PROCTER & GAMBLE Co Q3 FY2025 earnings call

• The company is protecting investment in brands, innovation, and demand creation amidst near-term volatility.
• Adjusted fiscal year guidance due to consumer and retail volatility.
• Strategy focuses on integrated growth, delivering superiority across portfolio, accelerating productivity, constructive disruption, and empowering agile organizations.
• Strong innovation pipeline with recent launches like Crest 3D White Deep Stain Remover, Oral-B iO10, Tide OxyBoost Power Pods, etc.
• Maintained margin investment levels supported by productivity improvements.

For the third quarter, organic sales grew 1%. Growth was broad-based across categories. Personal health care was up high single digits, skin and personal care mid-singles. Fabric care, oral care, feminine care, grooming, and hair care were low singles. Family care, baby care, and home care were low singles. Focus markets had 1% organic sales growth, enterprise markets 2%. North America saw 1% organic sales growth. Europe-focused markets were up 1%, with France a significant headwind. China organic sales declined 2%, but SK-II in Greater China grew double digits. Latin America led enterprise markets with 6% organic sales growth despite Mexico's challenges.

• Fiscal 2025 organic sales growth expected to be approximately 2%, with Q4 organic growth range 0.5%-4.5%.
• Core EPS outlook $6.72-$6.82 per share, equating to 2%-4% growth vs prior year.
• Adjusted free cash flow productivity forecasted at 90%.
• Plans to return $16-$17 billion to shareholders via dividends and share repurchases.
• Anticipates $100-$160 million in BT tariff impacts in Q4, ~$0.03-$0.05 per share.

• Tariff impacts on raw materials, packaging, and finished products from China and exports to Canada.
• Currency headwinds, geopolitical disruption, major supply chain disruptions, store closures could impact guidance.

Q: During the quarter, discussed retail inventory destocking in US and changing behavior in Europe. What's the latest readout on behavior in these regions and plans to support revenue growth and market share?

A: Consumption levels down in US and Europe. The Procter & Gamble Company is doubling down on innovation, superiority, productivity, and being close to consumers/markets. Holding share in Europe and US, private label shares trending down.

Q: How to think about modeling forecasting for 2026?

A: Global growth rates reduced. Expect markets to return to 3%-4% growth rate over 2-3 years. Focus on productivity, innovation, pricing as levers to offset impacts.

Q: How has the level of investment behind innovation and demand building changed with updated guidance?

A: Investment levels adjusted across regions/markets. Media and advertising spending flat vs sales. Committed to supporting innovation in Q4 with strong communication, no shift in mix between advertising and trade promotion.

Q: If consumer trade down, how is The Procter & Gamble Company positioned?

A: Well-positioned with broad portfolio across value tiers, channels. Innovation focused on all value tiers. Held share across periods of volatility, private label shares trending down.

Q: Any signs of anti-American brand sentiment outside Middle East?

A: No observed impact on consumption behavior. Brands viewed as local in markets. China seeing progress with SK-II and Olay growing.

Q: Clarification on tariff impact of $1-$1.5B and mitigation efforts?

A: $1-$1.5B before tax is annualized impact. Mitigation efforts include sourcing flexibility, productivity improvements. Pricing considered in effective categories/markets.

Q: Impact of tariffs on Q4 and pricing plans?

A: Q4 tariff impact $100-$160M BT (one month). Pricing plans complex, worked out by brand/market, reflected in guidance range.

Q: China skincare pricing and retailer/supplier conversations?

A: Skincare pricing behind innovation. Vision of partnering with retailers on supply chain 3.0, focus on stable, reliable, cost-efficient supply chains. Won't speak to retailers' private label strategies.

Q: Enterprise markets slowing, comment?

A: Enterprise markets volatile. Latin America doing well, Europe impacted by Turkey, Asia Middle East Africa has growth opportunities in India. Wide range for 2026 guidance.

Q: Impact of macro on innovation rollouts?

A: Innovation rollouts not slowed. Committed to driving innovation, focusing on simple propositions for incremental consumption.

Q: Commodity inflation guidance and crude oil impact?

A: Commodity inflation guidance $200M excluding tariffs. Crude oil impact on commodity prices spot-based, range wide.

Q: Supply chain agility and tariff mitigation conversations?

A: Majority supply chain close to consumption. Waiting for certainty to make sourcing/formulation changes. Conversations with retail partners/suppliers ongoing.