building and superiority at this pace can and will only be delivered by leveraging superior data, superior technology, and superior capabilities to create and extend competitive advantage with consumers and with retail partners. We define our strengths and opportunity here across three areas. First, we know how to build brands rooted in deep connections with consumers and our industry-leading innovation capability. We have an enormous wealth of consumer data and understanding, and we receive a continuous flow of new data every day. Our teams connect with consumers across more touchpoints than anyone in our industry: product research, shopper research, connected homes, ratings and reviews, social media posts, brand fan websites, and many more.

Shailesh Jejurikar: We mine for insights that lead to new product innovation, brand ideas, performance claims, marketing campaigns. Now we are building the consumer connectivity, the integrated data platforms, and the technologies that will enhance our team's ability to do this work better, faster, and even more consumer-centric than ever before. We have a unique set of innovation capabilities in our industry: substrate technologies, formulaic chemistry, devices, and now biology. We have years of experience integrating these capabilities to launch new platform technologies and innovations, and we see many more ways to bring combinations of these technologies to life in new consumer products. Tide evo is just one current example. Technologies like AI-enabled molecular discovery will enable faster and more powerful integration of innovation capabilities for faster growth.

We mine for insights that lead to new product innovation, brand ideas, performance claims, marketing campaigns. Now we are building the consumer connectivity, the integrated data platforms, and the technologies that will enhance our team's ability to do this work better, faster, and even more consumer-centric than ever before. We have a unique set of innovation capabilities in our industry: substrate technologies, formulaic chemistry, devices, and now biology. We have years of experience integrating these capabilities to launch new platform technologies and innovations, and we see many more ways to bring combinations of these technologies to life in new consumer products. Tide evo is just one current example. Technologies like AI-enabled molecular discovery will enable faster and more powerful integration of innovation capabilities for faster growth.

Shailesh Jejurikar: The second and related opportunity is to create a deeper, holistic connection with consumers to build brand relationships with them in the new media reality. Media fragmentation and emergence of new platforms creates an opportunity for brand builders who can best integrate across touchpoints. AI and Gen AI capability help our teams to discover consumer-relevant insights at every step of the consumer path to purchase, grounded in a unifying brand idea. We are creating the individual touchpoint experiences for each consumer at a time. These ideas are activated in claims, demonstrations, and visuals that communicate the performance and value of the brand across connected and broadcast TV, online video, social media, e-commerce sites, and in stores. Deep insights translated into a compelling brand idea repeated wherever consumers engage, making the brand easy to remember, reinforcing superior performance that is worth it for the price paid.

The second and related opportunity is to create a deeper, holistic connection with consumers to build brand relationships with them in the new media reality. Media fragmentation and emergence of new platforms creates an opportunity for brand builders who can best integrate across touchpoints. AI and Gen AI capability help our teams to discover consumer-relevant insights at every step of the consumer path to purchase, grounded in a unifying brand idea. We are creating the individual touchpoint experiences for each consumer at a time. These ideas are activated in claims, demonstrations, and visuals that communicate the performance and value of the brand across connected and broadcast TV, online video, social media, e-commerce sites, and in stores. Deep insights translated into a compelling brand idea repeated wherever consumers engage, making the brand easy to remember, reinforcing superior performance that is worth it for the price paid.

Shailesh Jejurikar: The third opportunity is integration with retail partners across the full supply chain and merchandising activity system. Again, the consumer understanding and brand-building capabilities we have from initial brand impulse to purchase transaction to in-home consumption are valuable assets. Integrating these with each retailer's category strategy and business model will enable our brands to create value across all retail formats. This includes activation of our brands in retail media to convey our superiority and value messages close to point of consumer purchase decision. Our supply chain capability is already a leader in the industry. Supply Chain 3.0 has driven a more complete system connection from purchase signal back through inventory systems to our production planning and material ordering to ensure consumers find the product they want each time they shop. We are well on our way in this journey across capabilities, data, and technology.

The third opportunity is integration with retail partners across the full supply chain and merchandising activity system. Again, the consumer understanding and brand-building capabilities we have from initial brand impulse to purchase transaction to in-home consumption are valuable assets. Integrating these with each retailer's category strategy and business model will enable our brands to create value across all retail formats. This includes activation of our brands in retail media to convey our superiority and value messages close to point of consumer purchase decision. Our supply chain capability is already a leader in the industry. Supply Chain 3.0 has driven a more complete system connection from purchase signal back through inventory systems to our production planning and material ordering to ensure consumers find the product they want each time they shop. We are well on our way in this journey across capabilities, data, and technology.

Shailesh Jejurikar: We are freeing up capacity and capabilities with the organization redesign we announced as part of the restructuring in June. We have built a structured data lake stocked with petabytes of relevant data. We have built data platforms, AI capabilities, programmatic shelf tools, and media creation and evaluation systems. We have supply chain platforms that can run autonomously, reacting to retail demand signals, consumer innovation needs, or productivity opportunities faster than ever before. The next step is to connect the dots, to integrate the pieces from identifying consumer friction point to product idea to product design to supply to creative concept to purchase transaction to usage in home to post-use evaluation. We will close the loop, and we believe this will create a different S-curve for our future growth and value creation centered around our consumer.

We are freeing up capacity and capabilities with the organization redesign we announced as part of the restructuring in June. We have built a structured data lake stocked with petabytes of relevant data. We have built data platforms, AI capabilities, programmatic shelf tools, and media creation and evaluation systems. We have supply chain platforms that can run autonomously, reacting to retail demand signals, consumer innovation needs, or productivity opportunities faster than ever before. The next step is to connect the dots, to integrate the pieces from identifying consumer friction point to product idea to product design to supply to creative concept to purchase transaction to usage in home to post-use evaluation. We will close the loop, and we believe this will create a different S-curve for our future growth and value creation centered around our consumer.

Shailesh Jejurikar: We're doing many things right in how we are innovating, operating, and building brands today, and I'm confident in the near-term progress we are seeing. We know the opportunities ahead of us are even bigger, and we will capture them with conviction and discipline. It took years to build the underlying platforms and capabilities, and it will take some time to fully integrate and activate these assets across the company. We know what we need to do, and we are excited by the opportunities ahead. In summary, we are confident in the short-term delivery and excited about the mid to long term as we leverage our strengths and unique capabilities to set us apart from the industry. We are inventing the CPG company of the future. We'll expand on these thoughts with some examples at CAGNY and even more as we get to Investor Day later this year.

We're doing many things right in how we are innovating, operating, and building brands today, and I'm confident in the near-term progress we are seeing. We know the opportunities ahead of us are even bigger, and we will capture them with conviction and discipline. It took years to build the underlying platforms and capabilities, and it will take some time to fully integrate and activate these assets across the company. We know what we need to do, and we are excited by the opportunities ahead. In summary, we are confident in the short-term delivery and excited about the mid to long term as we leverage our strengths and unique capabilities to set us apart from the industry. We are inventing the CPG company of the future. We'll expand on these thoughts with some examples at CAGNY and even more as we get to Investor Day later this year.

Shailesh Jejurikar: With that, I'll hand it over to Andre to cover the guidance update. Thank you, Shailesh. It's been a challenging start to the fiscal year with softer consumer markets, aggressive competition, and a dynamic geopolitical landscape. We expect stronger results in the second half, which enables us to maintain fiscal year 2026 guidance ranges across organic sales, core EPS, and adjusted free cash flow productivity. The growth rates embedded in our near-term guidance should return us to the lower half of our long-term growth algorithm as we exit fiscal 26 and head into fiscal 27. For fiscal 26, we continue to expect organic sales growth of in line to +4%. Global market growth for our portfolio footprint is around 2% on a value basis at the center of our guidance range. We're seeing progress in most regions, and we expect stronger growth in the US as interventions take hold.

Andre Schulten: Thank you, Shailesh. It's been a challenging start to the fiscal year with softer consumer markets, aggressive competition, and a dynamic geopolitical landscape. We expect stronger results in the second half, which enables us to maintain fiscal year 2026 guidance ranges across organic sales, core EPS, and adjusted free cash flow productivity. The growth rates embedded in our near-term guidance should return us to the lower half of our long-term growth algorithm as we exit fiscal 26 and head into fiscal 27. For fiscal 26, we continue to expect organic sales growth of in line to +4%. Global market growth for our portfolio footprint is around 2% on a value basis at the center of our guidance range. We're seeing progress in most regions, and we expect stronger growth in the US as interventions take hold.

Shailesh Jejurikar: As a reminder, this guidance includes 30 to 50 basis points of headwind from product and market exits that are part of our restructuring work. Our bottom-line outlook is for core EPS growth of inline to +4% versus prior year. This equates to a range of $683 to 709 per share. This guidance includes commodity costs roughly in line with prior year and a foreign exchange tailwind of approximately $200 million after tax. Taken together, no change versus prior guidance. Our fiscal 26 outlook continues to expect approximately $500 million before tax and higher costs from tariffs. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20% to 21% for fiscal 26, combined a $250 million after-tax headwind to earnings growth.

As a reminder, this guidance includes 30 to 50 basis points of headwind from product and market exits that are part of our restructuring work. Our bottom-line outlook is for core EPS growth of inline to +4% versus prior year. This equates to a range of $683 to 709 per share. This guidance includes commodity costs roughly in line with prior year and a foreign exchange tailwind of approximately $200 million after tax. Taken together, no change versus prior guidance. Our fiscal 26 outlook continues to expect approximately $500 million before tax and higher costs from tariffs. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20% to 21% for fiscal 26, combined a $250 million after-tax headwind to earnings growth.

Shailesh Jejurikar: We continue to forecast adjusted free cash flow productivity in the range of 85% to 90% for the year, and this includes an increase in capital spending as we add capacity in several categories that we incur the cash costs from the restructuring work. We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock, combined, a plan to return roughly $15 billion of cash to share owners in fiscal 26. The outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity or other cost increases, geopolitical disruption, major supply chain disruptions, or store closures are not anticipated within the guidance ranges. With that, I'll hand it back to Shailesh for a few closing thoughts. We continue to believe the best path to sustainable balanced growth is to double down on the strategy.

We continue to forecast adjusted free cash flow productivity in the range of 85% to 90% for the year, and this includes an increase in capital spending as we add capacity in several categories that we incur the cash costs from the restructuring work. We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock, combined, a plan to return roughly $15 billion of cash to share owners in fiscal 26. The outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity or other cost increases, geopolitical disruption, major supply chain disruptions, or store closures are not anticipated within the guidance ranges. With that, I'll hand it back to Shailesh for a few closing thoughts.

Shailesh Jejurikar: Stronger integrated execution to delight consumers with superior products at a superior value. Challenging markets like the ones we compete in today are an opportunity for P&G to step out from the pack and lead. We're focused on leveraging the industry's best insights, assets, capabilities, and people to return to the levels of growth and market leadership that we and you expect. With that, we'll be happy to take your questions. If you have a question, please press star followed by one on your phone. If your question has been answered or you would like to withdraw your question, press star followed by two. Your first question comes from the line of Lauren Lieberman of Barclays. Please go ahead. Great. Thanks so much. Good morning. So two kind of clear themes in the remarks that I wanted to ask about.

Shailesh Jejurikar: So Andre, first, kind of what gives you confidence in the near-term acceleration that you mentioned a couple of times? And to what degree is that about kind of comparisons and base period dynamics versus real fundamental improvement and acceleration? And then Shailesh, I know we'll get a lot more from you at CAGNY, but what gets you excited about this longer-term "reinvention of P&G"? It was a notable choice of words in the press release and then also in the prepared remarks. Thanks. Good morning, Lauren. Thanks for the questions. So let me start with path to acceleration. I think the first positive element of Q2 results is the strength of the business outside of the US. If you look at Latin America, 8% growth; Europe in aggregate growing 3%; China growing 3% on top of 5% growth last quarter. Asia, Middle East, and Africa is up 2%.

Shailesh Jejurikar: If you exclude the restructuring exits, it would be up 4%. There's real underlying acceleration in the business outside of the US. That is grounded in interventions that we've made in terms of innovation, in terms of commercial strategies, and in terms of doubling down on the precision and quality of execution in those markets, with Latin America really being ahead of the game here. That's proof for us that the core strategies we're implementing, I think, are showing the results that we want to see. The US underlying results, we believe, will improve because we don't have the base period headwinds that we saw in Q2. As you point out, I think that's part of the acceleration we expect in H2 versus Q2, not having inventory headwinds to the degree that we saw in Q2.

If you exclude the restructuring exits, it would be up 4%. There's real underlying acceleration in the business outside of the US. That is grounded in interventions that we've made in terms of innovation, in terms of commercial strategies, and in terms of doubling down on the precision and quality of execution in those markets, with Latin America really being ahead of the game here. That's proof for us that the core strategies we're implementing, I think, are showing the results that we want to see. The US underlying results, we believe, will improve because we don't have the base period headwinds that we saw in Q2. As you point out, I think that's part of the acceleration we expect in H2 versus Q2, not having inventory headwinds to the degree that we saw in Q2.

Shailesh Jejurikar: But the main element here, I think, is the fundamental execution of the same interventions we made outside of the US earlier. If you recall, the US slowdown was really a little bit delayed versus the balance of the markets. So we started in the rest of the world earlier with the innovation, commercial interventions, and execution. That same playbook is being executed in the US. Early indications where we have done this, for example, the Tide Boosted launch that is now in full distribution as of December, we're seeing results that are giving us confidence. The innovation we're launching on Olay just now on the jars with a new campaign and the launch of treatments at the same time with a new architecture gives us confidence.

Shailesh Jejurikar: The innovation we have on baby care, first wave executed now, second wave coming later, Tide evo coming in the back half of the year. So there's a wealth of innovation we're launching. We've clearly identified with our North America leadership the opportunity in sharper execution across all retail channels, and the team is committed and is turning that into execution changes. And then the simple opportunity to leverage the strength of our brands by staying fully invested across the second half in media with even better execution. So all of those elements that we executed outside the US that are showing progress, we feel will work in the US. And if we don't see any one-timers anymore in terms of base period headwinds, that will translate into stronger growth. And our objective clearly is to leave the year with share growth in the US.

The innovation we have on baby care, first wave executed now, second wave coming later, Tide evo coming in the back half of the year. So there's a wealth of innovation we're launching. We've clearly identified with our North America leadership the opportunity in sharper execution across all retail channels, and the team is committed and is turning that into execution changes. And then the simple opportunity to leverage the strength of our brands by staying fully invested across the second half in media with even better execution. So all of those elements that we executed outside the US that are showing progress, we feel will work in the US. And if we don't see any one-timers anymore in terms of base period headwinds, that will translate into stronger growth. And our objective clearly is to leave the year with share growth in the US.

Shailesh Jejurikar: Shailesh, you take the second part. Yeah, I will. Thanks, Lauren. So first, what excites me is plenty of growth opportunities. We see that everywhere, but it's not going to happen on its own. It will require us to create our own tailwinds, be it playing in a growth segment and driving it like personal care or playing in a segment which wasn't growing like best with Xevo and then having that category grow high singles. So we see growth, or you take China baby care, another example where you take and put the odds of growth with the lowest birth rates and all of that, and we find a way to grow there. So that's one thing that excites me. The second one is a unique once-in-a-generation opportunity to leverage the shifts in the landscape and our unique strengths and capabilities to set ourselves apart.

Shailesh Jejurikar: Yeah, I will. Thanks, Lauren. So first, what excites me is plenty of growth opportunities. We see that everywhere, but it's not going to happen on its own. It will require us to create our own tailwinds, be it playing in a growth segment and driving it like personal care or playing in a segment which wasn't growing like best with Xevo and then having that category grow high singles. So we see growth, or you take China baby care, another example where you take and put the odds of growth with the lowest birth rates and all of that, and we find a way to grow there. So that's one thing that excites me. The second one is a unique once-in-a-generation opportunity to leverage the shifts in the landscape and our unique strengths and capabilities to set ourselves apart.

Shailesh Jejurikar: The media landscape is changing. The retailer landscape is changing. There is a tremendous amount of technology, both from a point of what is applicable using AI, enabling a lot of other things, but even fundamentally our own product and packaging technologies, and then consumer preference and demographics, which are evolving. Then you take those and take our strengths and capabilities, brands with large consumer base. If you have a large user base and you're really delivering amazing products, you probably have the biggest fan club already right off the bat. Consumer understanding and consumer data, we have so much data that we have put in. We can get an answer even before getting started. And that flow just continues, and we are further strengthening that. Take the media spend leverage and take the different places we could be using it. That is another huge opportunity.

The media landscape is changing. The retailer landscape is changing. There is a tremendous amount of technology, both from a point of what is applicable using AI, enabling a lot of other things, but even fundamentally our own product and packaging technologies, and then consumer preference and demographics, which are evolving. Then you take those and take our strengths and capabilities, brands with large consumer base. If you have a large user base and you're really delivering amazing products, you probably have the biggest fan club already right off the bat. Consumer understanding and consumer data, we have so much data that we have put in. We can get an answer even before getting started. And that flow just continues, and we are further strengthening that. Take the media spend leverage and take the different places we could be using it. That is another huge opportunity.

Shailesh Jejurikar: Our R&D spending and capability across multiple areas of technology from formulation chemistry, substrates, devices, biology, that just enables us to innovate much more broadly. You take the China baby care. It's one thing to get the insight, another thing to find a way to put silk in the product, another thing to be able to communicate it to the consumer, bring it into packaging, bring it to life with user-generated content. So it's the ability to bring all of that together and the technology platforms and applications we've been building. And Andre talked a bit about this. I would say we have been building a lot, and I would say the future is here. It's just a little uneven. So our job is to integrate and bring it all together. Your next question will come from the line of Steve Powers with Deutsche Bank. Please go ahead. Great.

Shailesh Jejurikar: Thank you very much and good morning. I'm going to ask a question that kind of follows the same structure as Lauren's question. So the first one on the second half and improvements, if we think about things by category segment versus by geography, I guess maybe a little bit more detail on where you expect progress and sequential acceleration to manifest most clearly. It sounds like laundry and baby and perhaps skincare from what you said, Andre, but maybe you could elaborate a bit more from that perspective. And then, Shailesh, as you think about all those different pieces of operational enhancement and reinvention initiatives, how do you think about the path and timeline from here for the company to put all of them together and create those own tailwinds and win in the marketplace across the portfolio with consistency? How long does that take in your mind?

Thank you very much and good morning. I'm going to ask a question that kind of follows the same structure as Lauren's question. So the first one on the second half and improvements, if we think about things by category segment versus by geography, I guess maybe a little bit more detail on where you expect progress and sequential acceleration to manifest most clearly. It sounds like laundry and baby and perhaps skincare from what you said, Andre, but maybe you could elaborate a bit more from that perspective. And then, Shailesh, as you think about all those different pieces of operational enhancement and reinvention initiatives, how do you think about the path and timeline from here for the company to put all of them together and create those own tailwinds and win in the marketplace across the portfolio with consistency? How long does that take in your mind?

Shailesh Jejurikar: Morning, Steve. If I look across the businesses, the innovation interventions, the commercial interventions, the execution focus is consistently applied across every part of the portfolio. I will tell you the base period effects are probably a strong help when you look at family care, baby care, and even fem care. They were most heavily impacted in the first half of the year. So family care, for example, we see strong growth in January, even turning into share growth now. And we expect similar dynamics to happen across baby and fem. Baby at a global level is actually growing shares, so has returned to share growth in the most recent reading. So the momentum is there. We continue to work on the mid-tier proposition. You recall we had innovated on the top tier that continues to work well, Swaddlers Cruisers 360.

Andre Schulten: Morning, Steve. If I look across the businesses, the innovation interventions, the commercial interventions, the execution focus is consistently applied across every part of the portfolio. I will tell you the base period effects are probably a strong help when you look at family care, baby care, and even fem care. They were most heavily impacted in the first half of the year. So family care, for example, we see strong growth in January, even turning into share growth now. And we expect similar dynamics to happen across baby and fem. Baby at a global level is actually growing shares, so has returned to share growth in the most recent reading. So the momentum is there. We continue to work on the mid-tier proposition. You recall we had innovated on the top tier that continues to work well, Swaddlers Cruisers 360.

Shailesh Jejurikar: We've made the innovation interventions on Luvs a year ago. That's working. On Baby Dry, we have a two-phased approach. Phase one is executed. Phase two is coming later. So that's still work to be done. On laundry and fabric enhancers, we have very strong innovation, Tide Boost I mentioned before, the biggest laundry liquid upgrade in 20 years for consumers, and that is taking hold and working. We're preparing for the Tide evo launch. We have strong innovation across fabric enhancers as well. As you know, that's still a huge opportunity in terms of household penetration. So communication effectiveness and copy quality is improving. In beauty, in aggregate, beauty is growing 4%. We have an opportunity to strengthen growth in skincare in the US, making strong progress on SK-II outside of the US, on Olay outside of the US.

We've made the innovation interventions on Luvs a year ago. That's working. On Baby Dry, we have a two-phased approach. Phase one is executed. Phase two is coming later. So that's still work to be done. On laundry and fabric enhancers, we have very strong innovation, Tide Boost I mentioned before, the biggest laundry liquid upgrade in 20 years for consumers, and that is taking hold and working. We're preparing for the Tide evo launch. We have strong innovation across fabric enhancers as well. As you know, that's still a huge opportunity in terms of household penetration. So communication effectiveness and copy quality is improving. In beauty, in aggregate, beauty is growing 4%. We have an opportunity to strengthen growth in skincare in the US, making strong progress on SK-II outside of the US, on Olay outside of the US.

Shailesh Jejurikar: I think the new launch of Olay that is just coming out with strong retailer support, I think will accelerate that business. Personal care has momentum and will continue momentum in the US and globally. I can continue to go down the list, but I think I've given you enough depth to say this is really across the portfolio. It's the same idea, double down on the consumer, double down on the execution, double down on the quality of the brand campaign. I think that's where Shailesh is putting his focus, if I can speak for him. He's really doubling down in every review on the quality of the execution, the quality of the brand campaign, and the quality of the architecture thinking. It's stimulating thought. It's stimulating quality of execution.

I think the new launch of Olay that is just coming out with strong retailer support, I think will accelerate that business. Personal care has momentum and will continue momentum in the US and globally. I can continue to go down the list, but I think I've given you enough depth to say this is really across the portfolio. It's the same idea, double down on the consumer, double down on the execution, double down on the quality of the brand campaign. I think that's where Shailesh is putting his focus, if I can speak for him. He's really doubling down in every review on the quality of the execution, the quality of the brand campaign, and the quality of the architecture thinking. It's stimulating thought. It's stimulating quality of execution.

Shailesh Jejurikar: I think that gives us confidence from a geographic standpoint, as we talked earlier to Lauren's question, but also from a category standpoint. Well, thanks, Andre. I'll just bridge Steve from what Andre said to what I'm going to say. But some of it will be sequential, just simply because in the US, also when we make the interventions, we are extremely deliberate about making sure those interventions also drive category growth. So that's also why some of this has to happen with big innovations. But switching to your question, so I think a lot of the way to think about the future is we have, in many cases, already built platforms. Take the core data lake that I talked about earlier. I mean, that did not happen overnight, cannot happen overnight, requires data capabilities, requires partnerships, but also importantly, requires internal cultural change.

Shailesh Jejurikar: Can you give us a sense of the sort of cost of this progress, I suppose, and kind of the balance between the restructuring and some of the savings that that's going to allow for you relative to what you feel like is going to be needed, potentially, especially if you don't see that acceleration that you're going to be looking for in the coming months if you really want to stimulate the top line for this business over the next 12 to 18 months? Thanks so much. Hey, Chris, let me take a crack at this. The first part of the answer is many of the investments have been made over the last decade. If you think about the amount of money it takes to build a consistent global ERP platform, the data lake, the data governance structure, data engineering, all of that has been done.

Shailesh Jejurikar: So that was part of the results that we delivered over the past, I would say, five to 10 years. The investment to activate the technology, specifically around the innovation capabilities, the media capabilities, won't be significant. It's an investment in scaling, but the underlying technology, the underlying data, that heavy investment is already done. So in that sense, I don't expect major capital or expense investments. On the supply chain side, you see us build capacity. And as we build capacity, that capacity is built in a way that it leverages automation, digitization, both on the manufacturing side and on the warehouse side. So the elevated investment level in terms of capital is really related to building capacity, building capacity in a different way, but not fundamentally more expensive. So I don't expect, again, on the capital side, a significant shift.

So that was part of the results that we delivered over the past, I would say, five to 10 years. The investment to activate the technology, specifically around the innovation capabilities, the media capabilities, won't be significant. It's an investment in scaling, but the underlying technology, the underlying data, that heavy investment is already done. So in that sense, I don't expect major capital or expense investments. On the supply chain side, you see us build capacity. And as we build capacity, that capacity is built in a way that it leverages automation, digitization, both on the manufacturing side and on the warehouse side. So the elevated investment level in terms of capital is really related to building capacity, building capacity in a different way, but not fundamentally more expensive. So I don't expect, again, on the capital side, a significant shift.

Shailesh Jejurikar: The second part of your question on return to algorithm, I would say let us get through the next two quarters and focus on acceleration, and then we'll talk about where we see the next year and how close to algorithm we come once we have that reality under our belt. The next question will come from Dara Mohsenian of Morgan Stanley. Please go ahead. Hey, good morning. So, Shailesh, I just wanted to dial down a bit more into the US market. There's always an opportunity under a new CEO to refocus the organization and tweak areas of emphasis. Obviously, there's broad changes in the retailer environment, as you mentioned, AI technology, consumer landscape, etc., etc. And also, we're coming off a very difficult category growth environment in the US in calendar 2025.

Shailesh Jejurikar: So just as you look going forward, what are the most important priorities for the organization in terms of driving better execution, reaccelerating that organic sales growth, and specifically P&G's part of driving category growth? And part of the question is I'd like to better understand what's changing in terms of areas of emphasis of the strategy plans versus more where you're doubling down on execution and existing plans. Sure. Thanks, Darren. Few areas. So I think, as I said, I think if we get the elements of a plan right, I think there is opportunity to grow the market. So I think that is doable. What are some of the changes, as Andre talked about, the interventions short to mid-term that we are looking at and which also bleed into the long term? So it isn't just one separate short and long-term intervention.

Shailesh Jejurikar: One is the media landscape has changed very dramatically over the last few years. I think probably driven somewhat by COVID, habits, a bunch of other things. The way people consume media and content has changed dramatically. Adjusting our brand building plans to fully reflect that change and leverage it is the first big intervention we are focused on as we review plans, including in the US. The second one, linked to the retail landscape, there are a couple. But the first one is linked to when you see which channels are growing, where the growth is coming, we need to adjust the kind of innovation we do. The way we are calling it is stronger core, bigger more. Because by definition, what we are finding is just given how challenging it is to get awareness, how important it is for the big items to be there.

One is the media landscape has changed very dramatically over the last few years. I think probably driven somewhat by COVID, habits, a bunch of other things. The way people consume media and content has changed dramatically. Adjusting our brand building plans to fully reflect that change and leverage it is the first big intervention we are focused on as we review plans, including in the US. The second one, linked to the retail landscape, there are a couple. But the first one is linked to when you see which channels are growing, where the growth is coming, we need to adjust the kind of innovation we do. The way we are calling it is stronger core, bigger more. Because by definition, what we are finding is just given how challenging it is to get awareness, how important it is for the big items to be there.

Shailesh Jejurikar: For instance, even on e-commerce where you can list everything, it's really the first screen or two that matters. So having the item which has the velocity is extremely important. So the way to think about it is a stronger core, for example, is the Tide liquid relaunch. You have an amazing user base. You give them a delightful product. They continue using it, use more of it, and attract other people to come use it as well. The bigger moat, a good example is a launch of something like Tide evo, which is transformational. So you are going to get consumer attention and engagement. So we're changing the innovation to reflect that both from a point of view of how the media is being consumed, but also how the retail landscape is playing out. The third area of change is, of course, very deliberate on consumer value.

For instance, even on e-commerce where you can list everything, it's really the first screen or two that matters. So having the item which has the velocity is extremely important. So the way to think about it is a stronger core, for example, is the Tide liquid relaunch. You have an amazing user base. You give them a delightful product. They continue using it, use more of it, and attract other people to come use it as well. The bigger moat, a good example is a launch of something like Tide evo, which is transformational. So you are going to get consumer attention and engagement. So we're changing the innovation to reflect that both from a point of view of how the media is being consumed, but also how the retail landscape is playing out. The third area of change is, of course, very deliberate on consumer value.

Shailesh Jejurikar: Particularly in a market like US, a lot of it is about strengthening our proposition. Again, Tide is a great example of it, but we are going to have that pretty much across every category where we significantly improve the value by significantly improving the product performance so that the consumer notices it and feels the value. So one of the areas that we're looking at across categories is significant strengthening of the propositions. And in many of these cases, that do not come with a change in price. So we will be significantly strengthening value. So if I were to just summarize what I just said, it would be adjust to the new media landscape with how we do our brand campaigns, adjust how we innovate with much more emphasis on a strong core and a bigger more, and then ensure we're delivering really good consumer value.

Particularly in a market like US, a lot of it is about strengthening our proposition. Again, Tide is a great example of it, but we are going to have that pretty much across every category where we significantly improve the value by significantly improving the product performance so that the consumer notices it and feels the value. So one of the areas that we're looking at across categories is significant strengthening of the propositions. And in many of these cases, that do not come with a change in price. So we will be significantly strengthening value. So if I were to just summarize what I just said, it would be adjust to the new media landscape with how we do our brand campaigns, adjust how we innovate with much more emphasis on a strong core and a bigger more, and then ensure we're delivering really good consumer value.

Shailesh Jejurikar: I think having the core brand as strong as possible by improving the performance, improving the claims, the e-content, all of that, I think is the best and most urgent thing to do across the entire portfolio. So when it shows up on the landing page, it shows up as strong as possible. I think that's number one. I think there's an opportunity specifically if you look at online businesses. The willingness of consumers to actually go into higher-priced items is still very, very strongly developed. If you think about categories like haircare, if you think about categories like skincare, where small brands tend to play is in the upper end of the spectrum from a price per usage component. I think that's an opportunity for us to innovate, which is stronger core and a bigger more. And the more, especially on online, I think can be premium priced.

I think having the core brand as strong as possible by improving the performance, improving the claims, the e-content, all of that, I think is the best and most urgent thing to do across the entire portfolio. So when it shows up on the landing page, it shows up as strong as possible. I think that's number one. I think there's an opportunity specifically if you look at online businesses. The willingness of consumers to actually go into higher-priced items is still very, very strongly developed. If you think about categories like haircare, if you think about categories like skincare, where small brands tend to play is in the upper end of the spectrum from a price per usage component. I think that's an opportunity for us to innovate, which is stronger core and a bigger more. And the more, especially on online, I think can be premium priced.

Shailesh Jejurikar: I just add a couple of points, Andre, on this to what you said, which is firstly, at a broad strategic priority level, we are very, very deliberate about ensuring we win in the fast-growing segments, which may be channels or segments of a market. What is exciting to the point you made, Robert, about the e-commerce growth at a variety of retailers and a variety of countries is very often, if we can channel that right, it can dramatically grow the market size and category. And if you want to take a stark example and move away from the US for a second, we go to India where our portfolio is slightly different and has been evolving differently. E-commerce is growing probably at 10 times the pace almost of offline, and our share is about 1.8x of our offline business.

Shailesh Jejurikar: So we are very deliberate about that, whether it's the US or India or any other market, to make sure that happens. The drivers, as Andre pointed out, of winning there need certain things which we are making sure we have across the board, which includes content, which includes the item specificity, and making sure those are strong and growing and playing with the right portfolio. So those all become very critical elements, whether it's Amazon in the US or any other e-com player in the US or outside the world. The next question will come from the line of Peter Galbo with Bank of America. Please go ahead. Hey, guys. Good morning. Thanks for taking the question. And I'm now happy to be contributing very much to the baby care comps in the Galbo household.

Shailesh Jejurikar: So I wanted to ask just regarding Andre, your comments around returning to kind of the lower half of algorithm and the back half on the near term. Maybe a bit of clarification there. I think at one point in the prepared remarks, you talked about your categories growing at maybe 2%. Then there was another comment about if we took out the lap, you would have actually seen organic sales at 3%. So just maybe you can help clarify a bit on what you were trying to say with that comment as I've gotten some inbound from folks on that. Thanks very much, guys. Hey, Peter. Glad to welcome you to the Diapering Household Community. So if you look at our global categories, we see growth around 2% in terms of value. Enterprise markets are growing at about mid-single digits.

Shailesh Jejurikar: But there is a component of reduced share. So I don't want to gloss over the fact that we have worked to recover share. Partially, that's already in progress. I talked about family care. We're making progress on laundry. But the recovery in the second half will include both the base period effects moving out of the market and us recovering share. So our objective is really to leave the fiscal year with share momentum out in the US and at a global level. The next question will come from Kevin Grundy of BNP Paribas. Please go ahead. Great. Thanks. Good morning, everyone. Shailesh, I wanted to take a step back and ask for your assessment overall on the portfolio from a strategy perspective. So it's been over a decade since P&G completed its portfolio review.

Shailesh Jejurikar: Success, as you know, didn't come right away, but ultimately did and set the company on a very strong path for growth. But now, as we talked about on this call, the company finds itself in more of a transitional sort of phase of reinvention, if you will, as growth has slowed. So with that as context, I'd like your view here on whether you are generally pleased with the current portfolio. Is Procter still in the right segments in big total addressable markets, attractive returns on capital, and stronger growth? Or do you see it possible that certain businesses may make less sense today in P&G's portfolio than they may have in years past? So your thoughts there would be appreciated. Thank you. Thanks, Evan. I split it into a few parts.

Shailesh Jejurikar: If we were starting our company today, we would look at our portfolio and say, "Okay, are we in the right places?" That has been really the genesis or driver of the restructuring that we talked about six months back, where we said we need to get out of certain parts of the business because simply them being a drag or not where we saw future growth. So there's another part of it, which is just disciplined look, a continuous review of which are the right segments, and are we playing adequately in higher growth segments or not. There's a third element of it, which is when we look at categories, are we playing in the right segments? And something Andre just talked about, which is if you look at e-com, you see which category, what segments are growing, and are we present enough in some of those.

If we were starting our company today, we would look at our portfolio and say, "Okay, are we in the right places?" That has been really the genesis or driver of the restructuring that we talked about six months back, where we said we need to get out of certain parts of the business because simply them being a drag or not where we saw future growth. So there's another part of it, which is just disciplined look, a continuous review of which are the right segments, and are we playing adequately in higher growth segments or not. There's a third element of it, which is when we look at categories, are we playing in the right segments? And something Andre just talked about, which is if you look at e-com, you see which category, what segments are growing, and are we present enough in some of those.

Shailesh Jejurikar: If you look at social commerce in some categories and see, are we well represented in all segments, and we actually find a lot of opportunity at some of the higher price points in some of the categories in things like social commerce. So that's another aspect of the portfolio that we continue to strengthen. The final point I would make is we continue to look at where we can build greater strength. We've always talked about the fact that health and beauty are two areas where we find we have still opportunity to build a stronger presence, and we continue to look at opportunities which come our way there. The next question will come from the line of Peter Grom with UBS. Please go ahead. Yeah. Thank you, Albert. Good morning, everyone. I guess I just wanted to follow up on the US.

Shailesh Jejurikar: I guess you sound confident in your ability to see performance improve. But I guess I was trying to just pin down what you're expecting in terms of category growth for the back half of the year. I wasn't sure in your response to Peter's question around 1% to 2% growth, whether that's kind of the right runway we should expect moving forward or whether the guidance expects to get back to that 2% to 3%. So maybe if you could just elaborate on that, that would be helpful. Then I guess just related, at CAGNY last year, there's a lot of discussion around inventory destocking. So just any thoughts or comments on what investors should expect as we anniversary those impacts? Thanks. Hey, Peter. Yeah, thanks for the push on clarifying US category growth.

Shailesh Jejurikar: Our base expectation is 2% category growth in the back half. That's what we know, and that's what we're planning on. From an inventory standpoint, hard to predict. The only thing I'll leave you with is I would not expect any significant inventory built in the second half. That's not part of our plan. We expect some level of inventory efficiency to be driven across retailers like they always do. Some of our retail partners are finishing up supply chain interventions, and that will probably lead to some efficiency in terms of inventory levels. So I would tell you a slight headwind from inventory is probably adequate to assume on a market base that has about 2% of value growth. The next question will come from Filippo Falorni of Citi. Please go ahead. Hi. Good morning, everyone. I wanted to shift maybe to margins.

Shailesh Jejurikar: For the second half of the year, is it the right expectation to think that we should see an improving margin trajectory as well, considering the assumed improvement that you're embedded in the US market, which is your highest margin business, and given the commodity outlook looks a little bit more favorable in your guidance? And then below the gross margin line, Shailesh, you mentioned a lot about the interventions that you're planning, including the US business. Can you help us quantify the sizing of those interventions? Where would they show up, whether it's with more advertising, more R&D, more promotional investment? Any help like sizing and quantifying those impacts will be helpful. Thank you. Good morning, Filippo. Let me start. At the risk of disappointing you, I will not give you margin guidance for the back half.

Shailesh Jejurikar: I think the margin will be an outcome, and we will have to tactically maneuver to see where we want to invest for the strongest possible growth. We focus on top line, and we focus on EPS. As you will have noticed, our guidance ranges on both are relatively wide. They are wide because the outcomes will vary. There's still a lot of variability. The most important variability to the margin line will be our conviction and need to invest. So it's hard for me to give you a good indication of where that's going to land because it's going to be entirely driven by our ability and conviction to continue to invest in the brands. Where that investment comes, I can start, Shailesh, and you jump in. I think it's mostly in the range of, again, the innovation we're launching.

I think the margin will be an outcome, and we will have to tactically maneuver to see where we want to invest for the strongest possible growth. We focus on top line, and we focus on EPS. As you will have noticed, our guidance ranges on both are relatively wide. They are wide because the outcomes will vary. There's still a lot of variability. The most important variability to the margin line will be our conviction and need to invest. So it's hard for me to give you a good indication of where that's going to land because it's going to be entirely driven by our ability and conviction to continue to invest in the brands. Where that investment comes, I can start, Shailesh, and you jump in. I think it's mostly in the range of, again, the innovation we're launching.

Shailesh Jejurikar: And Shailesh talked about improving value by driving significant performance improvements on the core propositions. That will be an investment we're making that's baked into our assumptions. And the second component is to communicate those investments effectively and consistently across the balance of the year. So the media side is an important part. I wouldn't expect a significant increase year over year, but consistent media spend across the second half. And the third one is trade-related spending to drive trial, create display visibility, secondary placement in store. Again, our path chosen is not heavy investment in promotion depth and price. We don't believe that's market constructive. But it will be to drive trial of those superior propositions. So that's the third bucket. So product, media, and communication, and in-store visibility and trial. Yeah, I think you covered it.

And Shailesh talked about improving value by driving significant performance improvements on the core propositions. That will be an investment we're making that's baked into our assumptions. And the second component is to communicate those investments effectively and consistently across the balance of the year. So the media side is an important part. I wouldn't expect a significant increase year over year, but consistent media spend across the second half. And the third one is trade-related spending to drive trial, create display visibility, secondary placement in store. Again, our path chosen is not heavy investment in promotion depth and price. We don't believe that's market constructive. But it will be to drive trial of those superior propositions. So that's the third bucket. So product, media, and communication, and in-store visibility and trial.

Shailesh Jejurikar: Only thing I would say is the ratios of that vary based on the category. So the mix of which one needs a little more on product, which one needs a little more on advertising or visibility will vary. So that's the only point I would add to what you said, Andre. Our next question today will come from Bonnie Herzog of Goldman Sachs. Please go ahead. All right. Thank you. Good morning, everyone. I guess I had a question on your grooming segment. Organic sales were flat in the quarter, which was a pretty big deceleration versus last quarter with volumes inflecting negative and then margins contracting nearly 300 basis points. So could you provide a little more color, I guess, on what drove the weakness on volumes? And if there are any other factors behind the margin contraction outside of volume deleverage?

Shailesh Jejurikar: And then maybe lastly, how should we think about the segment for the second half in terms of whether it's innovation and whether the business can accelerate? Thank you. Good morning, Bonnie. I think you answered the first part of the question. I think the margin component and the bottom line component is an outcome of the top line. It's obviously a high-margin business. And so if the volume's slowing, that translates into the bottom line slowing, specifically since we don't curtail the investment in the business. Superiority investment across grooming is very important. The timing of the grooming business is heavily related to initiative timing. So year over year, the phasing of brand initiatives, female grooming, and male grooming initiatives is a driver in the quarterly profile that you see. On the second half, like other businesses, we expect modest acceleration in grooming related mostly to the US.

Andre Schulten: Good morning, Bonnie. I think you answered the first part of the question. I think the margin component and the bottom line component is an outcome of the top line. It's obviously a high-margin business. And so if the volume's slowing, that translates into the bottom line slowing, specifically since we don't curtail the investment in the business. Superiority investment across grooming is very important. The timing of the grooming business is heavily related to initiative timing. So year over year, the phasing of brand initiatives, female grooming, and male grooming initiatives is a driver in the quarterly profile that you see. On the second half, like other businesses, we expect modest acceleration in grooming related mostly to the US.

Shailesh Jejurikar: Probably the last point I would make is in US, we are also looking at changing the way our shelves are in many of the retailers and significantly improving how grooming comes across as a shopping experience. Our next question will come from the line of Kaumil Gajrawala of Jefferies. Please go ahead. Hey, guys. Good morning. If we could talk a bit about usage and volume, because there's so many puts and takes on your quarter. But to the extent that you're able to calculate what actual usage is in the households, has that sort of trended off as we got into the front half of this fiscal year? Is it about the same, and the rest sort of within it is just noise? I think, Kaumil, that is still a huge opportunity in our categories.

Shailesh Jejurikar: Usage volume growth is slow, honestly flat if you look at the front half of the year and even in the last quarter, both in the US and in Europe. So re-accelerating household penetration, re-accelerating user growth is a big part of what we're focusing on. And if you think about it, a lot of the growth in the past few years has been price-driven, right, as we came through the inflationary cycle of the supply chain crisis in all of our categories. And so I think the opportunity for us now is exactly what Shailesh described. It is to improve the value proposition for consumers by diligently constructing propositions that have a perfectly matching performance profile, well communicated and executed without raising the price so we can make the proposition attractive to more households, more consumers, more consistently.

Usage volume growth is slow, honestly flat if you look at the front half of the year and even in the last quarter, both in the US and in Europe. So re-accelerating household penetration, re-accelerating user growth is a big part of what we're focusing on. And if you think about it, a lot of the growth in the past few years has been price-driven, right, as we came through the inflationary cycle of the supply chain crisis in all of our categories. And so I think the opportunity for us now is exactly what Shailesh described. It is to improve the value proposition for consumers by diligently constructing propositions that have a perfectly matching performance profile, well communicated and executed without raising the price so we can make the proposition attractive to more households, more consumers, more consistently.

Shailesh Jejurikar: So the volume component will have to be a part of how we grow markets. As we talked about the second half, we believe this will take time. We don't think this is an easy fix, nor will it come quickly. Our growth trajectory that I just highlighted, the 2% value growth in the US, which is the assumption for H2, largely assumes that the volume component remains slow. Just add one point, reinforcing, Andre, what you said. But as we get on the journey of growth, I think user growth will be one which we place a lot of emphasis on. As Andre said, between user usage and price mix, I think the last five years probably had, due to inflation, a bigger component of price mix. We think the future is going to be a lot more about user growth as the foundation.

Shailesh Jejurikar: As you had a very strong productivity in the quarter, so are you thinking of, as you go in terms of reinvestments and all the media initiatives, innovation you've made, and perhaps by spec architecture for affordability, should we expect that to be canceled out? Or perhaps, as you see this environment and the opportunity to lean into more of a value proposition, how are you thinking of the balance between top line and bottom line? Thanks, Andrea. From a share perspective, it certainly is our objective to leave the year with share growth, both in the US and in the rest of the world. But we also acknowledge that that is an outcome of how well we execute, the competitive environment, other factors in terms of geopolitical dimensions, consumer health. So that's why we still maintain the range.

Shailesh Jejurikar: And within the range, if we end up in the mid to higher section, that will probably have an element of share growth. If we end up in the lower section, it won't. But be assured, our team's energy is exactly that. We need to grow share by growing more users, growing more households. And that's where all the innovation and the investment is focused. On the balance between productivity flow through top line and bottom line, I'll go back to what I said earlier. It depends on what we see happening. We will certainly err on the side of more investment to drive more user growth, drive household penetration in the short term. If we are convinced that we have the right innovation, if we are convinced that we have the right marketing program, the right commercial program, we will double down.

And within the range, if we end up in the mid to higher section, that will probably have an element of share growth. If we end up in the lower section, it won't. But be assured, our team's energy is exactly that. We need to grow share by growing more users, growing more households. And that's where all the innovation and the investment is focused. On the balance between productivity flow through top line and bottom line, I'll go back to what I said earlier. It depends on what we see happening. We will certainly err on the side of more investment to drive more user growth, drive household penetration in the short term. If we are convinced that we have the right innovation, if we are convinced that we have the right marketing program, the right commercial program, we will double down.

Shailesh Jejurikar: But we will be diligent in that assessment. So if we feel we've got the right program, we absolutely will continue to reinvest productivity. The next question will come from Olivia Tong of Raymond James. Please go ahead. Great. Thanks. Good morning. I want to talk a little bit about the margin with productivity savings, about 270 basis points this quarter. You reinvested 220 of that, which I think highlights your pricing productivity and reinvestment even as demand remains lower. So could you drill into that a little bit more in terms of what limitations there could be over the balance of the year on the price and productivity levers, particularly on price? Your implied second half guidance assumes some fairly strong margin leverage, but I want to understand those moving parts.

Shailesh Jejurikar: Then in terms of the guidance range, you mentioned in answer to another question that you can grow even without additional headcount, leveraging sales per employee. What's the risk that you might need to adjust those investment levels as you think about delivering on EPS? Thanks. I'll give it a shot, Olivia, but you can certainly follow up with the IR team to get you more detail. I think the margin productivity side, I feel very good about. We will continue to deliver in the range that we've delivered on. We have visibility to the productivity components for the next two to three years. We have the effect of the restructuring program kicking in. So I feel good about our ability to continue to drive productivity at the level we need to deliver investment and a reasonable EPS outcome.

Shailesh Jejurikar: For the longer term, I'll tell you, I am fairly convinced, and Shailesh will jump in here, that with the restructuring program, the way we're approaching the organization design, the way we're integrating technology into the way we work, and the way we want to decrease functional barriers, we think that's a powerful path forward to continue to drive organizational effectiveness and honestly free up a ton of capacity of our teams from internal work to focus on what really matters, which is the consumer innovation and execution. I agree with everything, Andrea. I would just add a couple of points to frame what we are trying to do, which is productivity as fuel for growth, growth as a fuel for EPS. So we really think productivity enables us to do what we need to get the growth, which gives us balanced top and bottom line growth.

Shailesh Jejurikar: So that is really the effort. So as you think of that, and that's really what Andre was also saying, is we're doing the productivity. We're very confident, by the way, in the productivity. But that finally is going to success on that is getting us a growing top and bottom line. The next question will come from the line of Robert Moskow of TD Cowen. Please go ahead. Hi. Thanks for the question. Your Procter & Gamble probably does more than any CPG company to grow categories through innovation and improving performance. That's always been your mantra. But when you look at the data in terms of the past 12 weeks or even the past year, the percent of products sold on promotion at Procter is substantially higher by about 200, 300 basis points.

Shailesh Jejurikar: So I'm wondering, do you think this data accurately represents what your approach is in market? Because it would indicate that there is more need to move volume. Or is it inaccurately depicting what you're trying to do to improve the volume? Thanks. Hey, Robert, I'll give you a two-part answer here. Good question. I think I've repeatedly said that I don't see a reason why the categories will not move back to pre-COVID levels of promotion, which are around 30%. That will happen. It's just a competitive dynamic, a retailer dynamic, and a consumer dynamic. And it's happening sequentially over time. The promotion read you're getting is not wrong, but it only captures part of what the market reality is. It doesn't capture forward gift cards. It doesn't capture layered couponing, which is a significant part of competitive promotion that we're seeing. You're right.

Shailesh Jejurikar: Our promotion volume is increasing and probably will increase in the second half. As we execute the innovation, part of creating trial for those innovations is to deliver promotion visibility. Not all of those promotions come with deep price discounting. In many cases, they don't, but they show up in the promotion line. So what I'll tell you is our objective is to grow categories. Have we done this consistently over the past 12 months? No. That's what Shailesh talks about, "We need to grow users, and we need to grow usage," that is the part of category growth that we're striving to drive. And part of that has to be to generate trial. Because if you don't have new users try superior propositions, you don't get repeat, and you don't get the growth. Thanks.

Our promotion volume is increasing and probably will increase in the second half. As we execute the innovation, part of creating trial for those innovations is to deliver promotion visibility. Not all of those promotions come with deep price discounting. In many cases, they don't, but they show up in the promotion line. So what I'll tell you is our objective is to grow categories. Have we done this consistently over the past 12 months? No. That's what Shailesh talks about, "We need to grow users, and we need to grow usage," that is the part of category growth that we're striving to drive. And part of that has to be to generate trial. Because if you don't have new users try superior propositions, you don't get repeat, and you don't get the growth.

Shailesh Jejurikar: But as the US growth slows back to sort of, I guess, more normalized levels, and we see continued growth in emerging markets, for example, what you're seeing in Latin America, how do you think about the regional mix of the business and the advantages that you see the business is having? Are those regionally agnostic, or can they be applied globally? Great question. Let me take a crack at it. So I would say our task, always given our business size and other things, is first and foremost to get US growing faster. And I believe it is doable, and we have plans to try and do it. That is really part of what we talk about when we say we want to create the future. But similarly, we think there are tremendous opportunities outside the US, which we are very focused on.

Shailesh Jejurikar: What we have tried to do is get very deliberate about which markets have that potential and then really double down in making sure we are playing to the future there. So a lot of the portfolio choices we have made over the past six to nine months have really been to put us in a position that we are playing in winning segments. Even if I take Latin America, we made the choice to change our business model in Argentina. A large part of that enabled us to much better focus on Mexico and Brazil. We changed the organization structure in the rest of Latin America, which then enabled us to get much more consumer focus. Now we are seeing, as Andre mentioned earlier, 9% growth in Brazil. That's not the pace the market is growing at. Double-digit in Mexico.

What we have tried to do is get very deliberate about which markets have that potential and then really double down in making sure we are playing to the future there. So a lot of the portfolio choices we have made over the past six to nine months have really been to put us in a position that we are playing in winning segments. Even if I take Latin America, we made the choice to change our business model in Argentina. A large part of that enabled us to much better focus on Mexico and Brazil. We changed the organization structure in the rest of Latin America, which then enabled us to get much more consumer focus. Now we are seeing, as Andre mentioned earlier, 9% growth in Brazil. That's not the pace the market is growing at. Double-digit in Mexico.

Shailesh Jejurikar: That's definitely not the pace the market is growing at. So I talked about India a bit earlier in a different context. But again, playing to the future growth there, which is heavily e-com, having spent a lot of my life there, it's staggering to see the pace of change over the last five years in that space. So we're very deliberate on the big markets outside the US on how we are going to get the growth. Of course, China still remains a big one. It has a slightly different profile of where it is coming from, but still a lot of future opportunities. So we do believe many of these large markets. We are well positioned to play to where the future is going. And I would just say it's the end. We need to get the US growing, and we need to grow outside.

Shailesh Jejurikar: And I think the good news is maybe only one point to add is the margin structure that Jon and then Shailesh have built in enterprise markets allows consistent investment because we can cover the cost of capacity, the cost of capital. So it's not dilutive. It funds itself. And that's the core idea behind expansion and growth in enterprise markets. Your final question will come from the line of Michael Lavery of Piper Sandler. Please go ahead. Good morning, and thanks for the question. Just wanted to come back to some of the share opportunities and how to think about it relative to value for the consumer. You've talked about the importance of that, but also it sounds like no real price changes are under consideration. You've pointed out some of the premiumization. Some smaller brands are doing effectively and maybe delivering better benefits and value in that way.

Shailesh Jejurikar: But you've also had, of course, some private label strength and share pressure. I guess how do we reconcile all of it? And maybe is it as simple as just a waiting game for the consumer health to improve? Or is there more to do to move the needle on how the consumer sees value other than just sort of trading them up? Yeah. No, great question. I would say it's not one thing because a very critical part of our strategy of delivering value is also having a portfolio. So Luvs plays an important role in baby care in that sense. Similarly, on laundry, we have a portfolio with Gain and Tide Simply. So across markets, we do build that portfolio to ensure we are playing at a variety of price points and making our products accessible.

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