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    Procter & Gamble Co (PG)

    Procter & Gamble (P&G) is a global leader in the consumer goods industry, specializing in branded consumer packaged goods of superior quality and value. Operating in approximately 180 countries and territories, P&G organizes its business into five main segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care . The company focuses on delivering superior products across these categories, leveraging innovation, and maintaining strong relationships with retail partners to drive growth and value creation .

    1. Fabric & Home Care - Offers fabric care products like Tide and Ariel, and home care products such as Febreze and Swiffer, contributing significantly to the company's net sales and earnings .
    2. Baby, Feminine & Family Care - Provides products under brands like Pampers, Always, and Charmin, playing a crucial role in the company's overall sales and earnings .
    3. Beauty - Includes hair care and skin and personal care products with major brands like Head & Shoulders, Pantene, Olay, and SK-II .
    4. Health Care - Comprises oral care and personal health care products, featuring notable brands such as Crest, Oral-B, and Vicks .
    5. Grooming - Encompasses grooming appliances and blades and razors, with key brands including Gillette, Venus, and Braun .
    Initial Price$165.59June 29, 2024
    Final Price$173.55September 29, 2024
    Price Change$7.96
    % Change+4.81%

    What went well

    • Procter & Gamble's core business, representing 85% of sales, is growing at 4%, with North America sales consistently up over the past five quarters (7%, 5%, 3%, 4%, 4%). The company is holding or growing volume share in these regions, demonstrating strong performance in its primary markets.
    • Robust innovation is driving growth, with successful product launches like Olay's super serums, described as the most successful entry in the segment in recent years, and Pantene becoming the #1 hair care brand online in China ahead of Kerastase for the first time. This strong innovation pipeline positions P&G for sustained growth.
    • Commitment to shareholder value is evident as P&G maintains its guidance for fiscal 2025, expecting organic sales growth of 3% to 5% and core EPS growth of 5% to 7%. The company plans to pay around $10 billion in dividends and repurchase $6 billion to $7 billion in common stock, returning over $16 billion of cash to shareholders this fiscal year.

    What went wrong

    • Procter & Gamble faces persistent challenges in key markets like China and the Middle East, causing volatility and deceleration in growth. The situation in these regions could continue to impact the company's performance, potentially pointing to the lower end of their guidance. ,
    • There is a divergence in performance across categories, with underperformance in segments like Beauty (due to SK-II in China) and Baby Care, which has been subject to decreasing growth rates amid declining birth rates. This underperformance could pose challenges to overall growth. , , ,
    • Procter & Gamble's market share performance has declined, with the company now gaining or holding share in only 28 of its top 50 category-country combinations, down from 75% in fiscal '22. This indicates increased competitive pressures and potential challenges in sustaining market share growth.

    Q&A Summary

    1. China Sales and Outlook
      Q: How do you assess China's challenges and outlook?
      A: Andre acknowledged that volatility in China introduces uncertainty, but expects sequential improvement as they annualize base effects in Q2 and Q3. If China stabilizes, they could reach the midpoint of their 3% to 5% organic sales growth guidance; improvement could lead to the top end, while continued deceleration may point to the lower end. They are adjusting to changes in consumer behavior, enhancing distributor partnerships, and focusing on innovation to regain momentum.

    2. Guidance and Growth Expectations
      Q: Can you achieve your organic sales growth guidance range?
      A: Andre affirmed confidence in reaching the 3% to 5% organic sales growth guidance by annualizing headwinds in China and the Middle East, and maintaining strong performance in the core 85% of the business. Sequential improvement is expected, with the back half strengthened by innovation and easing comparisons.

    3. U.S. Market Growth and Share
      Q: What is your outlook for U.S. market growth and share?
      A: Andre sees sustained U.S. market growth in the 3% to 4% range, driven by daily-use categories and strong product performance. Opportunities include serving unserved consumers representing a $5 billion growth opportunity, and increasing household penetration in categories like fabric enhancers. P&G aims to grow ahead of the market and continue gaining share.

    4. Gross Margins and Inflation Impact
      Q: How is inflation affecting gross margins?
      A: While some easing inflation is reflected, the main driver of gross margin improvement is productivity, contributing 170 basis points in the quarter. SK-II being down 35% impacts gross margins significantly, but annualizing these effects will help going forward. Easing commodity costs will benefit margins later in the fiscal year due to a 6 to 9-month delay from actual inflation to P&L impact.

    5. SK-II Brand Performance
      Q: What's happening with the SK-II brand?
      A: SK-II faces challenges due to its Japanese origin amid China tensions, impacting its performance in China and travel retail. However, the brand remains highly relevant, showing strong results outside China. P&G is investing to rebuild brand equity, launching innovations like a super premium tier, and adjusting marketing to revitalize the brand.

    6. Market Share Trends
      Q: How is market share performance?
      A: Market share trends are generally positive. The number of category-country combinations gaining or holding share decreased due to pricing dynamics and lagging retailer brand pricing in Europe. P&G focuses on growing markets by increasing household penetration, with volume share as an early indicator. Progress is notable in the U.S., with growth in both volume and value share.

    7. Baby and Family Care Performance
      Q: What's the outlook for Baby and Family Care segments?
      A: Family Care has a stable model driven by innovation in products like Bounty and Charmin, contributing to category growth without major impact from stock-up activity. Baby Care faces declining birth rates but focuses on providing superior products to trade consumers up, with innovations like Swaddlers and Cruisers 360 gaining share. Access to full production capacity supports future growth.

    8. Pricing, Promotions, and Consumer Behavior
      Q: Are you seeing trading down or changes in promotions?
      A: The promotional environment is stable, with no significant changes. Negative mix effects in Beauty are driven by SK-II, and in Grooming by shifts within the portfolio. There are no indications of consumers trading down; private label shares are flat or slightly down, suggesting stable consumer behavior.

    9. Innovation Pipeline
      Q: Can you update us on your innovation initiatives?
      A: Disruptive innovations like Olay Melts and Tide evo are performing well, with Olay Melts experiencing strong consumer response and Tide evo progressing in test markets. P&G is advancing its competitive edge through such proprietary technologies, with more details to be shared at the upcoming Investor Day.

    10. Retailer Relationships and Inventories
      Q: How are retailer inventories and relationships?
      A: Retailer inventory levels are stable with no major changes. P&G enjoys constructive relationships with retailers, focusing on growing markets and integrating supply chains to create mutual value. The retail dynamic in key markets like the U.S. and Europe remains positive.

    NamePositionStart DateShort Bio
    Jon R. MoellerChairman of the Board, President, and Chief Executive OfficerNov 2021Jon R. Moeller is the Chairman of the Board, President, and Chief Executive Officer of P&G. He assumed the role of President and CEO in November 2021 and was named Chairman of the Board effective July 2022 .
    Shailesh JejurikarChief Operating Officer2018Shailesh Jejurikar is the Chief Operating Officer at P&G. He was first elected to an officer position in 2018. He previously served as CEO of Fabric and Home Care from 2019 to 2021 .
    Andre SchultenChief Financial Officer2021Andre Schulten is the Chief Financial Officer of P&G. He was first elected to this officer position in 2021. Prior to becoming CFO, he served as Senior Vice President - Baby Care, North America from 2018 to 2021 .
    Gary A. CoombeChief Executive Officer - Grooming2014Gary A. Coombe serves as the Chief Executive Officer - Grooming at P&G. He has held this position since 2014. Prior to this role, he served as President - Europe Selling & Market Operations from 2014 to 2018 .
    Jennifer L. DavisChief Executive Officer - Health Care2022Jennifer L. Davis is the Chief Executive Officer of Health Care at P&G. She was first elected to this officer position in 2022. Prior to her current role, she served as President of Feminine Care from 2019 to 2022 .
    Ma. Fatima D. FranciscoChief Executive Officer - Baby, Feminine and Family Care2018Ma. Fatima D. Francisco is the Chief Executive Officer of Baby, Feminine, and Family Care at P&G. She has been serving in this role since 2018. She previously served as CEO of Baby and Feminine Care from 2019 to 2021 .
    R. Alexandra KeithChief Executive Officer - Beauty and Executive Sponsor for Sustainability2017R. Alexandra Keith is the Chief Executive Officer - Beauty and Executive Sponsor for Corporate Sustainability at P&G. She was first elected to an officer position in 2017 .
    Sundar RamanChief Executive Officer - Fabric and Home Care2021Sundar Raman is the Chief Executive Officer - Fabric and Home Care at P&G. He was first elected to this officer position in 2021. He previously served as President - Home Care and P&G Professional from 2020 to 2021 .
    Victor AguilarChief Research, Development and Innovation Officer2020Victor Aguilar is the Chief Research, Development and Innovation Officer at P&G. He was first elected to this officer position in 2020. He previously held various senior positions in R&D for Global Fabric Care from 2014 to 2019 .
    Marc S. PritchardChief Brand Officer2008Marc S. Pritchard is the Chief Brand Officer at P&G. He has been serving in this role since 2008 .
    Balaji PurushothamanChief Human Resources Officer2023Balaji Purushothaman is the Chief Human Resources Officer at P&G. He was first elected to this officer position in 2023. He previously served as Senior Vice President - Human Resources, Global Total Rewards from 2020 to 2022 .
    Susan Street WhaleyChief Legal Officer and Secretary2022Susan Street Whaley is the Chief Legal Officer and Secretary at P&G. She was first elected to this officer position in 2022. She previously served as Senior Vice President and General Counsel - North America from 2019 to 2022 .
    1. With the Baby Care segment experiencing sustained pressure over multiple quarters, partly due to declining birth rates in key markets like China and the U.S., how do you plan to drive growth in this segment, and can you elaborate on the specific innovations and strategies that will counteract these demographic challenges?

    2. Given the significant decline in organic sales in Greater China by 15%, particularly impacting the SK-II brand in the Beauty segment, what concrete steps are you taking to stabilize and revive performance in this critical market, and how confident are you in the timelines for returning to growth?

    3. As pricing becomes less of a tailwind and you anticipate lower market growth rates in the U.S. from 5%-6% down to 3%-4%, how will you sustain market share gains and drive category growth in a moderating pricing environment, especially when faced with increasing competition and changing consumer behaviors?

    4. The Family Care business has benefited from innovation in substrate and roll sizes, but with 11 consecutive quarters of growth, how sustainable are these growth rates going forward, especially as pricing benefits wane, and what are you doing to ensure continued category growth and market share gains?

    5. Despite stating that the promotional environment and private label competition remain stable, are you concerned about potential shifts in consumer behavior towards trading down or increased promotional pressures in the face of economic uncertainty, and how are you preparing to address these risks to protect your margins and market share?

    Program DetailsProgram 1
    Approval DateN/A
    End Date/DurationN/A
    Total additional amount$6 to $7 billion
    Remaining authorizationN/A
    DetailsThe program aims to reduce outstanding shares through direct share repurchases. It is expected to be financed by a combination of operating cash flows and the issuance of debt. The program can be increased, decreased, or discontinued at any time without prior notice.

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025
    • Guidance:
      1. Organic Sales Growth: 3% to 5%
      2. Core EPS Growth: 5% to 7% (equates to $6.91 to $7.05 per share)
      3. Commodity Costs: $200 million headwind after tax ($0.08 per share)
      4. Foreign Exchange: Impact expected to be in line with the prior year
      5. Nonoperating Income and Tax Rate: $0.10 to $0.12 headwind to core EPS
      6. Free Cash Flow Productivity: 90%
      7. Dividends and Share Repurchases: $10 billion in dividends, $6 billion to $7 billion in stock repurchases .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      1. Organic Sales Growth: 3% to 5%
      2. Core EPS Growth: 5% to 7% (translates to $6.91 to $7.05 per share)
      3. Commodity and Foreign Exchange Headwinds: $300 million commodity cost headwind, $200 million foreign exchange headwind (combined $0.20 per share headwind)
      4. Tax Rate and Divestitures: $0.10 to $0.12 headwind to core EPS
      5. Adjusted Free Cash Flow Productivity: 90%
      6. Cash Return to Shareowners: $10 billion in dividends, $6 billion to $7 billion in stock repurchases, $16 billion to $17 billion total cash return .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Sales Growth: 4% to 5%
      2. Core EPS Growth: 10% to 11%
      3. Commodities: $900 million tailwind after tax
      4. Foreign Exchange: $600 million headwind after tax
      5. Net Interest Expense: $100 million higher after tax
      6. Adjusted Free Cash Flow Productivity: 90%
      7. Cash Return to Shareowners: $14 billion to $15 billion total cash return, including more than $9 billion in dividends and $5 billion to $6 billion in stock repurchases .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Organic Sales Growth: 4% to 5%
      2. Core EPS Growth: 8% to 9%
      3. Commodities Impact: $800 million tailwind after tax
      4. Foreign Exchange Impact: $1 billion headwind after tax
      5. Net Interest Expense: $100 million higher after tax
      6. Adjusted Free Cash Flow Productivity: 90%
      7. Cash Return to Shareholders: $14 billion to $15 billion total cash return, including more than $9 billion in dividends and up to $6 billion in stock repurchases
      8. Wage and Benefit Costs: Noted as earnings headwinds .