Q4 2019 Earnings Call
Good morning, and welcome to Procter and Gamble's quarter end conference call.
PNG would like to remind you that today's discussion will include a number of forward looking statements.
If you will refer to PNG. His most recent 10-K 10-Q and 8-K reports you will see a discussion of factors that could cause the companys actual results to differ materially from these projections.
Also as required by regulation G Procter and gamble needs to make you aware that during the discussion the company will make a number of references to non-GAAP and other financial measures Procter and Gamble believes these measures provide investors with useful perspective on the underlying business trends and has posted on its investor Relations website, Www Dot PG investor Dot Com a full reconciliation of non-GAAP financial measures now I will turn the call over to P. and G.'s, Vice Chairman, Chief operating Officer, and Chief Financial Officer, John Butler.
Good morning.
David Taylor Chairman of the Board, President and Chief Executive Officer, and Jon Chappell Your Vice President Investor Relations joining me this morning.
I'm going to provide an overview of company results.
David is going to update us on four strategic focus areas superiority productivity constructive disruption and organization and culture.
I'll close with guidance for fiscal 2020 and will of course take your questions.
For the fiscal year, we just completed organic sales up 5% core earnings per share up 7% currency neutral core earnings per share up 15%.
Adjusted free cash flow productivity, 105%.
$12.5 billion of cash returned to shareowners.
Each of these metrics in line or ahead of objectives set going into the year.
GAAP earnings per share are lower reflecting a onetime noncash accounting charge to adjust goodwill and intangibles carrying values of the Gillette shaving business.
Grooming continues to be a very attractive business organic sales up year over year April June sales up 4%.
A truly global business with strong market positions.
The highly profitable and cash generative operation.
Initial care carrying values for Gillette were established nearly 14 years ago in 2005.
We significantly over delivered acquisition cost synergy commitments, but as outlined in each of our quarterly filings for the past three years. This global business has faced significant and increasing currency impacts over the last decade.
Lover, shaving frequency has reduced the size of the developed blades and razors market.
More recently and much less of an impact new competitors have entered at prices below the category average.
These factors caused us to reduce the accounting carrying value for this business on our balance sheet.
As I mentioned earlier, all core metrics organic sales growth core earnings per share growth currency neutral core earnings per share growth adjusted free cash flow productivity cash returned to shareowners in line or ahead of objectives set going into the year.
All of this progress against strong headwinds.
Foreign exchange commodities transportation costs and tariffs created a 1.4 billion dollar fiscal year after tax headwind.
A 13 point negative impact on core earnings per share.
Within this currency has a more than $900 million after tax.
Large markets with significantly weaker currencies.
British pound down, 4% Mexican peso down for Chinese Yuan down five Russian ruble down 12, Brazilian real down 18, Turkish lira down 14, the Argentinian peso down 97%.
Commodity cost increases of $400 million aftertax pulp up 14% resin up seven propylene uptown and kerosene up 16%.
Trucking costs up significantly in the us with increases in many additional markets.
Annualized tariff impacts approaching $100 million.
All overcome.
With innovation, driven volume growth pricing and productivity, yielding strong results for the year.
Capping a strong year of very strong April June quarter.
Organic sales up more than 7%.
The four quarters of the fiscal year for four five and seven on the top line.
Volume pricing and mix each contributed into topline momentum.
Broad based growth all 10 global categories growing organic sales.
Skin and personal care and personal healthcare each up mid teens fabric care and home care each up double digits.
Oral care and feminine care up high singles.
Family care and grooming each up mid single digits.
All six geographic regions also growing organic sales.
India Middle East and Africa up mid teens, greater China up double digits, North America, Latin America, and Asia Pacific up High singles Europe up mid singles.
Strong organic sales growth in our two largest markets up over 7% in the US 10 out of 10 categories growing.
Continued progress in China, improving from a 5% sales decline in fiscal 16, 1% growth in fiscal 17, 7% organic sales growth last year fiscal 19 growth up 10% up 12% in the April June quarter.
Global ecommerce organic sales up 25% now well over $5 billion in annual sales or about 8% of the company total.
Strong and improving market share trends.
Aggregate global value share up versus year ago, 33 of our top 50 category country combinations holding or growing value share in fiscal 19.
Up from 26 in fiscal 18 23 in fiscal 17 and 17 in fiscal 16.
So in chronological order 17, 20, 326 and now 33.
Eight of 10 global categories, holding or growing share.
On the bottom line core earnings per share of $1.10 up 17% versus the prior year.
Up 26% on a currency neutral basis.
Fourth quarter margins, improving both sequentially and versus year ago.
Core gross margin up 120 basis points strong topline leverage and productivity improvement more than offset FX commodity cost and mix headwinds on a currency neutral basis core gross margin up 160 basis points.
Core operating margin increased 130 basis points on a currency neutral basis up 210 basis points, including 340 basis points of productivity driven cost savings.
Cash flow remains strong.
Adjusted free cash flow productivity of 122% for the quarter, 105% for the year.
12, and a half billion dollars of cash returned to shareowners, a combination of dividends and share repurchase.
Our board increased the dividend by 4% in April the 60, threerd consecutive annual increase and 129th consecutive year in which PNG has paid a dividend.
PNG as one of only 10 us companies to pay a dividend from more than 120 consecutive years.
Only three us companies have increased dividends more consecutive years and Procter and gamble.
Over the last 10 years, the annual dividend has increased from $1.64 per share to $2.90 per share up almost 80% returning almost $67 billion of cash to shareowners.
Over the last decade, Weve returned more than 100% of net earnings to shareholders as dividends and share repurchase.
In summary, we delivered or over delivered on each of our going in targets.
Other than GAAP earnings per share.
We did this while offsetting a foreign exchange commodity transportation and tariff tsunami.
We built momentum on sales share and margin as the year progressed.
We delivered very strong constant currency core earnings per share growth.
And continued our best in class track record of cash returned to shareowners.
We still face challenges and continue to operate in a very difficult competitive and macro landscape.
Our work is not over but we're making progress behind the integrated and mutually reinforcing strategies, David will discuss next David.
Thanks, John one of the most encouraging points about the strong results. We delivered is the breadth of the progress we've made across the categories and countries. The breadth of grossing gives me confidence that the strategies and focus areas that are guiding our choices and investments are the right ones. It also gives me confidence that we are building the capabilities to sustain the growth at or above market levels.
The mutually reinforcing strategic choices. We've made are critical to the progress we focused and strengthen our portfolio in daily use categories, where performance drives brand choice in categories, where we occupy a number one or number two position, which have historically grown faster than the balance of the company in a more profitable in the benefits of the portfolio choices are clearly paying out.
Within these 10 categories, where performance drives brand choice, we've taken a deliberate steps to invest in advance the superiority of products and packages brand communication retail execution and value advantage growing the markets in which we compete in strength in the long term health and competitiveness of our brands. We've raised minimum standards of competitive advantage across each of the superiority drivers and are investing to meet or beat these new standards in superior offerings drive market growth and this is one thing thats incredibly important about the plan increasing consumption, creating additional usage occasions, bringing more spend into a category grows the market.
This creates topline growth that is typically more sustainable than simply taking business from a competitor.
It creates a winning proposition for our retail partners the pie expansion versus a zero sum, it's a positive versus negative spiral.
And when were where we grow markets disproportionately in more sustainably we build share.
We've spoken a lot about the role of product and package superiority and growing markets in PNG share, but communication go to market and value must also win.
We start with understanding our consumers in their needs wants and aspirations. We then create advertising that makes you think talk laugh cry smile share and of course by.
Advertising to drive growth for categories and brands.
Advertising that clears the highest far for creative brilliance, sparking conversations effecting attitudes changing behavior and sometimes even defining popular culture.
This year at the awards, which recognize the most effective marketing communication PNG one the top honor most effective effective marketer and tied one the Grand Effie Award.
At the Cannes Lions International Festival of creativity, PNG advertising and 16 Lions three gold six silver and seven brands.
And at the event, we announced a series of innovative new creative partnerships that reinvent advertising by merging the world of advertising with other creative worlds such as film, making music comedy journalism in technology.
Superior in store and online execution also grows categories and our brands the right trade coverage with category mastery with the right product forms sizes and prices and the write in store or online presence in merchandising execution.
Delivering against key business drivers for each category and brand across all channels in every store every day.
On the last earnings call in recent conference presentations, John is taking you through some of the recognition we received directly from some of our top customers and in third party retailers assessments of manufacturers capabilities. We very much appreciate each of these recognitions, but what really matters is retailers improved view of PNG as a partner in joint value creation.
Driving superiority to grow categories earn stronger distribution share of shelf display and feature.
The fifth element of superior execution is a winning consumer and customer value equation.
For consumers. This means a product that meets an important need in noticeable in superior way with a package that enhances the usage experience with compelling communication presented in a clear and shoppable way at a compelling price.
For the customers. This means margin penny profit SREC generation basket size, and very importantly category growth.
We're going to continue to work to make progress and superiority extending our margin of advantage and increasing the quality of execution, which will require ongoing investment.
The need for this investment and the need to offset the macro cost headwinds, we talked earlier and the need to drive balanced top and bottom line growth include including margin expansion underscores the importance of productivity.
We are driving cost savings and efficiency improvement in all facets of the business.
Now just past the midpoint of our second five year 10 billion dollar productivity program.
Through our productivity efforts PNG is maintained in built its status as a highly profitable company and the past John has shown you the charts before and it deserves repeating PNG before tax operating margins are among the highest in the industry behind only reckitt and Colgate, whose margins reflect our concentrations in healthcare.
We have significantly significant below the line advantages operating with one of the lowest interest expense percentages one of the lowest tax rates, putting us near the top of the industry in after tax margin.
Already highly profitable and aggressively driving more savings.
These results are due to a sustained intense focus on improving productivity across all cost falls and we will continue to focus on this because it will be a critical driver of our success.
Superiority and productivity are critical but insufficient to keep US ahead in a world with rapidly changing retail environment quickly evolving consumer needs media transformation in revolutionary changes in technology, we must and are leading the constructive disruption of our industry across all areas of the value chain.
We are disrupting the way, we innovate by accelerating the speed and quality of learning through lean innovation.
This new approach is delivering significant benefits in time and cost helping to reduce our learning cycles for months even days.
We're monetizing innovation across industries to accelerate investment in R&D and broaden society impact.
We are disrupting retail execution.
SK twos using AI supported technologies to enhance the consumer shopping experience with personalized recommendations based on smart scan super person skin product browsing on virtual shelves and shopping through the wave of the hand.
It's the first augmented reality retail environment, which merged is physical and digital technology to get the shopper exactly the skin care regimen needed a new smart packaging that features a companion app for personalized skincare every day.
Going beyond broad demographic targets to deliver exactly what she is looking for solutions designed to work for her.
We're reinventing brand building from wasteful mass marketing to mask, one to one brand building fueled by data and technology.
We're moving from generic demographic targets like women ages 18 to 49 to more than 350 precise smart audiences like first time moms are milenio young professionals or first time washing machine owners to reach the right people at the right time.
At the right place.
We continue to drop our supply chain with transformation across the globe in Europe , we've optimized but distribution in manufacturing infrastructure to fewer scaled multi category operations and optimum locations manufacturing sites are now down 30% distribution centers are down 35%.
We're making organization structure and culture changes to better position us to win.
We are taking steps to simplify the organization focusing effort clarifying responsibility, increasing accountability and structuring compensation and incentive programs to better align with these objectives.
We have an incredibly talented organization of more than 90000 fully committed people. They have moved mountains for years to deliver the progress. We're discussing this morning, they deserve the credit.
We have historically put in their way alot competing management structures lack of clear accountability lack of in decision, making many people who can say no and few who can say yes.
On July one we moved to a new organization structure designed to de matrix the company and provide even greater clarity on responsibilities and reporting lines to focus and strengthened leadership accountability.
We are operating as six industry based sector business units or SP use the Sps have profit and loss responsibility for the largest markets the focus markets, which represent about 80% of sales and 90% of profit.
The SBQ Ceos are focused on winning and driving value creation opportunities in these important markets.
We're optimizing the remaining markets, which we're calling enterprise markets to accelerate growth in dynamic macro environments. The benefit of this design is the creation of a more focused agile and accountable organization operating at a lower cost focused on winning through superiority fueled by productivity and operating at the speed of the market.
North America was the pilot regions beginning three years ago for the end to end SBQ approach in China. Following a year. So later the success of this design is evidenced by the sales and share progress we've made in both of these markets.
We are committed to winning everywhere, we choose to compete across both the focus and enterprise markets and we want to win the right way, we want to be a force for good in a force for growth.
Weve integrated citizenship into how we do business, enabling us to have a bigger impact on the people we serve the communities in which we live and work in the broader world that surrounds us in turn this helps us grow and build our business.
I hope this is evidenced that we have been disrupting PNG. The choices, we've made to focus and strengthen our portfolio and daily use categories were performance drives brand choice to establish an extend superiority of our brands to lead constructive disruption across the value chain to make productivity an integral part of our culture, just as much as innovation and to improve the organization focus agility and accountability. These are not independent strategies, they reinforce and build on each other.
They position us well within our industry to deal with near near term challenges from macro headwinds trade transformation and anticipated competitive response, and they had a foundation for stronger balanced growth and value creation over the short mid and long term.
I'm going to turn it back over to John to cover our outlook for fiscal 2020.
We provided the details of our outlook in the press release published this morning, So I'm going to focus on the primary guidance metrics in this call.
We expect organic sales growth in the range of 3% to 4%.
We're operating markets in markets that are currently growing at a rate somewhat above 3% on a value basis.
Our guidance range brackets current market growth with a bias toward continued share growth.
While still expecting a strong competitive response.
The range also implies acceleration of two year average growth rates moving from 3% to your average growth for fiscal years, 18, or 19 to more than 4% average organic sales growth across fiscal years, 19, and 20 in a market growing somewhat above 3%.
On the bottom line, we expect core earnings per share growth of 4% to 9% getting us back to our target mid to high single digit range.
Neither topline or bottom line guidance ranges are layoffs.
Both represent meaningful sequential progress.
Innovation, driven market sales and share growth.
Meaningful gross margin expansion.
While investing in product and package superiority.
Increased investments in media and other demand creation marketing programs.
Base period comps that include the Boston land sale and the gain on the sale of two oral care brands in Europe .
For fiscal 2000 fiscal 2020, we will continue our long track record of significant cash generation.
And return to shareholders ultimately the most important and enduring measure of a successful enterprise.
We are targeting another year of 90% free cash flow productivity, we expect to pay over $7.5 billion and dividends and repurchase $6 billion to $8 billion of shares in fiscal 2020.
Our guidance is based on current market growth rates current commodity prices current foreign exchange rates.
Significant currency weakness commodity cost increases or additional geopolitical disruptions are not anticipated within this guidance range.
Now, let me hand, it back to David for closing comments.
We delivered our fourth strong quarter in a row continued to build topline momentum and improving the quality of our bottom line results market shares have been improving for eight consecutive quarters. Our efforts to extend our margin of competitive superiority to drive productivity savings to fund investments for growth and enhance our industry, leading margins to simplify organization structure increase accountability to constructively disrupt our industry are driving improved results.
But we know our work isn't finished yet to further strengthen results. We will continue to accelerate the pace of change the macro environment and strong competition are sure to present new challenges in the years ahead.
But we're better positioned to manage through these challenges that we have been in many years with that John and I are happy to take your questions.
Ladies and gentlemen, if you have a question. Please press star followed by one on your phone. If your question has been answered or if you would like to withdraw your question Press Star followed by two.
Your first question comes from the line of Olivia Tong with Bank of America.
Great. Thank you good morning, Tom.
You guys have just finished which is what is arguably your best hearing about a decade. So can you just talk through my quarter sort of order of priority and the changes we made that have led to this the improving innovation and portfolio changes divestitures, you data from several years ago and how the organizational changes that are now in place to help to keep the help that.
Excuse me help help to keep the upside sustainability. Thanks.
Olivia Thank you the.
The strategy truly is working and we keep reinforcing it but I'd come back to it the combination of first starting with the consumer making sure we delight the consumer and we do that through superior products package communication go to market capability and value is really making a difference and what allows us to sustain it and you're seeing this now for three years in more and more category country combinations is an organization design this putting accountability closest to where the market is in a way that it's working and we've clarified responsibilities with focus markets and enterprise markets recognizing that not all markets are exactly alike.
And to me, what Weve seen increasingly each semester. If you will the organization respond clear priorities clear strategy on superiority they understand if internalized and doing a great job on productivity across all cost buckets, and we continue to work to clarify the organization designed in a way that delivers an engaged agile and accountable organization and you're seeing that better and better. It was reflected in the employee survey this year, where the confidence in the strategy went up significantly by folks across markets and Gpus, which to me speaks to to me an alignment of 90 plus thousand people on a plan Thats working and that's why I think you're seeing the sequential progress that we've seen quarter to quarter semester to semester, we really look year to year and so it's very encouraging.
But I would just add a couple of things that.
David.
Addressed in his.
Prepared remarks. The first is the thing that gives me the most confidence and sustainability of results is delivering growth by growing markets.
And there are many examples.
The inflection in the rate of the laundry market growth in North America and other.
Markets behind pods significant acceleration in the rate of the market growth of fabric enhancers behind things like bees.
Significant doubling actually of the growth of the adult incontinence market through always discreet and there are many other examples but those tend to be much more sustainable and much more profitable than when we're simply taking share from competitors. The second piece. Just briefly is David also mentioned this is the is the importance of balance that's the only way you sustain this level of growth and investment and still offer returned to shareowners, we need to grow both the top and bottom line the year in the quarter that we just completed our evidence of our ability to do that and we've got a leadership team that is committed to continue that.
Your next question comes from the line of Lauren Lieberman with Barclays.
Thanks, Good morning.
I was hoping I would ask the question looking person example, tangible examples because so much of the brand reinvestment working portfolio work that we've heard about that you guys have talked to the secondary U.S. focus.
And then sometimes sitting here, it's a little tough to get a full picture of the PNG World. So if you could talk a little bit about.
Some things that are maybe happened the other focus markets.
An example would be we read last month about this relaunch of Oriental therapy skin care in China, just you could run through some of that maybe to focus on China. Some of the portfolio work that you're doing.
We may not be that.
Aware of just sitting as the our EMEA Lac thanks.
Lauren there are many examples then we can kind of run around countries and categories, but I'll just give a few just to sprinkle around the world other than the us.
If I look in Europe .
Where you've seen an acceleration of growth.
Our dish business and I'll take auto dish is when we havent talked a lot about we've rolled out platinum across many of the countries. It's again, it's a trade up it's a superior proposition and we've seen meaningful share growth across many countries in Europe , where auto dish now as one of our faster growing categories.
If we look in China, we've given many examples over the last couple of years, we now have fem care growing double digits, you've got laundry growing end, you've got beads in pods and you've got just a series of.
Initiatives across almost each country on whatever is the most appropriate for that country, but two of them that I mentioned are those dish.
In Europe in frankly several of them in.
China.
But thats true as well I can give you almost good every focus market and there'll be a list, but it's hard to list one because each of the 10 categories. Now has a very specific innovation plan that addresses what it takes to grow the markets and better delight the consumers.
And even our expansion markets are that are newer brands are also doing well. So it's a broad base support right now.
Your next question comes from the line of Dara Mohsenian with Morgan Stanley .
Hey, good morning, guys.
So first just a clarification. The Q4 top line result was so strong I'm wondering if it included any timing benefit a retailer inventory shifts and if that might impact fiscal Q1.
And then you were clear in your prior answer is on the internal momentum and what's driving that internal momentum I was hoping you could give us a bit more detail on the level of risk from an external standpoint, just as you look at it a competitive standpoint on both pricing and marketing reinvestment going forward given a number of your competitors have publicly announced margin resets recently, so I love a bit more detail on what gives you confidence behind continued market share gains and how you think about that external environment. Thanks.
Jeryl I'll hand your second.
More important question to David.
On the first part, though we did see a small inventory builds and a couple of customers.
Primarily in the us.
Who increased their commit their service commitments to their customers relative to the number of days or hours that they were going to have products delivered to their their shoppers.
And they built a little bit of inventory to support that.
For perspective, though.
The organic sales growth rate in the fourth quarter. If you exclude that small inventory build would have remained or does it remain well over 7%.
And the second half on competition certainly our eyes are wide open and we respect our competitors in the S.. We have followed the the many announcements on.
Investments in becoming more competitive and we're aware of the guidance that they publicly offer.
What we're trying to do and have continuously been doing though is staying focused on the consumers on market growing innovation.
If we maintain superiority when we see.
Innovations come out in the marketplace to ensure that our innovations deliver on meaningful superiority that I think we're well placed.
Part of the reason we've continued to emphasize the need to generate productivity as we anticipate that we're going to have to invest.
It's we don't know exactly where how much of what category, but we know that if we can continue to invest meaningful rather create meaningful buckets of investment opportunity. Then we're able to remain competitive in the key markets to date, we've seen a number of innovations come on from our competitors and to date, we've been able to address those with our innovation and where possible.
Our intent is to provide innovation is to grow the category and in that environment. It frankly doesn't create a destructive market situation.
We have shifted our focus over the last several years on market growth and on meaningful superiority across the five elements, we're mindful of and aware of what competition does but we've we've made sure we don't get distracted on chasing a specific competitor and or innovation instead play our game and stick to our strategy and it's working well.
And there is a concern of the concern that the competitive environment is heating up as a valid one.
It's only logical and natural.
But what we're seeing so far take the US for example.
Volume moving on promotion indexing at 94 in the last quarter versus year ago. So so generally we're in a fairly constructive environment, where people are trying to innovate to grow markets and.
Thats the game that we like.
Your next question comes from the line of Jason English with Goldman Sachs.
Hey, good morning folks.
Okay, I guess I'm going to try to jam into one a quick follow on to Daras question.
Your guidance calls for commodities and currencies et cetera kind of be net neutral. So certainly a lot more culminated than we've been in the past and presumably this is this is the same type of environment for all competitors and you overlay the investment.
How do we think about category growth.
With particularly in context of the price trajectory as those dynamics play out.
So that's part one and then part two is still sort of linked to it if commodities currencies et cetera to kind of go net neutral for you and you deliver.
The productivity ramp you have it looks like you should have around 260 basis points of margin tailwind from productivity midpoint in guidance seems to suggest around 80 bips.
Implying that theres over $1 billion, a reinvestment is that math roughly right and if so where do you expect that reinvestment to go to.
Jason I'll take the first part and I'll, let John address the margin side.
First on category growth rates as John mentioned, they've been relatively healthy and frankly, if we continue to do our job and if competition does innovate and constructive ways and I think the categories remain healthy in if I look across the world. The U.S., which is our biggest market has been very constructive that 3% or better.
Europe , it's been at that too.
Percent, our view going forward is probably about 2%, maybe a little bit softer next year.
The India Middle East and Africa areas then.
Mid to high single digits at least mid single digits, China, Theres been a modest slowing down but still very healthy in our categories were seeing.
Call It high single digits, seven eight and we Havent seen a major slowdown just a little bit of softening.
Asia Pacific more light too.
So broadly when you look across the focus markets. The top 10 markets, we're seeing constructive growth rates and at least in our categories. When we bring meaningful innovation, we're seeing a tick up and that's that the.
To me the strength of this strategy is you've got to consumer right now that is interested in our categories and the innovation that we're delivering is ticking up some of the growth rates, where we have a meaningful share in most of the categories. We participate we do have a meaningful share so that works well.
There's very few places that aren't growing now in our major markets, India is one I did mention it's double digits.
And frankly as we look forward right now we don't see a reason why wouldn't stay.
And in the 10 to 10 to 12 range.
So with the exception of I'd call modest growth in Europe . Many markets are growing faster in Europe is very solid and profitable. So we like that region as well.
And on the income statement question I think your observations are generally correct in terms of directionality.
We should have under current under the current macro assumptions the ability to grow margin.
And to reinvest and.
Maintaining and building our levels of superiority.
Also as you look at the.
Comparisons.
Remember that there are several significant onetime gains and the base period that we have to lap as well.
But.
We are very cognizant as I think as reflected in the conversation we're having here about the competitive nature of our categories are our need to continue working on superiority.
The investment that's required to do that but still being conscious of the need and I think the ability to grow margin.
Your next question comes from the line of Steve powers with Deutsche Bank.
Great. Thank you.
I guess I was hoping maybe you could zero in and just to expand on some of the benefits that you're getting.
From a focus on the lean innovation initiatives that David I think you talked about in your prepared remarks.
Just maybe an example, or two you could share that illustrates the continued progress on that front and then I guess, what I'm really interested in is the benefits that you're getting is that really.
Measure just in terms of speed to market.
Or is there early evidence that the that lean innovation can actually lead to improve consumer acceptance of the of the products that are yielded by that process.
Steve I think the benefit so lean innovation are meaningful across many dimensions first.
There are several examples weve given in the past pampers pure came to market much much faster than it would have in the past.
Because we had a small team dedicated working on it they fell in love with the problem. They were trying to solve develop the product the materials. The communication and then went to market it's done very well.
We gave in the past I think the example, my sort of water in.
China, which was a line extension on Pantene, that's now been.
And to many brands in many other countries.
The benefits in San Juan is speed. The second is the number of hypotheses that we can advance and one problem area and what happens then is you find that consumer idea that's more powerful and then give an illustration. If you have one hypothesis you do a large space test you can get a significant break on a 300 based tests do you test 10 and have small teams and only getting 20 base size you have to have a major advantage in order to break.
Significance and we actually like the smaller base ask as you have to have a meaningful advantage or to be significant in what we're getting that added. This is were testing more ideas and finding bigger ideas that we can focus on incubate and then advance and whether its pampers pure mice or water, there's many more to come to market.
The last comment I'd make and I think we've released some of this and and either the consumer electronics show or others in the number of transaction learning experiments, we have going now which allows us to learn fast with small teams with relatively small investments is at a very high level and that gives me confidence again, we're going to find ideas consumer ideas and business propositions that have great promise with minimal investment.
The idea is you want learning to stay ahead of investment and as long as that happens to me along with a focus on delighting the consumer to me, we're going to see a robust innovation program come out of our 10 categories. Each of the 10 categories has a growth works effort to make sure. They are going to core first and foremost, but also looking at.
Underserved or fast growing areas that we can enter and win in the lean innovation allows us to explore more of those at a cost it's affordable and what you're seeing is accelerated topline and continued strong productivity efforts. So it's done it you can do more with less people and arguably with a better employee value proposition because it's more exciting work. So we're quite excited about it and we're staying in the learning mode. We're learning from people inside and outside the company and to me. This is an area that holds great promise going forward.
All right. Your next question comes from the line of Nik Modi with RBC.
Yeah. Thanks, good morning, everyone I'm going to try to squeeze into by Ken.
One of the areas that property has been addressed in the last few years and can install execution. So David John maybe you can just give us some metrics on kind of how things have progressed, there how things have improved.
And then the second question is.
You talked about data and you know kind of targeted consumer groups in a more specific fashion, but I'm just curious like how do you think about the next three to five years.
How how good its properties data capture and relate to individual consumers. So you can.
Actually target, Joe and John versus first time mothers.
Thanks.
[noise].
In terms of in store execution, it's obviously very broad topic.
Which extends out of store. So for example, one of the biggest things we need to do is be in stock.
On the shelf.
And or behind the shelf in the case of virtual shopping environment.
And we've made a lot of progress there coupled both by.
Our driven both by.
The joint business plans, we have with our retail partners, but importantly, also the reconfiguration and transformation of our supply chain.
Which puts 80% of our production within 24 hours on the shelf and allows us to.
Significantly increase service to customers, which turns into service to shoppers.
We're also working to do a better job of delivering and in store experience. That's consistent with what we know our key business drivers are which are different by category different by channel and ensuring that we're.
Measuring.
Performance of our sales organization, not just on physical distribution, but delivery of key business drivers in store.
A huge number of brand choices are made in front of a shelf, whether it's a physical shell for virtual shelf and uncertain, ensuring that that shelf serves that shopper enables them to select the item that's right for them is a significant focus.
And I could go on but this is an area, where we still have a lot of improvement.
Opportunity, but we've made significant progress.
And on the second half of your question, we're actually quite excited about this smart audience work that we're doing in the past we've had broad demographic groups that we targeted with our media and it's always been said that half. Your media is wasted you just don't know what half than we have the data now to find out what half.
It is and and we have developed a very large proprietary database, we have over a billion consumer aidid's worldwide meaningfully over that.
That allows us to have these smart audiences and once you have the smart audiences you can do propensity marketing with people that have similar characteristics, we have a much larger number of.
Cookie data that allows us to touch devices, but we like best where we got unique consumer ideas ideas and we run programs around the world and we certainly ask consumers and allow them to opt in but then we collect data the right way and use it with the appropriate privacy restraints and to me it's make a meaningful difference. It's part of what can fuel. The lean innovation work were doing because we can get very targeted audiences to test new business ideas, new new new products and new propositions. So I think going forward, it's only going to get more powerful as we continue to collect data refine it and become more accomplished it performance marketing taking that data usage in a respectful way to serve consumers products and propositions in messages that meet their needs.
Your next question comes from the line of Bonnie Herzog with Wells Fargo.
All right. Thank you good morning.
I actually wanted to ask about your baby care business first did in second half, leaving the quarter still would like to hear more about what drove the improvement and then I was hoping to get your outlook for this business and really what you guys need to do to continue to improve it do you still think additional price adjustments will be necessary in maybe the mid and value tiers and then.
Do you have any any innovation coming in the U.S., maybe on the premium end to counter the new innovation from Kimberly.
Thanks.
And finally I'd give it a couple of comments.
First overall for global Baby care, there is a very robust innovation program with myself, John and a team of the senior officers in the company of spent an extended period of time with the baby care team looking at the next three year strategy, including the innovation program by tier for major markets and certainly we don't announce in advance.
When we're coming with major innovation by them, but the premium in the mid tier and some of the specialty areas. We have a robust innovation program and into becoming sequentially incoming fast if I step back, though baby care improve the fiscal year with organic sales from last year to this year global organic sales did grow in the fourth quarter, we've seen an acceleration on most markets in the back half.
China importantly in the fourth quarter turn very positive to plus eight us at plus two.
This is for China in the first time, we've had sales and share growth.
In five years and there it's been driven by the results in both premium taped and pants. So those two combined are driving meaningful growth in China US Baby care is making progress. We know we have work left to do pure protection is doing well swaddlers is doing well pants is doing well.
And we're making we have innovation coming that will improve the superiority in the mid end value tiers and that will be competitive we have our eyes wide open we understand there's other participants in the category and it will be something we have to sequentially continue to work on but both global Baby US Baby and then if you look at China Baby.
Theres encouragement and we're excited about the new bundled is launching this month in China pampers pure into a super premium tier with natural cotton tape in pants.
Diapers with natural cotton, we haven't messed each product on tape and pants, featuring cloudsolv diapers with reliability, we have upgrades come in right now on mainline and premium, which we call, it's javan and new it's javan plus taped with double reasonable layers. So each of those tiers, we have meaningful upgrades coming so yes, it's robust and yes, it's competitive and our eyes are wide open and recognize this will be one of continuous innovation is just a highly engaged category for consumers are still attractive and your question about pricing, obviously, we can't comment on future pricing, but you should expect as we try and do premiumize. The portfolio there are pricing opportunities associated with the Premiumization will take advantage of.
The next question comes from the line of Steven Strycula with Us.
Hi, good morning, and congrats on a good quarter.
So.
Question for a high level is that it seems like the end markets are really accelerating here in terms of total category. In addition, today you're improving your market shares. So want to see is this analogous to call. It pre recession levels, where we are in a trade up economy. When you saw a lot of premiumization across the different categories.
That would be one perspective, and then the second follow up question for John would be.
Could you unpack the commodity versus transport versus FX, a little bit or all three are going to be relatively muted or as the net effect that they just kind of level out maybe two or up one is down. Thank you.
Stephen again take the first as you requested on on the growth rates.
The growth rates to be a pretty stable there not accelerating but they're they're stable at a very good place and again, our innovation is working to grow categories, where we can.
As I mentioned earlier.
They're in the three to four range a good three right now and it varies by country, but in the most important market for us the biggest markets, it's pretty healthy us is healthy China's healthy India's healthy Europe is stable at around.
Two and Japan, another large market is.
Flat, but yes, we're growing share so in general we feel pretty good whether it's as strong as it was pre recession that have to go back look at seven eight before it hit or six seven I think we are in the four to five then we are right now in that call. It three to four range, but we feel good about that and what we have seen to your point.
When we offer premium products that have meaningful advantages in many of our big markets. The answer is yes, they are trading up.
You are seeing that and some of the specialty areas. The natural for sure. It's an area. We have been very active are always in tampax pure there was launched in March of 19 is doing very well. The l. acquisition is doing well native our deodorant acquisition is doing well pampers pure we've mentioned before.
So theres many examples hi beads tide pods in the downy beads. Those are also examples of premium priced products where consumers have.
Traded up and they offer delightful benefits. So yes on the trade up when you have a meaningful consumer experience advantage and I'd call. It healthy relatively stable growth rates of three to four call. It three to three and a half right now.
John the second part of your question.
In a very broad sense I would look at currencies year to year. This is going into next year.
As a.
Relatively minor hurt if you think about markets like Turkey, and Argentina, where there has been significant devaluation that hasn't yet annualized.
If you think about what's happening in the UK.
And will continue to happen in the UK.
That's certainly not the order of magnitude that we saw last year, having said that if we were having this conversation last year at this time I'd be telling you the same thing.
Only to update you on our next earnings call with significant hurts. So it's a very what I would say is a constant in that space is volatility, but on a spot basis today a slight hurt.
Commodities on the other hand, or a slight health on a spot basis that also is a very volatile environment. When you consider the Petro complex and.
And pulp and natural gas as our biggest commodity exposures.
And there's a lot that's happening in the world that can affect those prices, but right now a small positive transportation. Good news is neutral and hopefully we'll get to the point when we annualize some of the Hertz, so that turns into a small health.
Year to year.
So thats it in a nutshell.
The next question comes from the line of Ali Dibadj with Bernstein.
Hey, guys. So a couple of things one is just obviously, they're getting sales growth, 7% very pleasing to all of us.
Can you give us a sense of how much of that growth is a true same store sales growth versus shelf space gain growth versus kind of broader distribution reach growth I've asked similar questions before but I guess I ask in the context of the guidance of 3% to 4%, we get you're lapping tougher compares but kind of better understand what the drivers of the asphalt expected slowdown our along those metrics.
And then the second question is.
If if one were to pick a little bit one would look perhaps at margins and see that even though gross margins were up 120 plus basis points.
SNA investments were higher of course to drive the topline, but heavier investments.
Throughout the business higher comp expenses and that seems to be a pattern.
Across consumer package goods.
I want to kind of elevate a little bit if you can maybe David it's part of your constructive disruption you've talked about but can you talk more specifically about where the industry is investing.
Clearly performance marketing as example of that and whether we should think about this at all as kind of a a profit pools shift in any way.
In terms of other places of the ecosystem. So our retailers getting the benefit here are there other partners are getting the benefit of this reinvestment.
And whether that investment just has to stay at this elevated level to get to this 3.5% category growth or whether you think that subsides overtime. So thanks very much for the both the specific and the broader question.
And let me, let me start with a broader one and John can jump in the specifics, but we can kind of bounce back on this one first of the broader question on the market and do I expect elevated investments.
Our required to sustain this growth in many ways, we have elevated the investments and yes, I do believe we'll have to have meaningful productivity to cover both retailer needs for their value improvement as well as continued to meet consumers needs with what I expect will be elevated competitive action, but I think thats all doable within the current guidance and that's why we've given a wide range. There is a lot of things that could happen having said that.
What we are seeing though is the innovation that we've delivered is contributing to markets that are growing.
Our data would say we are a significant part of the reason the markets are healthy in our categories and we know we have a robust innovation plan coming forth. This year and beyond secondly, we know and we have line of sight to continue on our current productivity program that is generating meaningful investments and it is covering and we will continue to work with our retailers to ensure that they have.
We have with them joint value creation plans that meet both needs.
And those we feel very constructive about.
We don't overreact by quarter, So I don't get overly excited about a an overly good or bad quarter. What we're looking for is trends over time and there is very clear trends over the last three years of increasing brand country combinations that we're growing share that breadth covers category in country. You can look at it by both ways and you see it moved up significantly from 16 to 17 to 18 to 19.
Which.
Again gives me confidence that this is a sustainable strategy and I think the elevated investment is built into our productivity program.
John I wouldn't have much to add.
The one thing that I would.
Make sure you understand that you can follow up with John on this when you look at the elevated SGN a.
As a measure of investment.
You need to take out.
A significant increase year to year in our accruals for compensation.
It's a 100 basis point impact on the quarter NSG DNA.
Everything that David said remains true with that excluded.
But it's important to understand that as we think about the true.
Year to year trend.
And then on the top line the only thing I would add.
You mentioned rightly.
The much tougher comps and I mentioned in my prepared remarks that were significantly accelerating.
The two year averages in terms of the topline growth rate.
We just need to do.
In an environment as we've all been discussing this morning, where we fully expect.
Continued heightened competition.
And to not.
Allow for that reality within our guidance range would seem less than less than prudent.
So we've done that in a way to contextualize the topline as we're growing at or ahead of the market.
With a bias towards growing ahead.
And that's as I said in my prepared remarks, not a layup.
Next question comes from the line of Bill Chappell I'm sorry.
Andrea Teixeira with JP Morgan.
Thank you good morning, and congrats on the results David can you comment a little bit on grooming. The same way is you gave on the baby boom on the state of the you know the baby side.
It was definitely refreshing to see that inflection on the two year stack over the past eight quarters and as as Don Miller was saying just now I think that you know what an acceleration, but can you comment on how sustainable this trend is going forward and how the Gillette online initiatives.
Can kind of sustain and also into key markets away.
A very good grooming remains an attractive business as we said and we haven't lost our enthusiasm for it for many many reasons and we did talk organic sales to grow this fiscal year and we had a good ending of the year.
A couple of things that are frankly very positive about the future. One is the the big New innovation called skin Guard continues to pick up share.
It's already double digit in several the focus markets that we have launched it is being expanded around the world right now and it addresses a very specific benefit of people that have sensitive skin. The strategy that weve pivoted to and I think will bear fruit over time is looking at the full ladder.
From double edge, all the way up to the heated razor.
So you go from pennies to very expensive products, depending on what you need is we're now more actively playing in disposables, including with innovation in disposables with since Oreo benefits being delivered with things like luber strips.
We now have innovation across the mid tier, which is the mark Klein in the premium line. All those to me are important then by market we have to figure out what is the right ladder and what is the right.
Demand.
Programs to be able to drive trial and the other we have to do and you're seeing meaningful changes is figure out how to be relevant to gen Z and millennials and we've made progress there as well.
So the skin guard initiatives performing well, it's in US Canada parts of Europe .
And overall acceptance has been strong the after use experience is very strong. So all of our efforts now are to drive trial and awareness.
And as that continues and that's a good.
Tailwind for us.
We have our eyes wide open we recognize we had a significant headwind on broad societal trend on shaving and we're broadening our view it with how we view grooming and making sure. We have products that also allow you to trim and other ways to take care of facial hair and so both the bond and the Gillette programs to me a very active and robust.
And to me that the plan going forward is robust it will be both relevant communication innovation and focused on ensuring that we bring it to life in ways that were consumers each market in which we focus.
And now we'll go to Bill Chappell with Suntrust.
Thanks, Good morning.
Hey, just a question on.
Competitive response, and what you're seeing I mean, I know you expect competitive response to the market share gains in the strength, but just want to understand like are you seeing a different competitive response, because it doesn't seem that.
We're seeing the same kind of price cutting promotional levels kind of even around the world, but especially in the us that we have in the past and so.
Are the competitors reacting differently or you are just they haven't reacted yet and so we're just kind of waiting for those price cuts to come.
And we have seen competitive reactions and I think broadly.
Each competitors acting consistent with the strategy I would characterize the market is constructive right now you're seeing a increased level of innovation, which frankly, we like and that's a challenge we look forward to addressing.
We are seeing and innovation across all price tiers that again.
An approach that we're happy to.
Address I believe that.
Generally people have learned a lot from past actions and each company has to decide what their value creation plan is and to date I have not seen behavior that will increase.
Concern on market attractiveness in the 10 categories in which we participate.
[noise].
And next we'll go to Camille Guardrail Waller with credit Suisse.
Hey, good morning can you talk a bit about media spending I guess, there's two conversations one is a kind of increased focus on traditional media and then also a conversation about increased spending media spending directly with the retailers can you talk about how your how you're thinking about that going forward.
First let me start with the macro headline.
We're looking at.
Stronger.
Media delivery of stronger programs at lower cost.
We found ourselves in many cases.
Over frequented.
So our frequency of.
Of AD presentation was too high and our reach was too low we're adjusting that.
As we do that we're finding efficiencies in our overall media program.
And we've talked about.
The significant opportunities that exist within the media supply chain, including.
Media compensation or agency compensation and production costs, and we are working to reduce that.
All with the idea of increasing the overall effectiveness of our program.
Which includes the right mix different by category.
For both traditional and digital media.
All right. The next question comes from the line of Kevin Grundy with Jefferies.
Thanks, Good morning, and congratulations on a strong year I wanted to come back to the Gillette business as well first the housekeeping question just for John on the impairment charge I understand it's noncash, but more concerned about potentially would it may signal, David sounded pretty positive a moment ago and results have gotten better. So maybe just confirm this was an annual requirement as opposed to some sort of triggering event that would be helpful. And then David I think the question was asked earlier I'm not sure you necessarily touched on it just in terms of the potential implications from edge wells acquisition of Harry's and bringing on their leadership team what they may bring your current views on the implications of consolidation in the space and how you see that the competitive dynamic potentially changing and what you guys are embedded in your outlook. Thank you.
Thanks, Kevin.
We test.
Each of our.
Goodwill and intangible assets.
Every year Thats.
Our requirement.
And we've been indicating.
Really for the last.
Number of years that the.
The cushion if you will in other words the value that we're coming up with every year as compared to the value that we're carrying on our balance sheet.
He has been declining.
If you look back at any of our financial statements over the last three years, you'll see reference to that.
And we've talked about how that cushion has been declining.
The drivers of that are primarily twofold. One is foreign exchange and then you've got here a business with a very broad global footprint.
And particularly with the year that we've just been through.
That that impacts that value assessment.
The second we've also had many conversations about which is the.
The impact on market size in developed markets from overall shaving incidence which is down.
And those two things as they get factored into our annual valuation.
At some point get us to a value that's less than the value. We currently have on our balance sheet and that kicks in a pretty complicated process.
To get to the new goodwill number and John can take you through that offline as needed.
But it is.
It is and it's a non discretionary annual.
Valuation test that's led to this outcome as has been clearly telegraphed I think and then our financial reports.
And I'll take the second part of the question I'm happy to give more detail on Gillette first at the edge well acquisition of Harry's.
Does this proposed additional risk to the business. It's still early the deal is not closed and we generally don't speculate on what we think competition's can do.
I will say a few things that we are doing that I think positions us well in broadly if you step back at gloomy rather it was going to have to make money and they bought a company. We've seen both unilever's acquisition of dollar Shave club and now.
The annual acquisition of Harry's both at the parent companies that have bought those startups need to make money and to me that's not a bad thing for the overall value creation opportunities in the industry. If I step back again and look at what we're doing we're doing more differentiation you've seen our joy launch at Walmart has done very very well.
As we begin activate across the latter and what we're seeing now with our willingness to differentiate where we juvenate in both Gillette Endovenous brands. The campaigns that we've put out there are working they are engaging very much with gensix in millennials and we've seen a significant positive 80% positive response millennials to our recent campaigns and their likelihood to purchase Gillette.
Which I think is positive online you mentioned the U.S. Juliet DTC, while still small is double than us in the past 12 months, our ecommerce business is growing in the UK win I think both competitors showed up.
When this time met him at the beach and were much more competitive defending our business, ensuring we provide attractive user experiences in value to those consumers and we've maintained share leadership in that segment.
We've recently expanded Gillette DTC in Germany, and Australia launched Venus DTC in the us.
So we've stepped up in showing that we can serve consumers on an offline. It's part of the superiority strategy, which is we want to win where the consumer wants to shop.
And while the majority is still done offline, we recognize we need to step up our game both user experience value in offerings.
But direct to consumer more broadly on ecommerce and have done that so I believe we are well positioned as we see it as a again competitive category, but attractive category and.
On the acquisition by as well to me doesn't change our interest arc, our frankly, our confidence that the the plan is robust.
Your next question comes from the line of Caroline Levy with Macquarie.
Good morning, and congrats on the quarter and the year.
I'm wondering if you did.
Back and think about the last decade has been very challenging for the companies that have already got the big brands and I'm wondering when you might if you do expect something to shift from advantage small disrupted to advantage PNG and this quarter. It may be an example of where things are starting to come together you've seen it in the U.S. you've seemed in China for more than a quarter more than a year.
Do you think this is going to start happening in other countries and kind of a secondary question. On this is housing organization changed such that Harry's or.
Although this rock tis are not going to be allowed to.
Flourish before you move.
Just a few comments.
Certainly again, our eyes are wide open and we do see the environment as highly competitive we understand there is a lot of new entrants in the category, but we don't have just a strong quarter. We have got over the last three years, we've seen increasing brain country combinations grow and we've talked about the breadth of our brands and countries improving and we've got now four quarters of 4% or better, which I think is a meaningful.
Sustained level of progress and we certainly expect we need these can go out and continue to earn it.
Big brands continued to do well when they address consumer needs they have to stay relevant and how they present themselves in both packaging communication and they have to have an experience that justifies the cost and is better than the best alternative.
And our big brands are doing well and we've extended ourselves into the fast growing areas. In many cases, it's been an extension of the parent brand you've seen that untied you've seen that in many other brands.
You've also seen that where we've gone into additional areas, where this l. acquisition native.
Walker and company and others to ensure we continue to learn to your question.
Do we think the organization is better prepared to deal with the competitive environment. When yes. We have we have simplified the organization in a way where the focus markets to me have increased focus the enterprise markets because of the high volatility have an organization structure that allows them to address that and get in and react much more quickly.
Weve shifted broadly to an organization that is engaged much more agile and it goes to everything from how we innovate which is small teams cycling fast to the fact that we now have one axis of decision, making on primary choices that address this threat, which is the sector business unit and so the need in the past at times to need to get alignment across the organization has been meaningfully reduced we value the input from other parts of the organization, but the leaders that run the businesses are accountable in touch and they have folks in the market. So I think we're actually well positioned to see and then respond to competitive threats and if we do our job right. We understand the consumer needs and we're ahead of those we're creating the new categories opportunities in segments of growth and we're seeing progress there as well, but it's highly respectful of our competition aware of increased competitive actions, but believing that this is a robust and such.
Okay Annabelle strategy focused on the core superiority funded by productivity and then brought to life by over 90000 people that have embraced the strategy believe in it and are executing with increasing excellence.
The next question comes from the line of Mark Astrachan with Stifel.
Thanks, and good morning, everybody.
I'm wondering if that's more of a broad kind of a longer term question too it historically your portfolio third.
Less well during recessionary times not that were.
Imminently heading into one but just curious how you think about.
Readying the portfolio or how do you think the court current portfolio responds during an economic downturn.
And how that would compare to where the company was 10 years or so ago. What's different this time around do you think.
I forget I've a couple comments see.
One of the areas that I think causes us to be at least well positioned to deal with whatever comes at US is one where in categories, where performance matters to the consumers their daily use categories. So they don't go away and frankly, the need to engage with them generally doesn't get reduced in a recession and the other is our brands today have broader ladders, we play across many price tiers in many benefits segments. So.
I think we're actually.
In many ways better positioned because we have now.
Identified where we can create value in each category and then established the appropriate both price tiers and benefit delivery.
For that category and mentioned automatic dish earlier, we have a base we have a premium than we have a super premium that's true in the laundry category Thats true certainly in shave care, that's true in baby care, we have many segments represent in Fem care, we have multiple segments represent in our family care business, we have multiple segments in our oral care business. So if you look at that at least now we're playing in segments and then what we are doing better and better at using the data. We have is we're understanding the specific needs of consumers in each segment in designing to make sure we delight, but recognize part of the delight is a competitive price point and to me we are doing that better in but it gets back to superiority has to be in the eyes of the consumer or the customer or the evaluator and to me where weve raised the bar on the expectation of what we deliver to delight the consumer.
Everything that they have answers.
Of course.
Extremely relevant.
I would just emphasize one point that I made which is the difference in the portfolio.
Just think for example have not.
Of.
Salon hair care prestige fragrances, much more discretionary items in which discretion as exercised when times get tough.
We have.
Categories now that our sales David said daily use their staples that Doesnt mean were immune to trade down but that that goes to his point of having a broader ladder of offerings. The right size offerings in the store that address tighten cash outlay needs et cetera.
Next question comes from the line of Jonathan Feeney with consumer edge.
Good morning. Thanks.
So you've told us since 2013, if I add up all of the citation for currency headwind that you've gotten had what has amounted to something like a little over $2 in todays tax rate and share count in total currency impact over the past six years and I guess I'm wondering you know.
Is it really just as simple as had we had a flat dollar since 2013, you'd be making 40% plus more and presumably if currency ever reverses or just stays the same is that just should we just think about or if it reversed back to 2000 Thirteens levels proportionately would we expect to get that as a tailwind in the coming years should I know you cited John that currency is still a little bit of headwind for next year. Thanks very much.
I mean, directionally and you can go back and compare.
Our earnings per share to the currency movements over time, you can do it on an industry level and you will see a clear relationship between those two.
Having said that as you can imagine in the scenario that you cite where things go back to 2013 levels.
What ultimately ends up happening from an EPS standpoint, it's going to be dependent on pricing.
Moves that competitors and others choose to make as a result of that.
So it's not that simple, but directionally it is.
Tough currency years are tough earnings years easier currency irrs are easier earnings years.
And your next question comes from the line of Robert Ottenstein with Evercore ISI.
Great. Thank you very much two questions. Please first in April of this year Amazon went to next day prime delivery.
And saw a sharp acceleration in their business.
I'm wondering to what degree you also shore saw an acceleration in your business with Amazon I know that you've got very well coordinated logistics shared warehouses with them.
Just like a little bit more detail in terms of.
How your business with Amazon is evolving are you gaining share getting share gains there and do you see this close coordination as a sustainable advantage.
And the second question.
It has to do with the detergent category grew 5% volume.
In the quarter hard to believe that the global industry is growing that that fast so maybe a little bit the details in terms of where you're gaining share and what's going on in that category. Thank you.
Let me just provide a little bit of.
Summary level response to that and then I'll give David the details.
[laughter] the we don't.
Comment on dynamics, what individual retailers for reasons I'm sure you can readily understand.
But we feel very well positioned broadly.
We certainly view Amazon is a very strong partner.
The in terms of the question on detergent I'll answer that more generally too which is.
With the exception of what I mentioned earlier, which has been a small inventory build.
And customers looking to shorten delivery times to customers in the us.
We have not seen significant changes and retail inventory levels.
We are pretty much tracking.
Our sales growth with consumption growth and most of the markets in which we're operating.
So that volume growth, you're seeing is largely consumption driven.
Let me add one point on that just if you kind of unpack a bit fabric care fabric care is more than laundry fabric care also includes fabric enhancers. So you get everything from dryer sheets to liquid fabric refreshers, all the way to beads and that category fabric Enhancers is what we call. It has been growing very nicely faster than the what you are considered the detergent category, because you're probably right I can see a huge spike and detergents, but one of the things we've done in that category in many categories is broaden our view of the benefits. We can provide that's why we call it fabric care not laundry in fabric care. There's many things you can do to extend the life of the fabric and to deliver a variety of benefits beyond just clean or stain removal. It can be anti static it can be softening. It can be extended freshness over time, and we do that in a way this delightful for consumers and created a very large business fabric. Enhancers is now I think over $750 million business in growing and that's part of what's been a.
Driver of fabric cares.
Outsized growth and they've just done a beautiful job again understanding the consumer need and this broad category called fabric care and doing it very well and it has contributed to an acceleration in category growth in many markets. The U.S. is probably one of the best examples. If you go back many years it was flat to 1% in the ticked up several percent behind Todd.
Pods.
Beads.
And frankly, weve reinvigorated, even the balance business by again delivering benefits in communicating the compelling way. So part of what every category has to take on is market growth is a key part of the sustainable strategy, we have and you're seeing more and more examples of superior innovation driving market growth, which then allows us to have the balanced top and bottom line growth.
That we aspire to deliver.
And we'll take our final question from the line of Jon Andersen with William Blair.
Hi, good morning, Thanks for taking the question.
Just one quick one you are kind of eight years now into 10 year.
Productivity and cost savings, which have been significant.
This is obviously critical as you pointed out key to two.
Achieving the balance that you're looking for in the business top and bottom line growth.
With margin improvement so as you kind of look out beyond.
Two years and take a longer term perspective.
Is the kind of the cost and productivity opportunities. Similarly, strong if you look out over overtime.
You know on an absolute or relative basis as it has been over the past seven or eight years with everything you've achieved thank you.
I don't have.
Specific visibility to something that's out that far but I will make a couple of comments one is.
The earnings progress that we made and.
The progress we made in offsetting some of the FX.
Items that John was referring to earlier.
Was largely productivity based.
And and we were very clear that that was not a sufficient program. Our strategy that we simply had to get the top line growing at reasonable rates, while maintaining a focus on productivity in order to create value.
And so hopefully at the end of the two year period, you're talking about our topline is in fact sustained at a higher rate.
From a productivity standpoint.
Well I'm not going to talk about dollars today, what I would say is that there are an increasing number of tools that are available, particularly in the digital space.
Which give us a reason to continue to.
Become even more and more productive and more and more effective.
Across our set of activities systems.
So that's that's what I'd offer you today the importance of productivity is not going to go away.
The tools that we have available increase every day.
But we also have to deliver that topline, which by itself from a leverage standpoint is a huge driver of margin improvement.
I think that ends the questions and let me just close with one thank you for investing the time and discussing PNG. Our strategies are beginning to deliver sustainable balanced growth and value creation, we have our eyes wide open we know there's still work to do but we're confident we're on the right track. We must continue and will continue to build the superiority advantage will continue to invest in productivity, but the credit goes to 90000 people, they're doing a 190000 plus the doing a wonderful job, bringing the strategy to life around the world and continuing to build value for all the stakeholders of this company. Thank you.
Ladies and gentlemen that concludes today's conference. Thank you for your participation you may now disconnect have a great day.