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Procter & Gamble Co Earnings - Analysis & Highlights for Q2 2025
Overview
PositivesNegativesOutlook
- Europe enterprise markets were up 1 point in Q2 on a base of 8% growth.
- Organic sales in North America grew by 4%, driven by 4 points of volume growth.
- Personal Health Care, Hair Care, Oral Care, Feminine Care, Fabric Care and Grooming grew low-single digits.
- Volume contributed 2 points to organic sales growth, mix added 1 point, and pricing was roughly in line with prior year.
- The company expects the environment to remain volatile and challenging from input costs to currencies, to consumer, competitor, retailer and geopolitical dynamics.
- The company is seeing high volatility in currencies, which are moving on a daily basis based on commentary.
- The company is still not out of the woods on volume in China.
- The company is seeing continued flat to declining private label shares in both the United States and Europe.
- The company expects the markets in which it competes to deliver local currency sales growth in the range of 3% to 4% for the year.
- The company has good visibility towards the lower end of the top and bottom line guidance ranges.
- The company expects significant cash return to shareholders to continue to play prominently.
- The company expects to return between dividend and share repurchase of $16 billion to $17 billion to shareholders this year.
- The company expects weakening across some of the core markets of North America and Europe or China returning to more negative territory, which would move the company to the lower end or slightly below the current organic sales growth guidance.
Q&A Highlights from Procter & Gamble Co Earnings Call Q2 2025
- Analyst asked about the performance of P&G's different business segments in fiscal Q2 and whether the company is on track to improve performance in the back half of the year.
- Andre Schulten, CFO, explained that the company's performance in fiscal Q2 was mixed, with the 85% of the business, comprising of the US, Europe, Latin America, and other enterprise markets, continuing to grow at around 4%. However, the 15% of the business, mainly the Asia, Middle East, and Africa markets, saw an improvement, with China's performance showing encouraging momentum towards recovery. The company expects continued strong performance in the 85% of the business, with some increased momentum across Europe and Latin America, and hopes to achieve the midpoint of organic sales growth guidance, or even a little bit higher.
- Andre Schulten, CFO, explained that the company's performance in fiscal Q2 was mixed, with the 85% of the business, comprising of the US, Europe, Latin America, and other enterprise markets, continuing to grow at around 4%. However, the 15% of the business, mainly the Asia, Middle East, and Africa markets, saw an improvement, with China's performance showing encouraging momentum towards recovery. The company expects continued strong performance in the 85% of the business, with some increased momentum across Europe and Latin America, and hopes to achieve the midpoint of organic sales growth guidance, or even a little bit higher.
- Analyst asked about the impact of consumption on P&G's results and whether there is any timing shift in shipments versus consumption.
- Jon R. Moeller, CEO, explained that the results in China were not impacted by heavy phasing within the quarter, with pre-shipments for 11/11 evenly distributed across the quarter. He also noted that the company is making progress on its core brands, innovating in Hair Care, Fabric Care, and Olay, and improving its collaboration with core distributors. He emphasized that China is still a challenging market and that volatility can drive the company to the midpoint or lower end of the guidance.
- Jon R. Moeller, CEO, explained that the results in China were not impacted by heavy phasing within the quarter, with pre-shipments for 11/11 evenly distributed across the quarter. He also noted that the company is making progress on its core brands, innovating in Hair Care, Fabric Care, and Olay, and improving its collaboration with core distributors. He emphasized that China is still a challenging market and that volatility can drive the company to the midpoint or lower end of the guidance.
- Analyst asked about the market changing and how P&G is taking advantage of those changes.
- Andre Schulten explained that the company is taking advantage of significant changes in the market, both with regard to consumer behavior and customer behavior and channels. He highlighted three key changes: moving distributor channels to be paid by category, reorienting the conversation with customers to focus on market growth, and reorienting the company's operations to be more end-to-end, similar to how they manage things in the US or focus Europe. He emphasized that these changes are aimed at becoming even stronger and more relevant to customers.
- Andre Schulten explained that the company is taking advantage of significant changes in the market, both with regard to consumer behavior and customer behavior and channels. He highlighted three key changes: moving distributor channels to be paid by category, reorienting the conversation with customers to focus on market growth, and reorienting the company's operations to be more end-to-end, similar to how they manage things in the US or focus Europe. He emphasized that these changes are aimed at becoming even stronger and more relevant to customers.
- Analyst asked about the company's productivity and operating leverage, and clarified about the disruptions in December in one of the supplier's transportation management system.
- Management explained that their guidance is based on the current foreign exchange rate and they have good visibility and confidence to the lower end of the guidance range, both on organic sales growth and on core EPS. They also clarified that the disruption in the transportation management system did not have any unusual effect on the quarter and the team was able to process strong orders in late December.
- Management explained that their guidance is based on the current foreign exchange rate and they have good visibility and confidence to the lower end of the guidance range, both on organic sales growth and on core EPS. They also clarified that the disruption in the transportation management system did not have any unusual effect on the quarter and the team was able to process strong orders in late December.
- Analyst asked about the quantification of the company's upbeat and positive outlook for calendar 2025, and if there's any way to model the expected impact on the top and bottom line.
- Management explained that the Chinese consumer market is still a challenge, but there are signs of improvement, such as the growth of SK-II business and the consumption growth in that business. However, they also stated that the broad swath of society is not confident and is still struggling, and it will take some time to get to dependable growth in China. They also mentioned that the market in all categories in dollar terms is down 5% in the past three months and 5% in the past 12 months, indicating a stable but not positive macro consumer environment.
- Management explained that the Chinese consumer market is still a challenge, but there are signs of improvement, such as the growth of SK-II business and the consumption growth in that business. However, they also stated that the broad swath of society is not confident and is still struggling, and it will take some time to get to dependable growth in China. They also mentioned that the market in all categories in dollar terms is down 5% in the past three months and 5% in the past 12 months, indicating a stable but not positive macro consumer environment.
- Analyst asked about the company's confidence in their innovation program, specifically in terms of the strength of their innovations coming to market over the next six months compared to a year ago.
- Management stated that they have gained confidence in their innovation program, citing examples such as the successful Tide evo test market in Colorado and the continued growth of premium innovations in terms of household penetration and market share. However, they also mentioned that there are some things that they are not at liberty to talk about.
- Management stated that they have gained confidence in their innovation program, citing examples such as the successful Tide evo test market in Colorado and the continued growth of premium innovations in terms of household penetration and market share. However, they also mentioned that there are some things that they are not at liberty to talk about.
- Analyst asked about the possibility of lowering reinvestment levels to deliver on the company's bottom line guidance.
- Andre Schulten, P&G's CEO, stated that the company has increased its spending on innovation and commercialization of that innovation, even during difficult times, and that they will continue to invest in innovation and commercialization. He noted that if lowering reinvestment levels is necessary to deliver on the company's bottom line guidance, they will be transparent and clear about it. However, he stated that currently, it is not their plan to lower reinvestment levels.
- Andre Schulten, P&G's CEO, stated that the company has increased its spending on innovation and commercialization of that innovation, even during difficult times, and that they will continue to invest in innovation and commercialization. He noted that if lowering reinvestment levels is necessary to deliver on the company's bottom line guidance, they will be transparent and clear about it. However, he stated that currently, it is not their plan to lower reinvestment levels.
- Analyst asked about the company's expectation of a return to growth in the Middle East in the second half of 2025.
- Andre Schulten stated that Latin America, specifically Mexico and Brazil, are making good progress, and the company has strong plans for the region. He also noted that Europe enterprise markets were up 1 point in the quarter, and the company is growing volume share in enterprise markets by 60 basis points. He expressed confidence in the company's ability to execute and stated that the innovation and go-to-market plans are strong, with stores looking phenomenal. He also noted that profitability in Latin America and Europe enterprise markets allows the company to remain fully invested in innovation and support thereof. He stated that the main driver for the Middle East will be stabilization, and while it will remain a more difficult environment, the company hopes that progress will continue.
- Andre Schulten stated that Latin America, specifically Mexico and Brazil, are making good progress, and the company has strong plans for the region. He also noted that Europe enterprise markets were up 1 point in the quarter, and the company is growing volume share in enterprise markets by 60 basis points. He expressed confidence in the company's ability to execute and stated that the innovation and go-to-market plans are strong, with stores looking phenomenal. He also noted that profitability in Latin America and Europe enterprise markets allows the company to remain fully invested in innovation and support thereof. He stated that the main driver for the Middle East will be stabilization, and while it will remain a more difficult environment, the company hopes that progress will continue.
- Analyst asked about the drivers behind the company's decisions to invest in Family Care, Oral Care, and Baby categories.
- Andre Schulten, Chief Operating Officer, explained that the company saw strong shipments and consumption in the Family Care category, which led to pantry loading from consumers. The company also experienced a port strike and hurricane in October, which resulted in increased inventory. Additionally, the company saw strong shipments in late December in anticipation of a January merch event. For Oral Care, the company is rolling out a full lineup of IO innovation, both iO10 and iO2, to make the opportunity across the power Oral Care business more accessible. The company also has a strong marketing campaign and taste innovation program, including heavy focus on whitening. For Baby, the company wants to invest in communication and potentially in promo to drive innovation across the entire lineup.
- Andre Schulten, Chief Operating Officer, explained that the company saw strong shipments and consumption in the Family Care category, which led to pantry loading from consumers. The company also experienced a port strike and hurricane in October, which resulted in increased inventory. Additionally, the company saw strong shipments in late December in anticipation of a January merch event. For Oral Care, the company is rolling out a full lineup of IO innovation, both iO10 and iO2, to make the opportunity across the power Oral Care business more accessible. The company also has a strong marketing campaign and taste innovation program, including heavy focus on whitening. For Baby, the company wants to invest in communication and potentially in promo to drive innovation across the entire lineup.
- Analyst asked about the level of investment necessary to achieve the company's broader goals and whether it needs to go higher or if it can leverage brand support investments.
- Jon R. Moeller, Chief Financial Officer, explained that the company will continue to invest where it makes sense, albeit at a slower pace than in previous years. The company is also making significant strides to be more profitable in the fastest-growing categories or fastest-growing channels in the country, and they are working to bring down the cost of delivering their marketing efforts.
- Jon R. Moeller, Chief Financial Officer, explained that the company will continue to invest where it makes sense, albeit at a slower pace than in previous years. The company is also making significant strides to be more profitable in the fastest-growing categories or fastest-growing channels in the country, and they are working to bring down the cost of delivering their marketing efforts.
- Analyst asked about the performance of SK-II, specifically regarding the improvement in the Chinese consumer perception of the brand and the geopolitical angle.
- Andre Schulten, the company's Chief Financial Officer, confirmed that the brand has strengthened with the Chinese consumer, citing several factors such as the easing of Japanese brand sentiment, significant investments in brand building, upgraded department store presence, and the launch of a super premium proposition called LXP. Additionally, consumption is stronger than organic sales, and the sales number is negative but consumption is returning in line with increased Chinese travel to different locations.
- Andre Schulten, the company's Chief Financial Officer, confirmed that the brand has strengthened with the Chinese consumer, citing several factors such as the easing of Japanese brand sentiment, significant investments in brand building, upgraded department store presence, and the launch of a super premium proposition called LXP. Additionally, consumption is stronger than organic sales, and the sales number is negative but consumption is returning in line with increased Chinese travel to different locations.
- Analyst asked about the possibility of pricing turning negative, and if there is a line in the sand where that won't happen.
- Andre Schulten, the company's Chief Financial Officer, stated that pricing is an outcome that consistently helps organic sales growth, and the company has had 54 out of 57 quarters of positive contribution of price/mix to organic sales growth. The timing of pricing is driven by innovation cycles, and the company likes to take pricing with innovation, which falls in different quarters. The company expects both the pricing dynamic with innovation and the mix dynamic to continue. Jon R. Moeller, the company's CEO, added that the company is focused on value creation and will be responsive to consumer needs, but they do not think about the possibility of negative pricing.
- Andre Schulten, the company's Chief Financial Officer, stated that pricing is an outcome that consistently helps organic sales growth, and the company has had 54 out of 57 quarters of positive contribution of price/mix to organic sales growth. The timing of pricing is driven by innovation cycles, and the company likes to take pricing with innovation, which falls in different quarters. The company expects both the pricing dynamic with innovation and the mix dynamic to continue. Jon R. Moeller, the company's CEO, added that the company is focused on value creation and will be responsive to consumer needs, but they do not think about the possibility of negative pricing.
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