The Procter & Gamble Company (PG) Earnings

Management highlights

### Leadership Announcement - Procter & Gamble announced the upcoming retirement of Jon Moeller from the Board of Directors and the company, after 38 years of dedicated service in key leadership roles including Executive Chairman, CEO, COO, and CFO. Moeller's strategic vision was instrumental in shaping P&G's current portfolio and operating structure. ### Overall Year Progress - P&G delivered full fiscal 26 results within all initial guidance ranges despite volatile macroeconomic, geopolitical, and cost headwinds. Top-line growth accelerated through the year: +1 point in H1, +2 points in H2, with market share improving and stabilizing at flat exiting the year. The company completed foundational work to enable future accelerated growth, with improving consumer momentum. ### Core Integrated Growth Strategy The company's long-term strategy remains focused on four core pillars to deliver long-term growth and value creation: - Focus on performance-driven categories, delivering irresistible superiority across product, packaging, brand communication, retail execution, and consumer value - Drive sustained productivity to fund innovation, demand creation, and offset cost headwinds - Pursue constructive disruption to stay ahead of industry and consumer trends - Maintain a fully engaged, consumer-focused organization ### Targeted Interventions for Landscape Changes To address three key industry shifts (media fragmentation, changing retail landscape, persistent inflation), P&G is rolling out four key interventions: - Build deeper, consumer-first connections across all touchpoints - Transform brand building to adapt to fragmented media and reduce the path from awareness to purchase - Build holistic end-to-end partnerships with retailers, aligned with the convergence of retail and media, digital commerce, and AI-powered shopping - Strengthen the core brand portfolio while expanding into new adjacent growth areas ### Proven Operational Success Examples Multiple regional and brand initiatives have delivered strong growth and share gains to date: - Greater China Baby Care: Insight-driven innovation delivered double-digit organic growth for six consecutive quarters and nearly 5 points of value share gain, reclaiming the number one market position - Latin America Wix Cough & Cold: Sensorial-focused product and marketing upgrades delivered mid-teen organic growth and over 1 point of share gain, becoming the category leader - Germany Pantene: Shift to social/influencer marketing and culturally relevant events tripled reach and delivered 14% value sales growth and 50 basis points of share gain - SK-II: Shift from functional to lifestyle messaging on social commerce platforms grew organic sales double digits over six quarters and gained value share - P&G Mexico: Shift to long-term joint business planning with retailers delivered high single-digit organic growth, over 1 point of value share, and captured 60% of category growth (twice fair share) - Mr. Clean: New Magic Eraser and shower scrubber innovations captured 18x fair share of bath cleaning category growth - Tide: Core Tide Original liquid upgrade (better performance at the same price) turned a declining core product to high single-digit growth; new patent-protected Tide Evo laundry innovation is on track for national full-scale launch in fiscal 27 ### Scaling Future Capabilities P&G is scaling four advanced capability platforms to build the CPG company of the future, leveraging its existing strengths: - **Brand building transformation**: Scale AI-enabled tools for creative development and media activation to improve content effectiveness and always-on consumer engagement in fragmented media landscapes - **Internal process transformation**: Automate workflows via integrated data platforms and AI, cutting discovery-to-execution time from weeks to hours to free teams for consumer-focused high-value work - **R&D advancement**: Leverage AI-enabled molecular discovery and existing core innovation capabilities to deliver more breakthrough product solutions faster - **Supply Chain 3.0**: Digitize and automate end-to-end supply chain from purchase signal to production planning, with a qualified high-return investment framework to ensure consistent product availability for consumers

Guidance

- **Fiscal 27 Organic Sales Guidance**: 1% to 3% year-over-year organic sales growth, with 30 to 50 basis points of headwind from ongoing brand, product, and go-to-market restructuring. The company targets to grow modestly ahead of underlying category market growth, which is projected to be 1% to 3% local currency value growth (current run rate near the midpoint of 2%). The low end of the guidance range accounts for potential additional softness in market growth, while the high end assumes acceleration in market growth and share gains. - **Fiscal 27 Core EPS Guidance**: 0% to 3% year-over-year growth, equating to a range of $6.89 to $7.11 per share, with a $7 midpoint. The guidance includes $1 billion after-tax cost headwinds from higher raw materials, energy, transportation, and Middle East conflict-related premiums, based on an average $90 per barrel Brent crude price assumption. The majority of the cost impact will be felt in H1 fiscal 27. - Additional fiscal 27 headwinds include ~$50 million after-tax foreign exchange headwind, ~$150 million after-tax higher net interest expense, and ~$150 million after-tax lower non-operating income, for a total after-tax earnings headwind of ~$1.4 billion (56 cents per share, 8% of fiscal 26 core EPS). The core effective tax rate is expected to remain 20%, in line with prior year. - Q1 27 EPS is expected to be down 5% or more versus prior year due to the front-loaded cost impact. - Capital spending is projected to be 4.5% to 5.5% of sales. P&G plans to return $15 billion to shareholders in fiscal 27: over $10 billion in dividends and ~$5 billion in share repurchases. - Management expects results to improve sequentially semester over semester, with greater momentum building in the second half of fiscal 27 as cost headwinds ease and interventions scale. The guidance range reflects current market realities, with all potential major disruptions (additional commodity cost increases, currency weakness, geopolitical disruption, major supply chain disruption) not included in the base range.

Segment performance

Full Fiscal 26: - Organic sales grew more than 1% overall, with 9 of 10 product categories holding or growing organic sales. Hair care and skin/personal care grew mid-single digits (accounting for ~20% of total sales combined); personal health care, baby care, home care, fabric care, feminine care, grooming, and oral care grew low single digits (collectively ~79% of total sales); family care declined, representing ~1% of total sales. - All 7 regions held or grew organic sales. Focus markets grew 1%, North America and European focus markets grew modestly, Greater China grew 4%, enterprise markets grew 4% led by Latin America at 6% organic growth. E-commerce sales grew 6%, representing 20% of total company sales. 5 of 10 product categories held or grew global share, with aggregate global value/volume share flat exiting the year after improving in the back half. - Core EPS was $6.89, up 1% year-over-year. Core growth margin declined 40 basis points, core operating margin declined 70 basis points. Adjusted free cash flow productivity was 100%. The company returned $15 billion of value to shareholders, $10 billion in dividends and $5 billion in share repurchases. Fourth Quarter Fiscal 26: - Organic sales were flat year-over-year; adjusted for restructuring and Q3 pull-forward impacts, organic sales for ongoing business were ~1% (2% excluding the pull-forward effect), with consistent 2% structural growth across the second half. 6 of 10 product categories held or grew organic sales: personal health care, hair care, and skin/personal care grew single digits; baby care, fabric care, and grooming were flat to low single digits up; home care, feminine care, family care, and oral care declined. 5 of 7 regions held or grew organic sales; focus markets declined 1%, North America organic sales declined 1% (consumption/sell-out was up 2%, sell-in was down 1% driven by inventory shifts and the Amazon Prime Day timing change); Asia Pacific Middle East Africa enterprise region grew 3%. Aggregate global market share was flat year-over-year, with 23 of the top 50 category-country combinations holding or growing share. - Core EPS was $1.43, down 3% year-over-year (down 5% on a currency neutral basis). Adjusted free cash flow productivity was 133%. $3.5 billion of cash was returned to shareholders, $2.6 billion in dividends and ~$900 million in share repurchases.

Risks & headwinds

- Persistent volatility in the operating environment, including ongoing commodity price fluctuations, currency volatility, shifting consumer demand, competitive pressure, retailer dynamics, and geopolitical instability, particularly the ongoing conflict in the Middle East - If the Middle East conflict is sustained, oil and gas prices remain elevated, leading to higher inflation and reduced consumer sentiment, which would create additional top-line and cost headwinds not included in the base guidance - Quarterly volatility from retailer inventory dynamics and shifts in major retail promotion events (such as the Amazon Prime Day timing shift that created a large Q4 sell-in/sell-out disconnect in fiscal 26) - Higher than expected competitive intensity in large core categories, particularly fabric care in Europe, which requires repositioning and investment to regain competitiveness - Persistent private label pressure in value-sensitive categories such as family care, which requires ongoing portfolio and pricing adjustments to maintain share - Slowdown in underlying market growth in large mature markets (North America and European focus markets), which has a disproportionate impact on P&G due to its large market share in these regions

Analyst Q&A

• Q: It has been over a year since your restructuring to reinvigorate organic sales growth. What initiatives remain to be implemented, and when can we expect consistent sales outperformance versus categories? /

  A: Global share has now stabilized after improvement through H2 fiscal 26, with recent volume share inflecting as an indicator of improving user growth. Share growth has already returned to China for the first time in 15 quarters, 55% of Latin America's business is now growing users (up from less than 10% three years ago), and conflict-impacted Middle East markets are recovering. Most key interventions for the U.S. are scheduled to launch in the first half of fiscal 27, so momentum is expected to pick up during that period, with consumption already strong heading into the new fiscal. Management is confident it remains on track to return to consistent outperformance. (312 characters)

• Q: What major category-country combinations still need additional focus, and what is the timeline for interventions over the next six to eight months? /

  A: The highest priority area to re-establish competitiveness is fabric care in Europe, where competitive intensity has increased. In the U.S., share growth is already accelerating, with 50% of top customer-brand combinations now growing share (up from 10% in H1 fiscal 26). Baby care in the U.S. has already returned to share growth after value adjustments, with innovation planned to extend this strength across the full portfolio. Family care in the U.S. has a clear plan to regain lost users over the next six months, with early user growth already observed ahead of full intervention rollout. All underperforming category-customer combinations have identified time-bound plans to inflect performance within the next six months. (398 characters)

• Q: How have recent experiences in volatile North American and European markets changed P&G's approach to go-to-market plans and consumer engagement? /

  A: Underlying market growth in both regions has slowed 1 to 2 percentage points over the past 18 months, with a disproportionate impact on P&G due to its large market share, but management still sees $5 to $10 billion in cumulative growth opportunities in these regions over the next 3-5 years. P&G has shifted its innovation strategy from riding market growth to actively driving category growth, which includes both innovating new adjacent products (like Tide Evo) and upgrading core propositions (like the original Tide liquid formula) to lift the entire category. The adjusted innovation strategy is already delivering results, with core products returning to growth after upgrades. (347 characters)

• Q: What is embedded in the organic sales guidance range from a category growth standpoint, and will the disconnect between consumption and shipments be resolved moving forward? /

  A: The base assumption for global category growth is 2%, the current market run rate. To hit the midpoint of P&G's organic guidance, the company needs to deliver underlying growth of ~2.5% after accounting for 40-50 basis points of restructuring headwind, which already requires modest share growth. The Q4 disconnect between U.S. consumption and shipments was driven by unusual one-time factors: Q3 inventory pull-forward and the Amazon Prime Day timing shift, which created larger than normal volatility. Some level of quarterly inventory volatility will always exist, but accelerating underlying growth will make this volatility less visible and impactful. The company focuses on consumption growth over rolling 6-month periods, when disconnects typically average out. (389 characters)

• Q: How is P&G balancing cost inflation and the need for price interventions to gain share, and what is the expected composition of volume, price, and mix growth in fiscal 27? /

  A: Promotion levels are returning to pre-COVID levels in both the U.S. and Europe, and this trend has been fully incorporated into guidance. P&G uses promotion primarily to drive trial, not as a sustainable strategy to build share or acquire users. The company will continue to drive price mix through innovation, with the innovation plan positioned to deliver strong consumer value even with consistent pricing. Management expects a more balanced composition of volume, price, and mix growth in fiscal 27, moving away from the post-COVID period where 100% of growth was driven by price. (298 characters)