P&G(PG) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter of fiscal 2026 saw organic sales growth of 2%, marking 40 consecutive quarters of organic sales growth and keeping the company on track for the 10th consecutive fiscal year of core EPS growth [3][4] - Core earnings per share (EPS) were $1.99, up 3% compared to the prior year, with core gross margin down 50 basis points and core operating margin equal to the prior year [7][19] - Adjusted free cash flow productivity was 102%, with $3.8 billion returned to shareholders, including $2.55 billion in dividends and $1.25 billion in share repurchases [7][20] Business Line Data and Key Metrics Changes - Skin and personal care led growth with high single-digit increases, while hair care, grooming, personal health care, home care, and baby care each grew low singles [4][5] - Oral care and feminine care were in line with the prior year, while fabric care and family care were down low single digits [4][5] - Six of seven regions held or grew organic sales, with North America up 1% and Latin America up 7% [6][19] Market Data and Key Metrics Changes - Global aggregate market share decreased by 30 basis points, with 24 of the top 50 category-country combinations holding or growing share [6][7] - Greater China organic sales grew 5%, with Pampers and SK-II each growing double digits [5][6] - European focus markets' organic sales were equal to the prior year, with strong growth in France and Spain offset by weaker performance in Germany and Italy [5][6] Company Strategy and Development Direction - The company is focusing on increased investment in its integrated growth strategy, emphasizing consumer-centric approaches and driving superiority across all product categories and retail channels [8][16] - A significant innovation program is underway, including the launch of Tide's biggest upgrade in 20 years and the introduction of Tide Evo, a new laundry detergent [9][10] - The company is actively managing its portfolio, including restructuring efforts to enhance efficiency and effectiveness, with plans to reduce up to 7,000 non-manufacturing roles [12][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging operating environment with heightened competitive activity in the U.S. and Europe, but expressed confidence in the company's strategy and its ability to drive market growth [16][19] - The company maintained its guidance for fiscal 2026, expecting organic sales growth in line to plus 4% and core EPS growth in line to plus 4% [17][19] - Management highlighted the importance of innovation and integrated superiority to navigate the competitive landscape and drive sustainable growth [18][19] Other Important Information - The company is experiencing a shift in consumer behavior, with a focus on value rather than affordability, leading to positive price mix dynamics [48][49] - The restructuring program aims to create a more agile organization and improve execution capabilities, with a focus on digital enablement and data-driven decision-making [15][27] Q&A Session Summary Question: How is the restructuring being received internally? - Management reported that the organization is adapting well to the restructuring, with clear plans in place to create a more agile and effective organization [24][25] Question: What is the competitive landscape in North America for fabric care and baby care? - Management noted heightened competitive activity, particularly in promotions, but emphasized the importance of innovation and integrated superiority to drive sustainable growth [30][31] Question: What are the implications of the global market share decline? - Management acknowledged the decline but pointed out that absolute share in the U.S. is improving, indicating a positive trend despite competitive pressures [38][39] Question: How is the company addressing consumer affordability? - Management clarified that value is central to the consumer equation, with a focus on integrated performance rather than just price [48][49] Question: What is the outlook for Greater China? - Management expressed confidence in the progress made in China, highlighting strong growth in key categories and the effectiveness of recent interventions [44][45]