Procter & Gamble Co Earnings - Q4 2025 Analysis & Highlights
Procter & Gamble Co. (PG) discussed its Q2 2026 earnings, highlighting flat organic sales, a decline in volume, and a slight increase in pricing. The company addressed the impact of base period dynamics, particularly in the US market, and expressed confidence in stronger growth in the second half of the fiscal year due to innovation and productivity plans. Strategic reinvention, leveraging data and technology, and adapting to changing consumer and retail landscapes were key themes. Financial guidance for fiscal year 2026 remains unchanged, with expectations for organic sales growth of in-line to plus 4% and core EPS growth of in-line to plus 4%.
Key Financial Results
Organic sales were in line with the prior year.
Volume was down one point, pricing was up one point, and mix was flat for the quarter.
Core earnings per share were $1.88, in line with the prior year.
On a currency-neutral basis, core EPS was $1.85.
Core gross margin was down 50 basis points and core operating margin was down 70 basis points versus the prior year.
Strong productivity improvement of 270 basis points was achieved with healthy reinvestment in innovation and demand creation.
Currency-neutral core operating margin was down 80 basis points.
Business Segment Results
7 of 10 product categories held or grew organic sales.
Hair Care grew mid-single digits.
Skin and Personal Care, Personal Health Care, Home Care, and Oral Care were each up low single digits.
Grooming and Fabric Care were each in line with the year ago.
Baby Care and Feminine Care were each down low singles, and Family Care was down approximately 10%, primarily due to base period dynamics.
Organic sales, excluding Family Care, were up 1% for the quarter.
7 of 10 regions grew organic sales.
Focus Markets were down 1%.
Organic sales in North America were down 2%.
European Focus Market organic sales were up 1%.
Greater China organic sales grew 3%.
Pampers and SK-11 led growth in Greater China, each up mid-teens or more.
Enterprise Markets grew mid-single digits for the quarter.
Latin America organic sales were up 8%.
Organic sales in the Europe Enterprise Market region were up 6% versus prior year.
The Asia Pacific, Middle East, Africa Enterprise region grew 2%.
Global aggregate market share was down 20 basis points.
25 of the top 50 category/country combinations held or grew share for the quarter.
Capital Allocation
Adjusted free cash flow productivity was 88%.
$4.8 billion of cash was returned to shareowners this quarter.
$2.5 billion was paid in dividends.
$2.3 billion was used for share repurchases.
The company expects to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock, totaling roughly $15 billion of cash returned to shareowners in fiscal 2026.
Industry Trends and Dynamics
Consumer media preferences and information collection are increasingly fragmented with new media platforms, including social media and retail media.
The retail landscape is changing with more concentration but also brand proliferation.
Retailers are becoming media platforms and media platforms are becoming retailers.
The consumer path to purchase is changing every day, is non-linear, and littered with millions of possible distractions.
Usage volume growth is slow to flat in the US and Europe.
Competitive Landscape
Global aggregate market share was down 20 basis points.
25 of the top 50 category/country combinations held or grew share for the quarter.
The company aims to build the strongest brands in the industry.
Pampers Prestige is the only leading diaper brand that has real silk ingredients in the product.
Downy Intense leverages internal perfume innovation expertise to create a new high-intensity perfume.
Macroeconomic Environment
Inflation across food, energy, healthcare, and many other areas of spending has taken a toll on consumers and how they assess value.
The fiscal 2026 outlook continues to expect approximately $500 million before tax and higher costs from tariffs.
Commodity costs are expected to be roughly in-line with the prior year.
A foreign exchange tailwind of approximately $200 million after-tax is expected.
Modestly higher interest expense versus last fiscal year is expected.
A core effective tax rate in the range of 20% to 21% for fiscal 2026 is expected.
These combined factors represent a $250 million after-tax headwind to earnings growth.
Growth Opportunities and Strategies
The company is confident that interventions and investments will improve near-term performance.
Strong innovation supported by sharper consumer communication and retail execution is a focus.
Greater China Baby Care has shown strong results, leading growth in premium and super premium segments.
Pampers Prestige delivers skin comfort and protection with real silk ingredients.
Mexico Fabric Enhancers disrupted the category with Downy Intense, leveraging perfume innovation.
A longer-term reinvention of P&G has begun, focusing on constructive disruption to create and extend competitive advantages.
The company remains committed to an integrated growth strategy with a portfolio of daily-use products where performance drives brand choice.
Productivity will be doubled down on to fund capabilities, innovation, and demand creation, and to mitigate cost headwinds.
The company aims to redefine the brand-building framework to deliver consumer-relevant superiority.
Leveraging superior data, superior technology, and superior capabilities is key to creating and extending competitive advantage.
Building brands rooted in deep connections with consumers and industry-leading innovation capability is a strength.
AI-enabled molecular discovery will enable faster and more powerful integration of innovation capabilities.
Creating a deeper, holistic connection with consumers to build brand relationships in the new media reality is an opportunity.
AI and GenAI capability help discover consumer-relevant insights at every step of the consumer path to purchase.
Integration with retail partners across the full supply chain and merchandising activity system is a key opportunity.
Supply Chain 3.0 has driven a more complete system connection from purchase signal back through inventory systems to production planning and material ordering.
The company is building structured data lakes, data platforms, AI capabilities, programmatic shelf tools, and media creation and evaluation systems.
Supply chain platforms can run autonomously reacting to retail demand signals, consumer innovation needs, or productivity opportunities.
The objective is to grow productivity sales per head disproportionately once these capabilities are implemented.
The company is focused on adjusting to the new media landscape, innovating with a stronger core and bigger offerings, and delivering good consumer value.
Financial Guidance and Outlook
Fiscal year 2026 guidance ranges across organic sales, core EPS, and adjusted free cash flow productivity are maintained.
Organic sales growth of in-line to plus 4% is expected for fiscal 2026.
This guidance includes 30 basis points to 50 basis points of headwind from product and market exits.
Core EPS growth of in-line to plus 4% versus prior year is expected, equating to a range of $6.83 to $7.09 per share.
Adjusted free cash flow productivity in the range of 85% to 90% for the year is forecasted.
This includes an increase in capital spending to add capacity and cover cash costs from restructuring.
The outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates.
Significant additional currency weakness, commodity or other cost increases, geopolitical disruption, major supply chain disruptions, or store closures are not anticipated within the guidance ranges.
The company expects to return roughly $15 billion of cash to shareowners in fiscal 2026.
The base expectation for US category growth in the back half is 2%.
A slight headwind from inventory is probably adequate to assume on a market base that has about 2% of value growth.
