PG - NYSE

Morning, and welcome to The Procter & Gamble Company's Quarter End Conference Call. Today's event is being recorded for replay. This discussion will include a number of forward-looking statements. If you will refer to The Procter & Gamble Company's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, The Procter & Gamble Company needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures. The Procter & Gamble Company believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website www.pginvestor.com a full reconciliation of non-GAAP financial measures. Now I will turn the call over to The Procter & Gamble Company's Chief Financial Officer, Andre Schulten.

Good morning, everyone. Joining me on the call today is Shailesh Jejurikar, Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for 2026, and Shailesh will discuss strategy, innovation, and focus areas as we start calendar year 2026. I'll close with guidance for fiscal '26, and then we'll take your questions. As we expected, second-quarter top-line results heavily reflect underlying market trends and impacts from base period dynamics. As a reminder, the base period included trade and consumer pantry loading, driven by port strikes and hurricanes in early October, and the fear of additional port strikes in late December. The biggest impacts were on the baby, feminine and family care sector, the fabric and home care sector. These base period impacts were concentrated in the US market. The balance of the company grew organic sales nearly 3% with almost all regions outside the US growing or accelerating in the quarter. Bottom-line results followed the top line. We continue to prioritize full investment in the business. We anticipated this would be the softest quarter of the fiscal year and we remain confident in stronger growth in the back half. So moving to the details. Organic sales were in line with the prior year. Volume was down one point, pricing up a point, and mix was flat for the quarter. Seven 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 a year ago, Baby care and feminine care were each down low singles, and family care was down approximately 10%, primarily due to the base period dynamics we described. As a side note, organic sales excluding Family Care were up 1% for the quarter. Seven of 10 regions grew organic sales, Focus markets were down 1%. Organic sales in North America were down 2%. Volume was down three points, including a roughly two-point headwind. From the base period trade inventory impacts I mentioned. Pricemix added a point of growth. European focused market organic sales were up 1%, Strong growth in France, Spain, and Italy largely offset by a softer period in Germany. Greater China organic sales grew 3% another quarter of growth in what remains a challenging consumer environment, Pampers and SK-II led the growth, each up mid-teens or more. Enterprise markets grew mid-single digits for the quarter, Latin America organic sales were up 8%, with solid growth across Mexico, Brazil, and the balance of smaller markets. In the region. Organic sales in the Europe enterprise market region were up 6% versus prior year, and the Asia Pacific, Middle East, Africa enterprise region grew 2%. Global Exhibit market share was down 20 basis points. 25 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, 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 operating margin was down 70 basis points versus prior year, Strong productivity improvement of 270 basis points with healthy reinvestment in innovation, and demand creation. Currency-neutral core operating margin was down 80 basis points. Adjusted free cash flow productivity was 88%, and we returned $4.8 billion of cash to shareholders this quarter, $2.5 billion in dividends and $2.3 billion in share repurchases. In summary, we've now completed what we fully expected will be the softest quarter of the fiscal year, We have strong innovation and productivity plans for the back half of the year, We continue to invest in creating superior propositions for our consumers and retail partners. With relevant innovation, powerful brand campaigns, across every touchpoint and continuously improving in-market execution across all channels and platforms. We are fully activated, It's working. So we move with confidence into half two of the fiscal year And with that, I'll turn it over to Shailesh.

Thanks, Andre. Good morning, everyone. I want to start by underscoring the point Andre just made. We are confident the interventions and investments we are making now will improve our near-term performance. Strong innovation supported by sharper, consumer communication and retail execution. We are already seeing strong results in parts of the business that have made these near-term interventions. Greater China Baby Care was one of the first categories to make step change and continues to lead growth of the premium and super-premium segments of the market behind consumer insight-driven innovation, and brand communication. Chinese parents want only the best for their baby. Softness and comfort in addition to dryness. The China team created a product that delivers on this insight from first seeing and touching the packaging to feeling the diaper on their baby. They leveraged the Chinese history with silk, The shiny, soft yet strong, luxurious material has been a status symbol for more than two thousand years. Pampers Prestige is the only leading diaper brand that has real silky ingredients in the product. Delivering the ultimate experience of skin comfort and protection. The shiny soft feel package conveys superiority at first touch. Reframing our superior premium line has driven Greater China Baby Care double-digit organic sales growth over the past eighteen months, and increased share nearly three points. More recently, our fabric enhancers team has disrupted a sleepy category through deep consumer understanding. Mexican consumers describe the gold standard smell of clean as rich, tasty, fruity, and floral. Like the scents from shampoos. Downy Intense leverages our internal perfume innovation expertise to create the new high-intensity perfume. The packaging highlights the intensity of fragrance blooming on the bottle like a flower, Brand communication drives awareness of an experience of twenty-four seven smelling, like freshly washed hair. In-store execution of impactful displays with stopping power is increasing trial. These deep consumer insights driving innovation and executed with shopper brand communication and retail execution as spurred Mexico fabric enhancer category growth, and led Downey to double-digit organic sales growth and over two points for value share growth. Other examples where we've accelerated results include the Brazil hair care business, U. S. Old Spice and US liquid laundry detergents businesses. Most of these interventions are starting now in The US The biggest most impactful part of the business. We'll go deeper on these at the CAGNY conference next month. While we work to improve our near-term results, we've also begun a longer-term reinvention of The Procter & Gamble Company. Think of this as the next important phase of constructive disruption that will create and extend our competitive advantages in each element of our strategy. We remain fully committed to the integrated growth strategy that has enabled us to deliver significant growth and value creation over the better part of the past decade and it will in the future. A portfolio of daily use products in categories where performance drives brand choice. In these categories, The Procter & Gamble Company is uniquely positioned to deliver irresistible superiority across product, package, communication, retail execution, and value. We will do this to drive market growth and create value for The Procter & Gamble Company and our retail partners. We will double down on productivity with multiyear visibility to fund capabilities, innovation, and demand creation and to mitigate cost headwinds while delivering financial results at the levels you and we expect. Constructive disruption to stay ahead of and to create emerging trends and opportunities in our fast-changing industry, We will disrupt ourselves. At the core of it all is our organization. Fully engaged, enabled, and excited to serve consumers and win in the marketplace. These strategies, taken alone, are just words that any company could say. The words alone have become a point of parity. The Procter & Gamble Company's point of difference, our competitive advantage, comes from outstanding integrated execution of these strategies across all activity systems in the company and from anticipating what is needed next. We've executed the strategy well for many years. Now we see the landscape around us changing faster than it's ever been in recent memory. Neither we nor our industry in aggregate have adapted as fast as needed. This shows in the growth trends of our categories. Consumer media preferences and information collection are increasingly fragmented with new media platforms, including social media and retail media. Inflation across food, energy, health care, and many other areas of spending has taken a toll on consumers, and how they assess value. This will continue to evolve. The retail landscape is changing. More concentration, but also brand proliferation. Retailers are becoming media platforms. And media platforms are becoming retailers. In summary, the consumer path to purchase is changing every day, is nonlinear, and littered with millions of possible distractions. We expect an even more intense pace of change in the next three to five years. We will adjust to and leap ahead of these disruptions to invent CPG company of the future. The way to break through consistently is to build the strongest brands in the industry. The Procter & Gamble Company has the capabilities and unique opportunity to redefine the brand-building framework to deliver consumer-relevant superiority every day every week, every month, putting the consumer at the center of everything we do. Leading the consumer-relevant brand building and superiority at this space can and will only be delivered by leveraging superior data, superior technology, and superior capabilities to create and extend competitive advantage with consumers, and with retail partners. We define our strengths and opportunity here across three areas. First, we know how to build brands rooted in deep connections with consumers and our industry-leading innovation capability. We have an enormous wealth of consumer data and understanding and we receive a continuous flow of new data every day. Our teams connect with consumers across more touchpoints than anyone in our industry. Product research, shopper research, connected homes, ratings and reviews, social media posts, brand fan websites, and many more. We mine for insights that lead to new product innovation, brand ideas, performance claims, marketing campaigns. Now we are building the consumer connectivity the integrated data platforms, and the technologies that will enhance our team's ability to do this work better faster, and even more consumer-centric than ever before. We have a unique set of innovation capabilities in our industry. Substrate technologies, formulaic chemistry, devices, and now biology. We have years of experience integrating these capabilities to launch new platform technologies and innovations and we see many more ways to bring combinations of these technologies to life in new consumer products. Tide e Tide Evo is just one current example. Technologies, like AI-enabled molecular discovery will enable faster, and more powerful integration of innovation capabilities for faster growth. The second and related opportunity is to create a deeper, holistic connection with consumers to build brand relationships with them in the new media reality. Media fragmentation and emergence of new platforms creates an opportunity for brand builders who can best integrate across touchpoints. AI and Gen AI capability help our teams discover consumer-relevant insights at every step of the consumer path to purchase, grounded in a unifying brand idea. We are creating the individual touchpoint experiences for each consumer at a time. These ideas are activated in claims, demonstrations, visuals that communicate the performance and value of the brand across connected and broadcast TV, online video, social media, e-commerce sites, and in stores. Deep insights translated into a compelling brand idea repeated wherever consumers engage, making the brand easy to remember, reinforcing superior performance, that is worth it for the price paid. The third opportunity is integration with retail partners across the full supply chain and merchandising activity system. Again, the consumer understanding and brand-building capabilities we have from initial brand impulse to purchase transaction to in-home consumption are valuable assets. Integrating these with each retailer's category strategy and business model will enable our brands to create value across all retail formats. This includes activation of our brands in retail media, to convey our superiority and value messages close to the point of consumer purchase decision. Our supply chain capability is already a leader in the industry. Supply Chain 3.0 has driven a more complete system connection from purchase signal back through inventory systems to our production planning and material ordering to ensure consumers find the product they want each time they shop. We are well on our way in this journey across capabilities, data, and technology. We are freeing up capacity and capabilities with the organization redesign we announced, as part of the restructuring in June. We have built a structured data lake stock with petabytes of relevant data. We have built data platforms, AI capabilities, programmatic shelf tools, and media creation and evaluation systems. We have supply chain platforms that can run autonomously reacting to retail demand signals, consumer innovation needs, or productivity opportunities faster than ever before. The next step is to connect the dots. To integrate the pieces from identifying consumer friction point to product idea, to product design, to supply, the creative concept, to purchase transaction, to usage in-home, to post-use evaluation. We will close the loop, and we believe this will create a different s curve for our future growth and value creation centered around our consumer. We are doing many things right in how we are innovating, operating, and building brands today. And I'm confident in the near-term progress we are seeing. We know the opportunities ahead of us are even bigger and we will capture them with conviction and discipline. It took years to build the underlying platforms and capabilities and it will take some time to fully integrate and activate these assets across the company. We know what we need to do and we are excited by the opportunities ahead. In summary, we are confident in the short-term delivery and excited about the mid to long term as we leverage our strengths and unique capabilities to set us apart from the industry. We are inventing the CPG company of the future. We'll expand on these thoughts with some examples at CAGNY, and even more as we get to Investor Day later this year. With that, I'll hand it over to Andre to cover the guidance update.

Thank you, Shailesh. It's been a challenging start to the fiscal year. With softer consumer markets, aggressive competition a dynamic geopolitical landscape. We expect stronger results in the second half which enables us to maintain fiscal year 2026 guidance ranges across organic sales core EPS and adjusted free cash flow productivity. The growth rates embedded in our near-term guidance should return us to the lower half of our long-term growth algorithm as we exit fiscal twenty-six. And head into fiscal 'twenty-seven. For fiscal 'twenty-six, we continue to expect organic sales growth of in line to plus 4%. Global market growth for our portfolio footprint is around 2%, on a value basis, at the center of our guidance range. We're seeing progress in most regions, and we expect stronger growth in The U. S. As interventions take hold. As a reminder, this guidance includes 30 to 50 basis points of headwind from product and market exits, that are part of our restructuring work. Our bottom line outlook is for core EPS growth of in line to plus 4% versus prior year. This equates to a range of €6.83 to $7.09 per share. This guidance includes commodity costs roughly in line with the prior year. And a foreign exchange tailwind of approximately $200 million after tax, Taken together, no change versus prior guidance. Our fiscal 'twenty-six outlook continues to expect approximately $500 million before tax and higher costs from tariffs. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year. And a core effective tax rate in the range of 20% to 21%, for fiscal 'twenty-six, combined a $250 million after-tax headwind to earnings growth. We continue to forecast adjusted free cash flow productivity in the range of 85% to 90% for the year, and this includes an increase in capital spending as we add capacity in several categories that we incur the cash costs from the restructuring work. Expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock. Combined a plan to return roughly $15 billion of cash to shareholders in fiscal 'twenty-six, This 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. With that, I'll hand it back to Shailesh for a few closing thoughts.

We continue to believe the best path to sustainable, balanced growth is to double down on the strategy. Stronger integrated execution, to delight consumers with superior products at a superior value. Challenging markets like the ones we compete in today are an opportunity for The Procter & Gamble Company to step out from the back and lead. We're focused on leveraging the industry's best insights assets, capabilities, and people and you expect. to return to the levels of growth and market leadership that we, With that, we'll be happy to take your questions.

If your question has been answered or you would like to withdraw your question, press star followed by 2. Your first question comes from the line of Lauren Lieberman of Barclays. Please go ahead.

Great. Thanks so much. Good morning. So two kind of clear themes in the remarks that I wanted to ask about. So Andre, first, kind of what gives you confidence in the near-term acceleration that you mentioned a couple of times? And to what degree is that about kind of comparisons and base period dynamic versus, like, you know, real fundamental improvement and acceleration. And then, Shailesh, I know we'll get a lot more from you. At CAGNY. But what gets you excited about this longer-term, quote, reinvention of The Procter & Gamble Company? It was a notable choice of words. In the press release and then also in the prepared remarks. Thanks.

Good morning, Lauren. Thanks for the questions. So let me start with half two acceleration. I think the first positive element of quarter two results is the strength of the business outside of The U. S. If you look at Latin America, 8% growth Europe in aggregate growing 3%. China growing 3% on top of 5% growth last quarter Asia, Middle East, Africa is up 2%. And if you exclude the restructuring exits, it'll be up 4%. So there's real underlying acceleration in the business outside of The US, that is grounded in interventions that we've made in terms of innovation, in terms of commercial strategies, and in terms of doubling down on the precision and quality of execution in those markets. With Latin America really being ahead of the game here. And that's proof for us that the core strategies we're implementing, I think, are the results that we want to see. The US, underlying results, we believe will improve because we don't have the base period headwinds that we saw in quarter two. As you point out, I think that's part of the acceleration we expect in half two versus quarter two, not having inventory headwinds to the degree that we saw in quarter two. But the main element here, I think, is the fundamental execution of the same interventions we made outside of The US earlier. If you recall, The US slowdown was really a little bit delayed versus the balance of the markets. So we started in the rest of the world earlier with the innovation, commercial interventions, and execution. That same playbook is being executed in The US. Early indications where we have done this, for example, the Tide boosted launch, that is now in full distribution as of December, We're seeing results that are giving us confidence The innovation we're launching on Olay, just now on the jars with a new campaign and the launch of treatments at the same time with a new architecture, gives us confidence. The innovation we have on baby care first wave executed now, second wave coming later, TideEVO Coming In The Back Half Of The Year, So There's A Wealth Of Innovation We're Launching. We've Clearly Identified With Our North America leadership the opportunity in sharper execution, across all retail channels, And the team is committed and is turning that into execution changes And then the simple opportunity to leverage the strength of our brands by staying fully invested across the second half in media with even better execution. So all of those elements that we executed outside The U. S. That are showing progress, we feel will work in The US and if we don't see any one-timers anymore in terms of base period headwinds, that will translate into stronger growth. And our objective clearly is to leave the year with share growth in The U. S. Felix, you take the second Yes, I will. Thanks, Lauren. So first, what excites me is plenty of growth opportunities. We see that everywhere. But it's not gonna happen on its own. It will require us to create our own tailwinds Be it playing in a growth segment and driving it like personal care or playing in a segment which wasn't growing like best with

Product. Another thing to be able to communicate it to consumer. Bring it into packaging, bring it to life with user-generated content. So it's the ability to bring all of that together And the technology platforms and applications we've been building and Andre talked a bit about this, we are I would say we have been building a lot and I would say the future is here. It's just a little uneven. So our job is to integrate and bring it all together.

Your next question will come from the line of Steve Powers with Deutsche Bank. Please go ahead.

Great. Thank you very much, and good morning. I'm gonna ask a question that kinda follows the same structure as Lauren's question. So the first one, on the second half, improvements, if we think about things by category segment versus by geography, I guess, maybe a little bit more detail on where you expect progress and sequential acceleration to manifest most clearly. It sounds like laundry and baby and perhaps skincare what you said, Andre, but maybe just you could elaborate a bit more from that perspective. And then Shailesh, you know,

You take the China Baby Care. It's one thing to get the insight. Another thing to find a way to put silk in the

If you think about all those different pieces of operational enhancement and reinvention initiatives, How do you think about the path and timeline from here for the company to put all of them together and create those own tailwinds and win in the marketplace you know, across the portfolio consistency? How long does that take in your mind? Morning, Steve. If I look across the businesses, the innovation interventions, the commercial interventions, the execution focus is consistently applied across every part of the portfolio. I would tell you the base period effects are probably a strong help when you look at family care baby care, and even fem care, They were most heavily impacted in the first half of the year. So Family Care, for example, will see strong growth in January, even turning into share growth now. And we expect similar dynamics to happen across Baby and Fem. Baby at a global level is actually growing share, so has returned to share growth in the most recent reading. So the momentum is there. We continue to work on the mid-tier proposition You recall we had innovated on the top tier. That continues to work well. Swaddlers, cruisers three sixty. We've made the innovation interventions on Luvs a year ago. That's working. On Baby Dry, we have a two-phased approach. Phase one is executed. Phase two is coming later, So that's still work to be done. On laundry, fabric enhancers, we have very strong innovation, tight boost that I mentioned before, the biggest laundry liquid upgrade in twenty years. For consumers, and that is taking hold and working. And we're preparing for the TideEVO launch. We have strong innovation across fabric enhancers as well. And as you know, that's still a huge opportunity in terms of household penetration So communication effectiveness and copy quality is improving. In beauty in aggregate, beauty is growing 4%. And we have an opportunity to strengthen growth in skincare in The US. Making strong progress on SK-II, outside of The US, on Olay Outside Of The US, And I think the new launch of Olay that is just coming out with strong retailer support, I think, will accelerate that business. Personal Care has momentum and will continue momentum in The U. S. And globally. So I can continue to go down the list, but think I've given you enough depth to say this is really across the portfolio. It's the same idea, double down on the consumer. Double down on the execution. A double down on the quality of the brand campaign, And I think that's where, you know, Shailesh is putting his focus, if I can speak for him. He's really doubling down in every review on the quality of the brand campaign, the quality of the architecture thinking. And it's stimulating thought. It's stimulating quality of execution. And I think that gives us confidence from a geographic standpoint as we talked earlier to Lauren's question, but also from a category standpoint.

Well, thanks, Andre. And I'll just bridge Steve from what Andre said what I'm gonna say. But some of it will be sequential just simply because in US, also, when we make the interventions, we are extremely deliberate about making sure those interventions also drive category growth. So that's also why some of this has to happen with big innovations. But switching to your question. So I think a lot of the way to think about the future is we have, in many cases, already built platforms. Take the core data lake. That I talked about earlier. I mean, that did not happen overnight, cannot happen overnight, requires data capabilities, requires partnerships, but also importantly requires internal cultural change. For people to work the data and systems in a certain way is not a change that you can just do overnight. Even if you have the technology solution, very often the culture chain needs to go along with it. And so a lot of that work has happened or is happening. The timeline, if you asked as you specifically did ask, is I think by the time we really get the future evenly distributed, I think we're talking twelve to eighteen months. But it is not one which is a line of demarcation. So you will see parts of the business and certain businesses better equipped to take on all aspects of the transformation So some businesses may be ahead of others. Some regions may get ahead of others. But the simple answer to your question is really, I think, to get the future evenly distributed will be twelve to eighteen months.

The next question will come from the line of Chris Carey with Wells Fargo. Please go ahead.

Hi, everyone. I wanted to ask about investment levels. The Procter & Gamble Company has recently announced a restructuring program and you're going through some initiatives today, new media platforms. Supply chain integration with an evolving retail landscape, Obviously, there's an expectation for improvement. In sales growth, rebalancing of this I guess, top line and move toward algorithm over time. Can you give us a sense of the sort of cost of this progress, I suppose? And kind of the balance between the restructuring and some of the savings that that's going to allow for you relative to what you feel like is going to be needed You know, potentially, you know, especially if you don't, you know, see that that acceleration that you're gonna be looking for you know, in the coming months. If you if you really wanna stimulate top line for this business over the next twelve to eighteen months? Thanks so much.

Hey, Chris. Let me take a crack at this. The first part of the answer is many of the investments have been made over the last decade. If you think about the amount of money it takes to build a consistent global ERP platform, the data lake, the data governance structure, data engineering. All of that has been done. So that was part of the results that we that we delivered over the past, I would say, five to ten years. The investment to activate the technology specifically around the innovation capabilities, the media capabilities, won't be significant. It's an investment in scaling, but the underlying technology, the underlying data, that heavy investment is already done. So in that sense, I don't expect major capital or expense investments. On the supply chain side, you see us build capacity. And as we build capacity, that capacity is built in a way that it leverages automation. Digitization, both on the manufacturing side and on the warehouse side, So the elevated investment level in terms of capital is really related to building capacity building capacity in a different way, but not fundamentally more expensive So I don't expect, again, on the capital side, a significant shift. The restructuring we have announced in June, the two-year program, I think, will take us through the majority of the org changes and portfolio changes that we need to make. From there on out, if this works the way we want to, it will basically allow us to grow without incremental investments in organization or people. If you think about it, the objective is to grow productivity sales per head disproportionately once these capabilities are implemented. But we don't think it requires another wave of significant restructuring beyond what we typically have as part of our core earnings. So I wouldn't look at a cliff of investment that comes with this. The second part of your question on return to algorithm, I would say let us get through the next two quarters. And focus on acceleration. And then we'll talk about where we see the next year and how close algorithm we come once we have that reality under our belt.

The next question will come from Dara Mohsenian of Morgan Stanley. Please go ahead.

Hey. Good morning. So, Shailesh, I just want to dial down a bit more into The US market. There's always an opportunity under a new CEO to refocus the organization and tweak areas of emphasis Obviously, there's broad changes in the retail environment, as you mentioned, AI technology, consumer landscape, etcetera, etcetera. And, also, we're coming off a very difficult category growth environment in The US in calendar '25. So just as you look going forward, what are the most important priorities for the organization in terms of driving better execution, reaccelerating that organic sales growth? And specifically The Procter & Gamble Company's part of driving category growth. And part of the question is I'd like to better understand what's changing in terms of areas of emphasis to the strategy plans versus more where you're doubling down on execution and existing plans?

Sure. Thanks, Dara. Few areas. So I think as I said, I think if we get the elements of a plan right, I think there is an opportunity to grow the market. So I think that is doable. What are some of the changes, as Andre talked about, the interventions short to midterm that we're looking at and which also bleed into the long term. So it isn't just one separate short and long-term intervention. One is the media landscape has changed very dramatically over the last few years. I think, probably driven somewhat by COVID habits, a bunch of other things. The way people consume media and content has changed dramatically. Adjusting our brand-building plans to fully reflect that change and leverage it is the first. Big intervention we are focused on as we review plans including in The US. The second one linked to the retail landscape, there are a couple. But the first one is linked to when you see which channels are growing where the growth is coming, We need to adjust the kind of innovation we do. The way we are calling it is stronger core, bigger more. Because by definition, what we are finding is just given how challenging it is to get awareness, how important it is for the big items to be there, For instance, even on e-commerce where you can list everything. It's really the first screen or two that matters. And so having the item which has the velocity is extremely important. And so the way to think about it is a stronger core, for example, is the Tide Liquid relaunch. You have an amazing user base You give them a delightful product. They continue using it, use more of it. Attract other people to come use it as well. The bigger more, a good example is the launch of something like TideEVO, which is transformational. So you are going to get consumer attention and engagement. So we're changing the innovation to reflect that both from a point of view of how the media is being consumed, but also how the retail landscape is playing out. The third area of change is, of course, very deliberate on consumer value. Particularly in a market like the US, a lot of it is about strengthening our proposition Again, Tide is a great example of it, but we are gonna have that pretty much across every category where we significantly improve the value by significantly improving the product performance. So that the consumer notices it and feeds the value. So one of the areas that we're looking at across categories is significant strengthening of the propositions and in many of these cases, that do not come with the change in price. So we will be significantly strengthening value. So if I were to just summarize what I just said, it would be adjust to the new media landscape with how we do our brand campaigns. Adjust how we innovate with much more emphasis on a strong core and a bigger mold, And then ensure we're delivering really good consumer value.

The next question will come from Robert Ottenstein of Evercore ISI. Please go ahead.

Great. Thank you very much. And I think you've kinda hinted at this. But let's just talk about The US. And Amazon. You know, our data is showing that it's driving a disproportionate amount of the growth in your categories depending on category anywhere from 60 to 80% or so. You know, how specifically is that impacting your media efficiency and competitive dynamics against smaller brands what do you need to do differently? And perhaps you know, do you have any particular learnings from China that are relevant here? Thank you.

Yeah. Can I do one? Yeah. I can start. Hey, Robert. A couple of points that I think Shailesh hinted towards I think having the core brand as strong as possible by improving the performance, improving the claims, the e-content, all of that, I think, is the best and most urgent thing to do across the entire portfolio. So when it shows up on the landing page, it shows up as strong as possible. I think that's number one. I think there's an opportunity, specifically if you look at online businesses, The willingness of consumers to go into higher-priced items is still very, very strongly developed. You think about categories like hair care, if you think about categories like skincare, where small brands tend to play is in the upper end of the spectrum from a price per usage component, I think that's an opportunity for us to innovate. Which is you know, stronger core, and a bigger more. And the more, especially online, I think can be premium priced that's where you see innovation. Innovation happening. And in general, the last thing I'll leave you with is taking smaller brands and looking at some of the ideas that these creators are bringing, I think, is good inspiration. So looking at some of these brands and saying, that could be an interesting idea maybe on some of our core business, or it could be an interesting idea to replicate as a line extension There's nothing unique if you think about the ability that the ecosystem of small brands can bring. Not technology-wise, certainly not from a marketing scale perspective, certainly not from a supply chain perspective, but the creative stage is something interesting for us to look at.

I'll just add a couple of points, Andre, on this. To what you said, which is firstly, at a broad strategic priority level, we are very, very deliberate about ensuring we win in the fast-growing segments, which may be channels or segments of a market. What is exciting to the point you made, Robert, about the e-commerce growth at a variety of retailers and variety of countries is very often if we can channel that right, it can dramatically grow the market size and category. And if you want to take a stark example and move away from The US for a second, we go to India where our portfolio is slightly different and has been evolving differently. E-commerce is growing probably at 10 times the pace almost of offline. And our share is about 1.8 x. Of our offline business. So we are very deliberate about that, whether it's The US or India or any other market to make sure that happens. The drivers, as Andrew pointed out, of winning there need certain things, which we are making sure we have across the board, which includes content, which includes the item specificity, and making sure those are strong. And growing. And playing with the right portfolio. So those all become very critical elements, whether it's Amazon in US or any other ecom player in The US or outside

The next question will come from the line of Peter Galbo with Bank of America. Please go ahead.

Hey, guys. Good morning. Thanks for taking the question. And I'm now happy to be contributing very much to the baby care comps in the Galbo household. So I wanted to ask just regarding, Andre, your comments around you know, returning to kinda the lower half of algorithm in the back half on the near term, maybe a bit of clarification there. I think one point in the prepared remarks, talked about your category is growing at maybe two Then there was another comment about if we if we took out, you know, the the the lap, you would have seen organic sales a breeze. So just maybe you can help clarify a bit on what you were trying to say with that comment as I've I've gotten some inbound from folks. On that.

Hey, Peter. Glad to welcome you to the 2% in terms of terms of value. Enterprise markets are growing at about mid-single digits. China is still negative by about one point. Europe, flat in volume about 1% in value. And the most recent reading in The US, all outlet read, so our data, would indicate about 2% one to 2% of value growth. If you look specifically at the O And D Quarter, They Are There Might Be A Point Of There Is A Point Of Inventory Within Those Numbers. So You Want To Be Optimistic, You Could Say The US structurally could be growing at two to three points. But we have to see where that goes. From our point of view is the actual results, we've delivered 3% growth outside of The US. So that's roughly in line with market growth outside of The US. And we have delivered minus 2% in The US, which is below the market, And a good part of that is the inventory effects. There is a component of reduced share. So I don't wanna gloss over the fact that we have work to do to recover share, Partially, that's already in progress. I talked about family care. We're making progress on laundry. But the recovery in the second half will include both the base period effects moving out of the market and us recovering share So our objective is really to leave the fiscal year with share momentum out in The U. S. And at a global level.

The next question will come from Kevin Grundy of BNP Paribas. Please go ahead.

Great. Thanks. Good morning, everyone. Shailesh, I wanted to take a step back and ask for your assessment overall. On the portfolio from a strategy perspective. So it's been over a decade since The Procter & Gamble Company completed its portfolio review. Success as you know the income right away, but ultimately did. And set the company on a very strong path for growth. Now as we talked about on this call, the company finds itself in more of a transitional sort of phase of a reinvention, if you will, as growth has slowed. With that as context, I'd like your view here on whether you are generally pleased with the current portfolio Is The Procter & Gamble Company still in the right segments with in big total addressable markets? Attractive returns on capital and stronger growth? Or do you see it possible certain businesses may make less sense today in The Procter & Gamble Company's portfolio than they may have in years past. So, your thoughts there would be appreciated. Thank you.

Thanks, Evan. I split it into a few parts. So first is, I think we are clear that we play in daily use categories where performance matters. So I think we feel very good about that choice. We feel very good about that choice because it's extremely well integrated with the total strategy That's where superiority becomes critical. Whole model works well when we are in categories where daily use categories where performance matters. So I think that is one part of it. Second part of it is what we call the day one loop. We were starting our company today, we would look at our portfolio and say, okay. Are we in the right places? That has been really the genesis or driver of the restructuring that we talked about about six months back. Where we said we need to get out of certain parts of the business because simply them being a drag or we're not where we saw future growth. So there's another part of it, which is just disciplined look, continuous review of which are the right segments, and are we playing adequately in higher growth segments or not. There's a third element of it, which is when we look at categories, are we playing in the right segments? And something Andre just talked about, which is if you look at ecom, you see which category, what segments are growing, and are we present enough in some of those. If you look at social commerce, in some categories and see are we well represented in all segments, And we actually find a lot of opportunity at some of the higher price points in some of the categories in things like social commerce. So that's another aspect of the portfolio that we continue to strengthen. And the final point I would make is we continue to look at where we can build greater strength, and we've always talked about the fact that health and beauty are two areas where we find we have still opportunity to build a stronger presence, and we continue to look at opportunities which come our way there.

The next question will come from the line of Peter Grom with UBS. Please go ahead.

Yes. Thank you, operator, and good morning, everyone. So I guess I just wanted to follow-up on The U. S. And I guess it sounds you sound confident in your ability to see performance improve But I I guess I was trying to just pin down what you're expecting in terms of category growth for the back half of the year. And I wasn't sure in your response to Peter's question around 1% to 2% growth, whether that's kind of the right runway we should expect moving forward or whether the guidance expects to get back to that 2% to 3%. So maybe if you could just elaborate on that, that would be helpful. And then I guess just related, you know, at CAGNY last year, know, there's a lot of discussion around inventory destocking. So just any thoughts or comments on what investors should expect as we anniversary those impacts? Thanks.

Hey, Peter. Yeah. Thanks for the push on clarifying US category growth. Our base expectation is 2% category growth in the back half. That's what we know. And that's what we're planning on. From an inventory standpoint, hard to predict The only thing I'll leave you with is I would not expect any significant inventory built. In the second half. That's not part of our plan. We expect some level of inventory efficiency to be driven across retailers like they always do. Some of our retail partners are finishing up supply chain interventions, and that will probably lead to some efficiency in terms of inventory levels. So I'm I would tell you a slight headwind from inventory is probably adequate to assume. On a market base that has about 2% of value growth.

The next question will come from Filippo Falorni of Citi. Please go ahead.

Hi. Good morning, everyone. I wanted shift maybe to margins. For the second half of the year, is it the right expectation to think that we should see an improving margin trajectory as well considering the assumed improvement that you're embedded in The US market, your highest margin business. And given the commodity outlook looks a little bit more favorable in your guidance, And then below the gross margin line, Shailesh, you mentioned a lot about the interventions that you planning, including The US business. Can you help us quantify where the sizing of those intervention, where would they show up, whether it's with more advertising, more R&D, more promotional investment. Any help, like, sizing and quantifying those impacts will be helpful. Thank you. Good morning, Filippo. Let me start

At the risk of disappointing you I will not give you margin guidance for the back half. I think the margin will be an outcome and we will have to tactically maneuver to see where we want to invest for the strongest possible growth We focus on top line and we focus on EPS. And as you will have noticed, our guidance ranges on both are relatively wide. And they are wide because the outcomes will vary. There's still a lot of variability. And the most important variability to the margin line will be our conviction and need to invest. And so it's hard for me to give you a good indication of where that's gonna land because it's gonna be entirely driven by our ability and conviction to continue to invest in brands. Where that investment comes, I can start, Shailesh, and you jump in? Think it's mostly in the range of again, the innovation we're launching, and Shailesh talked about improving value by driving significant performance improvements on the core propositions, That will be an investment we're making. That's baked into our assumptions. And the second component is to communicate those investments effectively and consistently across the balance of the year. So the media side is an important part. I wouldn't expect a significant increase year over year. But consistent media spend across the second half. And the third one is trade-related spending to drive trial. Create display visibility, secondary placement in-store, Again, our path chosen is not heavy investment in promotion depth and price. We don't believe that's market constructive. But it will be to drive trial of those superior propositions So that's the third bucket. So product, media and communication, and in-store visibility and trial.

No. I think you covered it. Only thing I would say is the ratios of that vary based on the category. So the mix of which one needs a little more on product, which one needs a little more on advertising or visibility will vary. So that's the only point I would add to what you said, Andrew.

Our next question today will come from Bonnie Herzog of Goldman Sachs. Please go ahead.

All right. Thank you. Good morning, everyone. Guess I had a question on your Grooming segment. Organic sales were flat in the quarter, which was a pretty big deceleration versus last quarter with volumes inflecting negative and then margins contracting nearly 300 bps. So could you provide a little more color I guess, on what drove the weakness on volumes? And if there are any other factors behind the margin contraction outside of volume deleverage And then maybe lastly, how should we think about this segment for the second in terms of whether it's innovation and whether the business can accelerate? Thank you.

Good morning, Bonnie. Think you answered the first part of the question. I think the margin component and the bottom line component is an outcome of the top line. It's obviously a high-margin business. And so if the volume's slowing, that translates into the bottom line slowing, specifically since we don't curtail the investment in the business. Superiority investment across grooming is very important. The timing of the grooming business is heavily related to initiative timing. So year over year, the phasing of Braun initiative, female grooming, and male grooming initiatives is a driver in the quarterly profile that you see. On the second half, like other business, we expect modest acceleration in grooming. Related mostly to The US, And I think the biggest opportunity for our grooming business has continued activation of the portfolio in The U. S. And quality of execution in US stores, and that's what the team is entirely focused on.

Just to add maybe a couple of points, Bonnie, to that. One is we see within grooming, a huge opportunity in continuing to drive Venus. That has upside in pretty much every region In many regions, that's growing in the tens and twenties percent growth. So we see a lot of upside on the female grooming side. We see a lot more on appliances as well. And then we are working on innovation, which will have which comes in the in calendar '26, which hope which should further drive category growth. And probably the last point I would make is in US, we are also looking at changing the way our shelves are in many of the retailers and significantly improving how grooming comes across as a shopping experience.

Our next question will come from the line of Kaumil Gajrawala of Jefferies. Please go ahead.

Hey, guys. Good morning. If we could talk a bit about usage and volumes, there's so many puts and takes on your quarter. But, know, to the extent that you're able to calculate what actual usage is in the households, has that sort of trended off as we got into the front half of this fiscal year? Is it about the same in the rest sort of within it is just noise?

I think, Kaumil, it's that is still a huge opportunity in our categories. Usage volume growth is slow. To honestly flat if you look at the front half of the year. Even in the last quarter, both in The U. S. And in Europe. So reacceleration household penetration, reaccelerating user growth is a big part of what we're focusing on. And if you think about it, a lot of the growth in the past few years has been price-driven, right, as we came through the inflationary cycle, the supply chain crisis, all of our categories, And so I think the opportunity for us now is exactly what Shailesh described, It is to improve the value proposition for consumers by diligently constructing propositions that have a perfectly matching performance profile well communicated and executed, without raising the price so we can make the proposition attractive to more households, more consumers, more consistently. So the volume component will have to be a part of how we grow markets. As we talked about the second half, we believe this will take time. So we don't think this is an easy fix nor will it come quickly. So our growth trajectory that I just highlighted, the 2% value growth in The US, which is the assumption for half two, largely assumes that the volume component remains slow.

Just add one point reinforcing, Andrew, what you said But as we get on the journey of growth, I think user growth will be one which we place a lot of emphasis on. As Andre said, between user, usage and price mix, I think last five years probably had a due to inflation, a bigger component of price mix. We think the future is gonna be a lot more about user growth as the foundation, and then that typically we get that, we also get the usage growth.

The next question will come from the line of Andrea Teixeira with JPMorgan. Please go ahead.

Thank you. Good morning, everyone. So I was hoping if you have a clear clarification and one question. On the clarification you just mentioned, Shailesh, and Andre, like you're assuming that your 2%, you know, category growth, but are you thinking you can stabilize or even perhaps have share gains with the interventions you were making? And within that, are still seeing some trade down within your branch from, let's say, parts to liquid? Or if that has stabilized. And my real question is on the productivity reinvestment. As you had a very strong productivity in the quarter. So are you thinking of like as you go in terms of reinvestments and all the media initiatives, innovation you've made, and perhaps by spec architecture for affordability. Should we expect that to be canceled out? Or perhaps, as you see this environment and the opportunity to lean into more of a value proposition? How are you thinking of, like, the balance between top line and bottom line?

Thanks, Andrea. From a share perspective, it certainly is our objective to leave the year with share growth. Both in The US and in the rest of the world. But we also acknowledge that that is an outcome of how well we execute, the competitive environment, other in terms of geopolitical dimensions, consumer health, So that's why we still maintain the range And within the range, you know, if we end up in the mid to higher section, that will probably have an element of share growth If we end up in the lower section, it won't. But be assured, our team's energy is exactly that. We need to grow share, by growing more users, growing more households, and that's where all the innovation and the investment is focused. On the balance between productivity flow through top line and bottom line, I'll go back to what I said earlier, It depends on what we see happening. We will certainly on the side of more investment to drive more user growth drive household penetration in the short term, If we are convinced that we have the right innovation, if we are convinced that we have the right marketing program, the right commercial program, We will double down but we would be diligent in that assessment. So if we feel we've got the right program, we absolutely will continue to reinvest productivity.

The next question will come from Olivia Tong of Raymond James. Please go ahead.

Great. Thanks. Good morning. I want to talk a little bit about the margin with productivity savings about 70 basis points this quarter. You reinvested two twenty of that which I think highlights your you know, pricing productivity and reinvestment even as demand remains lower. So could you drill into that a little bit more in terms of what limitations there could be over the balance of the year on the price and productivity lever levers, particularly on price. Your implied second-half guidance assumes some fairly strong margin leverage but I want to understand those moving parts. And then in terms of the guidance range, you mentioned to in answer to another question that you can grow even without additional headcount, leveraging sales per employee. What's the risk that you might need to adjust those investment levels you know, as you think about delivering on EPS? Thanks.

I'll give it a shot, Olivia, but you can certainly follow-up with the IR team to get you more detail. I think the margin productivity side, I feel very good about We will continue to deliver in the range that we've delivered on. Have visibility to the productivity components for the next two to three years. So I think and we have the effect of the restructuring program kicking in. So I feel good about our ability to continue to drive productivity. At the level we need to deliver investment and a reasonable EPS outcome. Again, I won't get into guidance for next year, but it's certainly our objective to make progress towards algorithm. Over the next few quarters. The extent of that progress will not depend on our ability to deliver productivity. I feel very confident about that. It will entirely deliver depend on our ability to stimulate top-line growth, in the market conditions we're facing. And the level of confidence and conviction we have to invest behind that growth in the market. So I'll leave it there. For the longer term, I'll tell you I am fairly convinced that Shailesh will jump in here. That with the restructuring program, the way we're approaching the organization design the way we're integrating technology into the way we work, and the way we want to decrease functional barriers we think that's a powerful path forward to continue to drive organizational effectiveness and honestly free up a ton of capacity of our teams from internal work to focus on what really matters, which is the consumer innovation and execution.

I agree with everything, Andre. I would just add a couple of points. To frame what we are trying to do, which is productivity as fuel for growth. Growth as a fuel for EPS. So we really think productivity enables us to do what we need to to get the growth, which gives us balanced top and bottom line growth. So that is really the effort. So as you think of that, and that's really what Andrew was also saying is we're doing the productivity. We're very confident, by the way, in the productivity. But that finally is going success on that is getting us a growing top and bottom line.

The next question will come from the line of Robert Moskow of TD Cowen. Please go ahead.

You know, The Procter & Gamble Company probably does more than any CPG company to grow categories through innovation and improving performance That that's always been your mantra. But know, when you look at the data, as in terms of, like, the past twelve weeks or even the past year, the percent of products sold on promotion at The Procter & Gamble Company is substantially higher by about 200, 300 basis points. So I'm wondering, do you think this data, like, accurately represents what's what your approach is in market? Or because it would indicate that there is more need to move volume And or or is it inaccurately? Depicting what you're what you're trying to do to improve the volume? Thanks.

Hey, Robert. I'll give you a two-part answer here. Good question. I think I've repeatedly said that I don't see a reason why the categories will not move back to pre-COVID levels of promotion, which are around 30%. That will happen. It's just a competitive dynamic, a retailer dynamic, a consumer dynamic. And it's happening sequentially over time. The promotion read you're getting is not wrong, but it only captures part of what the market reality is. It doesn't capture forward gift cards. It doesn't capture layered couponing. Which is a significant part of competitive promotion that we're seeing. You're right. Our promotion volume is increasing and probably will increase in the second half, as we execute the innovation part of creating trial for those innovations is to deliver promotion visibility. Not all of those promotions come with deep price discounting. In many cases, they don't. But they show up in the promotion line. So what I'll tell you is our objective is to grow categories. Have we done this consistently over the past twelve months? No. That's our when Shailesh talks about we need to grow users and we need to grow usage, That is the part of category growth that we're striving to drive. And part of that has to be to generate trial because if you don't have new users try superior propositions, you don't get repeat, and you don't get the growth.

Thanks. I'll just add one thing to this, which is that as we strengthen our propositions it should strengthen our promotion elasticities as well. Which means we will be less impacted as our propositions get stronger. So that is always something we look for. So there's a balance between ensuring are building a future business, which is less dependent on promotions, but making sure we are not completely losing the plot on competitiveness.

The next question will come from the line of Edward Lewis of Rothschild and Co. Redburn. Please go ahead.

Yes. Thanks very much. I just Shailesh, wanted to touch on the regional mix of the business. Clearly, your elevated presence in The U. S. Has served you well of late. But as The U. S. Growth slows back to sort of, I guess, more normalized levels, we see continued growth in emerging markets, for example, what you're seeing in Latin America. Do you think about the regional mix of the business? And the advantages that you see the business as having are those regionally agnostic or can they be applied globally?

Great question. Let me take a crack at it. So I would say our task always given our business size, and other things is first and foremost to get US growing faster. And I believe it is doable and we have plans to try and do it. That is really part of what we talk about when we say we want to create the future. But we don't we think there are tremendous opportunities on the outside The US, which we are very focused on. And what we have tried to do is get very deliberate about which markets have that potential and then really double down and making sure we are playing to the future there. So a lot of the portfolio choices we have made over the past six to nine months have really been to put us in a position that we are playing in winning segments. Even if I take Latin America, we made the choice to change our business model in Argentina A large part of that enabled us to much better focus on Mexico and Brazil, and we changed the organization structure in the rest of Latin America. Which then enabled us to get much more consumer focused And now we are seeing, as Andrew mentioned earlier, 9% growth in Brazil, That's not the pace the market is growing at. Double digit in Mexico, that's definitely not the pace the market is growing at. So talked about India. A bit earlier in a different context. But, again, playing to the future growth there, which is heavily e-com, mean, having spent a lot of my life there, it's staggering to see the pace of change over the last five years in that space. So very deliberate on the big markets outside The US on how we're going to get the growth. Of course, China still remains a big one. Has a slightly different profile of where it coming from, but still a lot of future opportunities. So we do believe many of these large markets, we are well positioned to play to where the future is going.

And I would just say it's an end. We need to get The US growing, and we need to grow outside. And I think the good news is, maybe only one point to add, is the margin structure that John and then Shailesh have built in enterprise markets allows consistent investment because we have we can cover the cost of capacity, the cost of capital, So it's not dilutive. It funds itself, and that's the core idea behind expansion and growth in enterprise markets.

Your final question will come from the line of Michael Lavery of Piper Sandler. Please go ahead.

Good morning, and thanks for the question. Just wanted to come back to some of the share opportunities and how to think about it relative to value for the consumer You've you've talked about the importance of that, but also it sounds like no real price changes are under consideration. You've pointed out some of the premiumization some smaller brands are doing effectively and maybe delivering better benefits and value in that way. But you've also had, of course, some private label strength and share pressure. I guess how do we reconcile all of it? And maybe is it as simple as just a waiting game for the consumer health to improve, or is there more to do to move the needle on how the consumer sees value other than just sort of, you know, trading them up?

Yeah. I no. Great question. I would say it's not one thing because a very critical part of delivering value is also having a portfolio. So Luvs plays an important role in baby care in that sense. Similarly, on laundry, we have a portfolio with Gain and Tide Simply, So across markets, we do build that portfolio to ensure we are playing at a variety of price points. And making our products accessible. But if I were to look at the largest opportunities to address growth through value, I would say bulk of them are really in strengthening propositions. And if I look at probably one of our largest core items, which would be tied Liquid, which is a huge, huge business. We're seeing real momentum as we've just significantly improved the product performance. So it's a combination to answer your question. And k. With that, it looks like we have no further So just thank you for joining us this morning, and look forward to seeing you at CAGNY next month. Have a great day.

Thanks, everyone.