Robust Quarterly Results and Organic Sales Growth

Procter & Gamble (P&G), one of the world’s largest and leading consumer goods companies, released its financial results for the second quarter of fiscal year 2025, demonstrating strong and stable financial performance. The company reported net sales of $21.9 billion, a 2% increase compared to the prior year. Furthermore, organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, grew by 3% – a figure indicating fundamental strength in demand for the company’s products. Diluted net earnings per share (Diluted EPS) jumped by 34% to $1.88, an impressive increase primarily attributed to a one-time non-cash impairment of the carrying value of the Gillette intangible asset in the base year, which created a lower comparison base. In terms of Core EPS, which excludes one-time impacts, a 2% increase to $1.88 per share was recorded, reflecting consistent growth in core operations. These figures demonstrate P&G’s ability to successfully navigate a challenging economic environment while maintaining strong operational performance and creating significant value for shareholders.

Strong Cash Flow and Substantial Capital Return

Beyond profitability figures, P&G demonstrated exceptional ability in generating cash and returning value to shareholders. Operating cash flow amounted to $4.8 billion, with net earnings for the quarter at $4.7 billion. Another impressive figure is the adjusted free cash flow productivity, which reached 84% – a metric indicating the efficiency with which the company converts its earnings into cash. This productivity is calculated by deducting capital spending from operating cash flow and dividing the result by net earnings. The company also returned over $4.9 billion in cash to shareholders, of which $2.4 billion was paid in dividends and $2.5 billion was executed through share repurchases. “The P&G team delivered an acceleration in organic sales growth, core EPS growth and strong cash return to shareowners in the second quarter,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer. “Our first-half results keep us on track to deliver within our guidance ranges on all key financial metrics for the fiscal year.”

Focused Growth Strategy and Category Performance

P&G’s success is attributed to an integrated growth strategy that includes a focused product portfolio in daily use categories where superior performance drives brand choice. This strategy emphasizes product superiority, packaging, brand communication, retail execution, and consumer and customer value. Additionally, the company focuses on productivity, constructive disruption, and an agile and accountable organization. Organic sales increased due to a 2% rise in organic volume and an additional 1% from favorable geographic mix, with pricing having a neutral impact on sales growth. A category-by-category analysis reveals a diverse picture: the Beauty segment recorded a 2% increase in organic sales, with growth in hair care and personal care products, but a slight decline in skin care. The Grooming segment rose by 2% driven by innovation. The Health Care segment grew by 3% with growth in oral care and personal health care. The Fabric & Home Care segment increased by 3% with strong performance in both fabric care and home care. The Baby, Feminine & Family Care segment recorded a 4% increase in organic sales. This diversification across growth segments demonstrates the company’s ability to adapt to changing consumer needs worldwide.

Gross Margin Challenges and Operating Expenses

Despite sales growth, P&G faced some challenges in profitability. Reported and core gross margin for the quarter decreased by 30 basis points and 20 basis points respectively (on a currency-neutral basis) compared to the prior year. Productivity savings of 150 basis points and benefits from increased pricing of 30 basis points were fully offset by 110 basis points of unfavorable mix, 50 basis points of unfavorable commodity costs, and 40 basis points of product reinvestments and transportation services costs. Selling, General and Administrative (SG&A) expenses as a percentage of sales increased by 40 basis points (50 basis points on a core basis and 30 basis points on a currency-neutral basis) compared to the prior year. This increase was primarily driven by reinvestments, partially offset by productivity savings and leverage from net sales growth. Reported operating margin for the quarter increased by 550 basis points, while core operating margin decreased by 80 basis points (50 basis points on a currency-neutral basis).

Stable Financial Outlook and Commitment to Capital Return

P&G maintained its guidance for fiscal year 2025, with an expected all-in sales growth in the range of 2% to 4% versus the prior year. The company anticipates that combined headwinds from foreign exchange and divestitures will negatively impact all-in sales growth by approximately one percentage point. Additionally, P&G maintained its outlook for organic sales growth in the range of 3% to 5%. The company also maintained its guidance for fiscal 2025 diluted net earnings per share growth to be in the range of 10% to 12% and core earnings per share growth in the range of 5% to 7% versus fiscal 2024. This outlook translates to a range of $6.91 to $7.05 per share, with a mid-point estimate of $6.98, representing a 6% increase. P&G anticipates a negative impact of approximately $200 million (after tax) from commodity costs and approximately $300 million (after tax) from unfavorable foreign exchange rates. Combined, these represent a negative impact of $0.20 per share. The company continues to expect adjusted free cash flow productivity of 90% and plans to pay around $10 billion in dividends and repurchase $6 to $7 billion of common shares in fiscal 2025.