Q2 2025 Earnings Summary
- Strong relationships with retail partners focused on market growth, with positive conversations and collaborative efforts to work more efficiently, indicating healthy demand and support for P&G's products across key markets.
- Stability and growth in core markets, with the consumer in their categories described as stable, market growth in Europe at around 4%, and consistent market share gains, including private label shares declining in both the US and Europe. This suggests P&G's strong positioning and potential for continued growth.
- Encouraging recovery and growth prospects in China, with organic sales decline improving from down 15% in Q1 to down 3% in Q2, and brands like SK-II returning to growth at 5%. P&G is leveraging marketplace changes to strengthen its position and drive market growth, indicating potential upside in a key market.
- Increased foreign exchange headwinds are pressuring EPS, with P&G now expecting a $300 million after-tax headwind, equating to $0.12 per share for fiscal '25. Management acknowledges confidence toward the lower end of the guidance range for both organic sales growth and core EPS due to these headwinds.
- Continued challenges in key markets like China and the Middle East pose risks to growth. Management admits that "China is not out of the woods" and will remain difficult and volatile, which could drive results to the midpoint or lower end of the guidance. The Middle East is also expected to remain a more difficult environment throughout the second half.
- P&G may have limited flexibility to offset headwinds due to its commitment to investing in innovation, even if it means accepting lower EPS. Management states they will "fully support" the innovation pipeline and may accept coming in "a little bit lower" on earnings if necessary.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +2% | Underlying Business Factors: Pricing adjustments (+3 points) and a modest volume decline (-1 point) from the prior fiscal periods contributed to overall revenue growth. <br/> Market Conditions: Easing commodity costs and partial recovery in key regions like Europe offset weaker consumer demand in Greater China. <br/> Company-Specific Initiatives: Ongoing innovation and brand investments helped sustain organic sales growth. <br/> Forward-Looking: Continued focus on premiumization and geographic expansion may drive moderate revenue gains, though lingering FX and consumer confidence headwinds remain. |
Operating Income (EBIT) | +29% | Underlying Business Factors: A significant gross margin expansion (helped by productivity savings) and lower commodity cost pressures compared to earlier periods boosted EBIT. <br/> Market Conditions: Reduced inflationary headwinds and partially favorable FX trends also aided cost efficiency. <br/> Company-Specific Initiatives: Restructuring efforts and disciplined SG&A spending improved operating leverage. <br/> Forward-Looking: Continued margin improvement could be tempered by renewed commodity volatility or higher brand investments. |
Net Income | +33% | Underlying Business Factors: Higher operating profit and controlled restructuring charges this period contrasted with heavier one-time costs in prior quarters. <br/> Market Conditions: Moderating raw material expenses and ongoing brand strength supported stronger profitability. <br/> Company-Specific Initiatives: Strategic pricing actions and cost controls drove robust bottom-line results. <br/> Forward-Looking: Focus on operational excellence may sustain net income growth if macro conditions remain stable. |
Basic EPS | +35% | Underlying Business Factors: The EPS surge built on higher net income and share repurchases, which reduced share count versus prior periods. <br/> Market Conditions: Favorable cost environment and gradual rebound in select international markets lifted per-share earnings. <br/> Company-Specific Initiatives: Earlier restructuring drove efficiency, supporting strong EPS growth. <br/> Forward-Looking: Ongoing capital returns (e.g., buybacks) and stable cash flows could continue supporting EPS momentum. |
All Major Business Segments (Beauty, Grooming, Health, Fabric/Home, Baby/Feminine) | Within ±3% YoY | Underlying Business Factors: Pricing-driven growth in mature markets offset by softer volumes in certain international regions. <br/> Market Conditions: Adjusted consumer spending and competition in categories like Beauty tempered wider gains, while Fabric & Home saw modest increases aided by new product launches. <br/> Company-Specific Initiatives: Balanced portfolio management and targeted marketing investments sustained steady performance. <br/> Forward-Looking: Incremental gains are likely but could vary by category amid currency shifts and evolving consumer preferences. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Organic Sales Growth | FY 2025 | 3% to 5% | 3% to 5% | no change |
Core EPS Growth | FY 2025 | 5% to 7% (≈ $6.91 to $7.05 per share) | 5% to 7% (≈ $6.91 to $7.05 per share) | no change |
Commodity Cost Headwind | FY 2025 | ~$200 million after tax (≈ $0.08 per share) | ~$200 million after tax (≈ $0.08 per share) | no change |
Foreign Exchange Headwind | FY 2025 | No significant additional currency weakness noted (no explicit amount) | ~$300 million after tax (≈ $0.12 per share) | lowered |
Non-Operating Income & Tax Rate | FY 2025 | ~$0.10 to $0.12 per share headwind | ~$0.10 to $0.12 per share headwind | no change |
Free Cash Flow Productivity | FY 2025 | ~90% | ~90% | no change |
Cash Returned to Shareholders | FY 2025 | ~$10B in dividends plus | $16B–$17B total, including $10B in dividends and $6B–$7B in share repurchases | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Organic Sales Growth | Q2 2025 vs. Q2 2024 (y/y) | 3% to 5% growth | ~2% y/y growth (21,882Vs. 21,441) | Missed |
EPS Growth | Q2 2025 vs. Q2 2024 (y/y) | 5% to 7% growth | ~35% y/y growth ($1.94Vs. $1.44) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong market performance in NA/EU | Consistently highlighted (e.g., 3–4% volume growth in NA and steady gains in Europe). | Stable consumer environment with ~4% market growth, continued volume and share gains, and private label share remaining flat or declining. | Consistently repeated across all periods. |
Challenges in China (SK-II brand performance) | Persistent headwinds for SK-II (-30% to -35% declines in prior quarters), with geopolitical and economic factors slowing recovery. | Partial improvement from -15% to -3% organic sales decline; SK-II grew ~5% in Greater China, supported by brand-building investments and easing geopolitical tensions. | Still a challenge, though improving for SK-II. |
Difficult geopolitical environment in the Middle East | Previously cited as geopolitical and economic headwinds constraining growth in Q1, Q4, and Q3 2024. | Continues to weigh on growth; stabilization remains the main driver for any near-term improvement, but the region is expected to stay volatile. | Ongoing concern discussed in each period. |
Ongoing emphasis on innovation pipeline | Repeated focus on disruptive innovation (e.g., Olay Melts, Swiffer, Oral-B iO) as a key growth driver, mentioned in Q1, Q4, and Q3 2024. | Strong commitment to invest in innovation and product superiority, showcased by recent launches (Tide evo, Charmin Smooth Tear) and willingness to accept lower EPS if needed. | Central to growth strategy and consistently reinforced. |
FX and commodity cost headwinds | Historically noted as significant margin pressures but partially mitigated by productivity and pricing actions. | Combined ~$0.20/share EPS impact; maintaining core EPS growth guidance of 5–7% despite costs and volatility. | Remain a recurring issue, offset by pricing and productivity. |
Investing in innovation at expense of near-term EPS | While innovation investments have been cited previously, explicit willingness to lower EPS if needed was less frequently emphasized. | Willing to accept modest EPS trade-offs to fully fund strong innovation pipeline; references to past practice during tough currency/commodity cycles. | Newly emphasized willingness to prioritize innovation over short-term profits. |
Partial recovery in China | Sequential improvement from double-digit dips, but still negative; Q1 and prior calls highlighted hopes for later-quarter recoveries. | Organic sales decline narrows to -3%, with SK-II growing 5% in Q2 2025; brand-building and channel strategies are helping, though the market remains fragile. | Gradual improvement but still volatile. |
Private label share declines | Mentioned as stable in earlier quarters, indicating no major consumer trade-down. | Flat to declining private label share in key markets (US, Europe), reinforcing P&G’s share gains. | Supports P&G’s market share in developed markets. |
Fabric Care challenges | Previously noted issues around competitive pricing and portfolio focus in Q4 2024. | Not mentioned as a current concern in Q2 2025. | No longer highlighted, suggesting improvement or resolution. |
Baby Care underperformance | Past calls showed deeper concerns, particularly pre-Q1 2025. | Briefly referenced as low single-digit decline, with innovation (e.g., Luvs) and merchandising investments aimed at turnaround. | Not a major focus now, possibly stabilizing. |
Collaborative retail partnerships | Previously described as extremely strong, with joint efforts on inventory and promotion strategies. | Positive, constructive dialogue focused on market growth and supply-chain efficiency, indicating healthy demand. | Continues to support growth through operational alignment. |
Potential consumer softness in US/Europe | Past quarters also showed steady demand in key categories; no major softness identified. | Described as stable with ~4% growth; no significant indication of trade-down despite volatility. | Remains stable, not viewed as a major guidance risk. |
China’s future impact | Viewed as a longer-term opportunity in prior quarters, with meaningful but delayed impact. | Brand-specific recoveries (like SK-II) and structural changes in go-to-market approach could have large implications once macro improves. | Significant upside if momentum continues. |
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China Sales Outlook
Q: How is China's performance and outlook?
A: China's market remains challenging, but there are signs of improvement. In Q2, China's organic sales were down only 3%, improving from a 15% decline in Q1. The SK-II brand is returning to growth at 5%. We are innovating across core brands like Hair Care, Fabric Care, and Olay, and making progress in go-to-market strategies. However, we acknowledge that China is "not out of the woods," and volatility could impact our guidance ,. -
Organic Sales Growth Guidance
Q: Are you confident about hitting your organic sales growth targets?
A: We have good visibility and confidence towards the lower end of our guidance range for organic sales growth and core EPS. Continued strong performance of around 4% growth in the 85% of our business (U.S., Europe, Latin America) and recovery in the 15% (Asia, Middle East, Africa) could move us to the midpoint or higher. However, weakening in core markets or a return to negative territory in China could move us to the lower end ,. -
Input Costs and FX Impacts
Q: How are input costs and FX affecting margins?
A: We maintained our outlook for a $200 million after-tax headwind from input costs. Any variations in input costs now will likely impact the first half of next fiscal year due to contract structures. Most FX impact will hit in the second half, largely due to currency volatility. We are confident in our productivity programs, aiming for $1.5 billion in cost of goods sold savings and $2 billion overall, including SG&A ,. -
Innovation Pipeline Strength
Q: How strong is your upcoming innovation program?
A: We have a robust innovation pipeline and are confident in our upcoming programs. For example, the Tide evo test market in Colorado exceeded first-year expectations in just 12 weeks. We are investing in innovation across categories, including Oral Care with the rollout of iO 10 and iO 2 toothbrushes. Innovation enables modest pricing moves and drives market growth ,. -
Capital Allocation and Share Repurchase
Q: What are your plans for M&A and share buybacks?
A: We continue to prioritize returning value to shareholders, expecting to return $16 to $17 billion this year via dividends and share repurchases. M&A is not a primary focus due to our strong market positions, but we remain open to opportunities in categories like Personal Health Care and Skin Care if they create value. We will continue aggressive share repurchases as part of our ongoing capital allocation strategy. -
Consumer Trends in U.S. and Europe
Q: How are U.S. and European consumers behaving?
A: Consumers in our categories remain stable. In Europe, markets continue to grow around 4%, with inflation down to about 2%. In the U.S., consumption was volatile due to external factors but overall remains stable, with market growth around 4% and volume growth around 3%. Private label shares are flat to declining in both regions, indicating consumer resilience. -
Performance of Key Categories
Q: How are key categories like Beauty and Health Care performing?
A: In Beauty, we see strength in Antiperspirants up 11%, Personal Care up 16%, and Hair Care up 3%. However, Skin Care is an area of opportunity, with declines due to shifts in consumer preferences and distribution changes. In Health Care, growth is impacted by a mild cough/cold season, but we are building share and remain positive about our broader portfolio's growth prospects ,. -
Pricing Strategy and Mix
Q: Will pricing remain flat or turn negative?
A: Pricing is an outcome driven by innovation and market conditions. We have consistently contributed to top-line growth through modest pricing for 54 of the last 57 quarters. We will continue to take pricing with innovation, and we do not foresee pricing turning negative. Mix is positively impacted by consumers trading up within categories, which boosts sales but may affect gross margins mathematically ,. -
Latin America and Enterprise Markets Outlook
Q: What is the outlook for Latin America and Enterprise Markets?
A: Latin America delivered 3% growth this quarter on a base of 17%. Markets like Mexico are challenging, but we expect acceleration in the second half due to strong plans and easier comparisons. Europe Enterprise Markets grew 1% on a base of 8%, with volume share increasing by 60 basis points. In Asia, Middle East, and Africa, stabilization, particularly in the Middle East, is key for future growth. -
Retailer Relationships
Q: How are relationships with retail partners evolving?
A: Conversations with retail partners are positive and focused on market growth and efficient collaboration. In Europe, we are working closely with customers to drive market growth. In the U.S., while some retailers face challenges, we continue to focus on opportunities for joint growth. Our discussions emphasize optimizing supply chains and being strong partners in driving category growth.