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    PG
    Earnings call· Dec 2025(Q2 FY26)

    PROCTER & GAMBLE Co PG

    Jan 22, 2026 Source

    Executive summary

    Procter & Gamble Q2 FY26 — Strategic Interventions Drive H2 Confidence Amidst Soft Q2

    Procter & Gamble navigated a challenging Q2 FY26, with organic sales flat due to significant base period headwinds, particularly in the U.S. and certain categories. Despite this, the company expressed confidence in a stronger second half, driven by strategic interventions in innovation, commercial execution, and brand building, which have already yielded positive results in international markets. Management is also embarking on a "longer-term reinvention" to adapt to evolving consumer and retail landscapes, leveraging data and technology to redefine brand building and drive future growth.

    Highlights

    4

    • Organic sales excluding Family Care grew 1% for the quarter, with 7 of 10 product categories holding or growing.

    • Latin America organic sales grew 8%, with Europe Enterprise Markets up 6%, and Greater China up 3% despite a challenging environment.

    • Strong productivity improvement of 270 basis points, enabling healthy reinvestment in innovation and demand creation.

    • Returned $4.8 billion of cash to shareowners, comprising $2.5 billion in dividends and $2.3 billion in share repurchases.

    Concerns

    5

    • Overall organic sales were in line with prior year (0%), with volume down 1 point, primarily due to base period dynamics in the U.S.

    • Core gross margin was down 50 basis points and core operating margin was down 70 basis points versus prior year.

    • Global aggregate market share was down 20 basis points, with only 25 of 50 top category-country combinations holding or growing share.

    • North America organic sales were down 2%, including a 2-point headwind from base period trade inventory impacts.

    • Baby Care and Feminine Care were each down low single digits, and Family Care was down approximately 10% due to base period dynamics.

    Guidance & targets

    12
    CategoryTargetConfidence
    Organic sales growth
    in line to plus 4%
    high materiality
    High
    Core EPS growth
    in line to plus 4%
    high materiality
    High
    Adjusted free cash flow productivity
    85% to 90%
    medium materiality
    High
    Dividends
    around $10 billion
    medium materiality
    High
    Share repurchases
    approximately $5 billion
    medium materiality
    High
    Total cash return to shareowners
    roughly $15 billion
    high materiality
    High
    Commodity costs
    roughly in line with prior year
    medium materiality
    High
    Foreign exchange tailwind
    approximately $200 million after tax
    medium materiality
    High
    Tariffs
    approximately $500 million before tax and higher costs
    medium materiality
    High
    Interest expense
    modestly higher
    low materiality
    High
    Core effective tax rate
    20% to 21%
    low materiality
    High
    U.S. category growth
    2%
    medium materiality
    Medium

    Segment performance

    19
    SegmentRevenueYoYQoQMargin
    Hair Care
    		—mid-single digits——
    Skin and Personal Care
    		—low single digits——
    Personal Health Care
    		—low single digits——
    Home Care
    		—low single digits——
    Oral Care
    		—low single digits——
    Grooming
    		—in line with year ago——
    Fabric Care
    		—in line with year ago——
    Baby Care
    		—down low singles——
    Feminine Care
    		—down low singles——
    Family Care
    Primarily due to base period dynamics.
    		—down approximately 10%——
    Company-wide (excluding Family Care)
    		—up 1%——
    Focus markets
    		—down 1%——
    North America
    Volume: down 3 pointsPrice/mix: up 1 pointHeadwind from base period trade inventory: roughly 2 points
    		—down 2%——
    European Focus Markets
    Strong growth in France, Spain and Italy, largely offset by a softer period in Germany.
    		—up 1%——
    Greater China
    Another quarter of growth in what remains a challenging consumer environment.
    Pampers and SK-II growth: mid-teens or more
    		—3%——
    Enterprise Markets
    		—mid-single digits——
    Latin America
    Solid growth across Mexico, Brazil and the balance of smaller markets in the region.
    		—8%——
    Europe Enterprise Markets
    Versus prior year.
    		—6%——
    Asia Pacific, Middle East, Africa enterprise region
    Would be up 4% excluding restructuring exits.
    		—2%——

    Operational metrics

    24
    Core EPS
    $1.88in line with prior year
    Q2 FY26
    Currency-neutral core EPS
    $1.85
    Q2 FY26
    Core gross margin
    down 50vs prior year
    Q2 FY26
    Core operating margin
    down 70vs prior year
    Q2 FY26
    Productivity improvement
    270
    Q2 FY26
    Currency-neutral core operating margin
    down 80vs prior year
    Q2 FY26
    Cash returned to shareowners
    $4.8 billion
    Q2 FY26
    Global aggregate market share
    down 20
    Q2 FY26
    Category-country combinations holding/growing share
    25 of top 50
    Q2 FY26
    Organic sales growth (volume component)
    down 1
    Q2 FY26
    Organic sales growth (pricing component)
    up 1
    Q2 FY26
    Organic sales growth (mix component)
    flat
    Q2 FY26
    Organic sales growth (ex-Family Care)
    up 1
    Q2 FY26
    North America volume
    down 3
    Q2 FY26
    North America price/mix
    up 1
    Q2 FY26
    Greater China Baby Care organic sales growth
    double-digit
    past 18 months
    Greater China Baby Care share increase
    nearly 3
    past 18 months
    Mexico fabric enhancer organic sales growth
    double-digit
    Q2 FY26
    Mexico fabric enhancer value share growth
    over 2
    Q2 FY26
    Organic sales headwind from product and market exits
    30 to 50
    FY26

    Part of restructuring work.

    After-tax headwind to earnings growth (interest expense and tax rate)
    $250 million
    FY26

    Combined impact of modestly higher interest expense and core effective tax rate.

    Future evenly distributed (reinvention)
    12 to 18 months
    from Q2 FY26

    Timeframe for full integration and activation of assets across the company for the longer-term reinvention.

    U.S. category growth
    2
    H2 FY26

    Base expectation for the U.S. market.

    Promotion levels
    will move back to pre-COVID levels
    ongoing

    Pre-COVID levels are around 30%; expected due to competitive, retailer, and consumer dynamics.

    Industry KPIs

    10
    MetricValueDetails
    Effective tax rate20% to 21%%
    Organic sales growthin line with prior year (0%)%
    Household penetrationreaccelerating
    Regional emerging market growthup 8% (Latin America), up 6% (Europe Enterprise), up 2% (Asia Pacific, Middle East, Africa)%
    Advertising marketing investmentconsistent media spend
    Commodity input cost sensitivityroughly in line with prior year
    Category level organic sales growthmid-single digits (Hair Care), low single digits (Skin and Personal Care, Personal Health Care, Home Care, Oral Care), in line (Grooming, Fabric Care), down low singles (Baby Care, Feminine Care), down approx. 10% (Family Care)%
    Innovation new product contributionstrong innovation
    Category growth benchmark market sharedown 20bps
    Core underlying EPS and operating margin$1.88 (EPS), -70 bps (Operating Margin)USD (EPS), bps (Operating Margin)

    Product announcements

    5
    ProductTypeDetails
    Tide Boostlaunch
    Olay (jars and treatments)launch
    Tide evolaunch
    Pampers Prestigelaunch
    Downy Intenselaunch

    Capital programs

    2
    Restructuring workunderway
    Start: June

    Benefit: take us through the majority of the org changes and portfolio changes that we need to make, allow us to grow without incremental investments in organization or people

    A 2-year program announced in June, expected to lead to productivity growth and allow growth without incremental organizational investments. Includes cash costs.

    Capacity expansionunderway

    Benefit: add capacity in several categories

    Includes an increase in capital spending to add capacity, leveraging automation and digitization in manufacturing and warehousing.

    Risks & headwinds

    6
    Base period dynamics (trade and consumer pantry loading)Q2 FY26

    Caused organic sales to be in line with prior year (0%) and North America organic sales to be down 2% (including a 2-point volume headwind). Family Care down ~10%, Baby/Feminine Care down low singles.

    Mitigation: Expected to ease in H2 FY26, contributing to stronger growth.

    Global aggregate market share declineQ2 FY26

    Down 20 basis points.

    Mitigation: Focus on interventions to recover share, aiming to leave FY26 with share growth in the U.S. and globally.

    TariffsFY26

    Approximately $500 million before tax and higher costs.

    Mitigation: Included in FY26 guidance.

    Modestly higher interest expense and core effective tax rateFY26

    Combined $250 million after-tax headwind to earnings growth.

    Mitigation: Included in FY26 guidance.

    Soft consumer markets, aggressive competition, dynamic geopolitical landscapeQ2 FY26

    Contributed to a challenging start to the fiscal year.

    Mitigation: Strategic interventions, investment in superiority, and focus on execution to drive growth.

    Product and market exits from restructuringFY26

    30 to 50 basis points of headwind to organic sales.

    Mitigation: Part of broader restructuring work to optimize portfolio.

    What to watch in Q3 FY26

    5

    U.S. Organic Sales Growth

    H2 FY26
    Currentdown 2%
    Targetimproved, contributing to stronger H2 growth

    Why it matters

    U.S. is a major market, and its recovery from Q2 headwinds is key to overall company performance and achieving full-year guidance.

    The U.S. underlying results, we believe, will improve because we don't have the base period headwinds that we saw in quarter 2. ... But the main element here, I think, is the fundamental execution of the same interventions we made outside of the U.S. earlier.

    Q&A highlights

    6

    What gives confidence in H2 acceleration (base period vs. fundamental improvement)? What excites management about the longer-term "reinvention"?

    Andre highlighted strong growth outside the U.S. (LatAm 8%, Europe 3%, China 3%) from interventions, which are now being applied to the U.S., along with easing base period headwinds. Shailesh expressed excitement about growth opportunities, leveraging shifts in media/retail/technology, and P&G's unique strengths (large user base, consumer data, R&D).

    “The U.S. underlying results, we believe, will improve because we don't have the base period headwinds that we saw in quarter 2. ... But the main element here, I think, is the fundamental execution of the same interventions we made outside of the U.S. earlier.”

    asked by Lauren Lieberman · answered by Andre Schulten

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance Drivers

    Andre Schulten detailed that Q2 results heavily reflected underlying market trends and base period dynamics, including trade and consumer pantry loading from port strikes and hurricanes in the prior year. These impacts were concentrated in the U.S. market and affected Baby, Feminine, and Family Care sectors. Excluding Family Care, organic sales were up 1%, with most regions outside the U.S. growing or accelerating.

    02

    Confidence in H2 Acceleration

    Management expressed strong confidence in a stronger second half, attributing it to ongoing innovation, commercial strategies, and execution. They noted that interventions made outside the U.S. have already shown results (e.g., Latin America 8% growth, China 3% growth), and the same playbook is now being applied to the U.S. market, which is expected to benefit from the absence of Q2's base period headwinds.

    03

    Longer-Term Reinvention

    Shailesh Jejurikar introduced a "longer-term reinvention" of P&G, aiming to create and extend competitive advantages through constructive disruption. This involves adapting to rapidly changing consumer media preferences, evolving retail landscapes, and leveraging advanced data, AI, and technology to redefine brand building and consumer connectivity. The goal is to invent the CPG company of the future, with full integration and activation of these assets expected to take 12-18 months.

    04

    Strategic Priorities for U.S. Growth

    Key priorities for driving better execution and reaccelerating organic sales growth in the U.S. include adjusting brand building plans to the new media landscape, innovating with a focus on "stronger core, bigger, more" items (e.g., Tide liquid relaunch, Tide evo), and significantly strengthening value propositions by improving product performance without price changes. This aims to attract more households and users.

    05

    Focus on User Growth and Household Penetration

    Management emphasized a shift towards user growth and household penetration as the foundation for future market growth, moving away from the price-driven growth seen during recent inflationary cycles. They aim to make propositions more attractive to consumers by enhancing product performance and value, thereby stimulating volume growth.

    06

    Productivity and Investment Strategy

    P&G continues to deliver strong productivity improvements (270 bps in Q2), which are viewed as fuel for growth. The company plans to reinvest these savings into innovation, media, and in-store visibility to drive trial of superior propositions, rather than deep promotional discounting. This balanced approach aims for sustainable top and bottom-line growth.

    AI-generated summary of the company’s earnings call. Not investment advice.