Procter & Gamble's Q1 2026: Contradictions Emerge on Pricing Strategy, Restructuring's Competitive Edge, Chinese Market Optimism, Tariff Challenges, and Innovation-Driven Growth

Date of Call: October 24, 2025

Financials Results

• EPS: $1.99 core EPS, up 3% YOY; currency‑neutral +3%
• Gross Margin: Core gross margin down 50 basis points vs prior year
• Operating Margin: Core operating margin equal to prior year; currency‑neutral core operating margin up 40 basis points

Guidance:

• Organic sales growth for fiscal 2026: in line to +4%.
• Core EPS growth: in line to +4% (range $6.83–$7.09; center $6.96, +2%).
• Global market growth ~2% (value basis, center of range); Q2 expected to be the softest quarter due to lapping port‑strike order spikes.
• Guidance assumes 30–50 bps headwind from restructuring product/market exits.
• ~$100M after‑tax commodity headwind; ~$300M after‑tax FX tailwind; ~$500M before‑tax tariff-related costs in outlook.
• Core tax rate 20–21%; adjusted FCF productivity 85–90%; plan to return ~$15B in FY26 ($10B dividends, ~$5B buybacks).

Business Commentary:

* Strong Financial Performance: - Procter & Gamble reported core earnings per share of $1.99, up 3% versus prior year, and core operating margin remained stable, despite a difficult geopolitical environment. - The growth was driven by strong execution of their integrated strategy and productivity improvement.

• Regional Market Growth:
• Greater China saw organic sales growth of 5%, with categories like Pampers and SK-II growing double digits.

• Growth was attributed to successful interventions in digital commerce and distributor business, along with strong innovation.

• Innovation and New Product Launches:

• Tide's biggest liquid detergent upgrade in 20 years was launched, and Tide evo showed promising sales growth in test markets.

• The company's innovation strategy focuses on enhancing consumer delight and expanding product forms to drive category growth.

• Challenges and Strategic Adjustments:

• The company faced global aggregate market share decline by 30 basis points, with only 24 of the top 50 category-country combinations holding or growing share.
• The decline was due to heightened competitive activity, particularly in the U.S. and Europe, prompting strategic investments in integrated superiority and superiority execution.

Sentiment Analysis:

Overall Tone: Neutral

• Management called it "a solid quarter" with "40 consecutive quarters of organic sales growth" and EPS up 3%, while repeatedly noting a "challenging" competitive and geopolitical environment, heightened promotional activity, and ongoing restructuring to enable reinvestment and future growth.

Q&A:

• Question from Dara Mohsenian (Morgan Stanley): So I just wanted to touch on the restructuring you announced back in June, given you're now a few months into putting the initial plans into place. A, just how do you think the organizational changes are being received internally by your workforce, given there's a significant reorg and also rationalization of the job roles at P&G? And then just b, the context externally is a more difficult top line environment in general in CPG, that's also volatile. So I just love a high-level overview of what the reorg does for the organization and P&G's competitiveness relative to that challenging broader industry landscape.
  Response: Restructuring is on track, being implemented globally (portfolio, supply chain, org redesign), expected to reduce up to 7,000 non‑manufacturing roles, improve agility and supply‑chain efficiency, generate cost savings and fund innovation/investment.

• Question from Peter Galbo (BofA Securities): Andre, I just wanted to maybe click in a bit more on some of the subcategories in North America. And in particular, on Fabric Care, and Baby Care, where you noted a bit more, I think, competitive activity. Obviously, there's a list of innovation that you outlined over the coming year. But maybe you can just give us a bit more detail on what you're seeing real time from a competitive standpoint, both in North America Fabric Care and Baby Care.
  Response: Heightened promotion in Fabric and Baby Care; P&G's response is integrated superiority—major product upgrades (Tide liquid, Tide evo) and baby innovations (Swaddlers, Cruisers, Luvs Platinum and mid‑tier Baby Dry) aimed at driving trade‑in/trade‑up and sustainable share gain versus short‑term promo.

• Question from Lauren Lieberman (Barclays Bank PLC): Just wanted to touch on the market share stats, the global market share down 30 basis points. I know that can be very impacted by geographic mix to some elements, but even just at the 24 of 50 category country combinations are holding or gaining share is on the low side. So I'm asking for you to walk through the 26 that are troubled. Maybe just where might you call out some particular hotspots of activity things where is it a matter of macro and positioning and relative affordability at this time? Is it a matter of the innovation that's yet to come, you think will be the answer, but it was a pretty stark statistic, and I'd love to get your thoughts on that.
  Response: Global share down ~30 bps over 3–6 months but nearer flat in the last month; hotspots include heightened promotions in U.S. Fabric, Baby and Oral Care and competitive re‑entry in Europe—plan is to regain sustainable share via integrated superiority and innovation, with sequential U.S. absolute shares already improving.

• Question from Stephen Robert Powers (Deutsche Bank AG): Andre, maybe talk a little bit more elaborating on China picking up on what you had just spoken to. A good result this quarter with Greater China, up 5%. Maybe just a little bit more perspective about what you've seen evolving on the ground in that market, how the business was trending entering the quarter versus how it exited. And just how confident you are in the relative progress you've seen so far just sustaining through the year?
  Response: China improvement driven by a redesigned go‑to‑market (fewer/better aligned distributors), strong local innovation (SK‑II, Olay, Baby Care) and retailer/online execution; progress is encouraging and broad‑based though volatility remains and management is cautiously optimistic about sustaining gains.

• Question from Robert Ottenstein (Evercore ISI): Great. I want to swing back to the U.S. and there was a lot of talk about the need for competitive promos that are going on in the market. And I guess my question is, as you look at the other side of that, which is the consumer side and the research you're doing on the consumer, has affordability become a bigger driver of consumer choice in the quarter? Do you expect that to continue? And then specifically, if that is the case, that it is a bigger driver, how do you look to address affordability apart from innovations, but looking at whether it's a change in shift in channel strategy, RGM, price pack architecture, other ways to get at affordability issues.
  Response: Management frames the issue as value (price/performance) not pure affordability; consumers still trade up in many channels, private label is declining, and P&G will address value through multi‑tier innovation, pack‑size and price ladder optimization plus tailored channel and promotion strategies.

• Question from Christopher Carey (Wells Fargo Securities): I wanted to follow up on your commentary in China, Andre, I think it sounds like SK-II and Olay and as such, your broader personal care business in China were similar to last quarter. Correct me if that's wrong, but I do think it implies then that you're seeing improvement in businesses outside of that Skin & Personal Care segment in China. Would you agree with that assessment and are you seeing signs that improvement is durable? Or were there any factors that are specific to the quarter that may have helped that business. So I just wanted to test that just a little bit.
  Response: Yes—the improvement is broad‑based beyond Skin & Personal Care (Fabric Care, Hair Care, Baby Care also up), driven by portfolio interventions, innovation and execution, and management views the breadth as validating the approach though cautions about China volatility.

• Question from Andrea Teixeira (JPMorgan Chase & Co): I was trying to -- Andre to dive into a little bit more on the price/mix and then by categories. I know you had invested more in Luvs and in particular, in diapers in the U.S. So I was hoping to see if you've seen response from the consumer. You did say that consumers in general have been into premiumization, but obviously, that's a picture -- overall picture. I wonder if you can kind of give us some examples of ways the Procter has been more active in pivoting for that low-income consumer and in categories where they are looking for value not only in diapers but also in paper goods.
  Response: P&G innovates across all tiers—examples include Luvs (value), mid‑tier Baby Dry upgrades, Cascade across tiers and Olay super premium—strategy is to offer superior choices at each price tier plus optimized pack sizes and channels to capture value‑seeking consumers.

• Question from Filippo Falorni (Citigroup Inc.): Andre, I wanted to ask on some of the items that you called out in the guidance. You clearly lowered the headwind from commodities and tariffs. So maybe if you can give us some more color on what drove that lower headwind on those 2 items. And then if you sum up all the items that you call out, it's now like a $0.19 headwind before it was $0.39. So you have some flexibility about $0.20, but obviously, the EPS guidance is unchanged. So can you walk us through like what is the offsetting factor? It seems like there's probably more investment in promotion in marketing to offset some of the competitive environment that you're seeing in the promotional environment. But maybe help us understand where is the incremental $0.20 of benefit being invested in.
  Response: Commodity headwind eased as petro/energy prices fell and tariff impact lessened via exclusions/recissions; the incremental benefit is being preserved for reinvestment (innovation, marketing, trade) amid early‑year volatility, so guidance held steady while remaining flexible to allocation.

• Question from Peter Grom (UBS): So I wanted to ask a follow-up on North America. Andre, I think you mentioned consumption decelerated throughout the quarter, and you alluded to some of the phase-in considerations related to the port strike a year ago. So just maybe first, how do you see underlying category demand evolving from here? I know it might be a little bit harder now because you're lapping some of the impact, but just curious whether you would expect this deceleration to continue? And then just related on the comment on the port strikes that will make 2Q the soft this quarter. Is there a way to frame how much of an impact these laps will have? Or maybe how much of a step back you would expect from where we started the year.
  Response: North America consumption decelerated to ~1.8–1.9% and management expects ~1.5–2% consumption for the next two quarters, with Q2 being the weakest quarter due to lapping last year's port‑strike order spikes and a stronger back half expected.

• Question from Olivia Tong Cheang (Raymond James): Two questions for you, Andre. First, in terms of the regional outlook. Obviously, you just talked about the U.S., you've been pretty guarded in terms of China. But what about rest of world, just thinking through dynamics with respect to demand, how the consumer is doing in Western Europe and Latin America, in particular. And then in terms of some of the restructuring actions that you've taken, you mentioned some of the portfolio changes in the Middle East and then also in Fem Care. If you -- can you expand on that a little bit in terms of potentially bigger changes to the portfolio to make a step change in terms of the growth trajectory, either more culling -- more substantial culling of the portfolio or potentially looking the opposite way in terms of filling some of the gaps with inorganic growth.
  Response: Western Europe dynamics mirror North America (low‑single volume, weak‑2% value); Latin America strong (~7% growth); enterprise markets more muted; portfolio pruning is surgical/fringe to improve returns—not planning dramatic exits and no need for transformational M&A, though attractive inorganic opportunities would be considered.

• Question from Nik Modi (RBC Capital Markets): Andre, I was hoping maybe you can just kind of opine on agentic commerce and how you think P&G can leverage some of the advantages you have in kind of the brick-and-mortar shopping environment to this kind of new world that we're walking into, especially given the announcement with OpenAI and Walmart. So just any thoughts you have. I mean, the big question I have is just how do suppliers get their products in the actual basket if people are shopping through prompts? Any thoughts would be helpful.
  Response: Agentic commerce is an opportunity; success will require deep consumer understanding, data/infrastructure and close collaboration with retailers/algorithms to ensure P&G's superior propositions are surfaced in automated shopping decisions.

• Question from Kaumil Gajrawala (Jefferies): Just a couple of clarifying questions. There was a commentary around tariffs and sort of natural products being exempted as Were there any particular deals or maybe just that the threat wasn't as much as what perhaps you had estimated earlier. And then on China, a lot of conversations around distribution and distribution changes. Was there anything onetime in there as it relates to sort of a near-term benefit from flipping into a new distribution structure? Or is what we're seeing more related to an improvement in consumption.
  Response: Tariff relief came via broad exceptions for materials not producible in the U.S.; China distribution changes were structural (fewer, better‑aligned distributors and incentive changes) and represent ongoing benefit rather than a one‑time bump.

• Question from Xin Ma (TD Cowen) on behalf of Robert Moskow: This is Victor on for Rob Moskow. Two for me as well. So I think previously, there was a discussion of taking a mid-single-digit pricing on about 25% of your U.S. SKUs to mitigate the tariff impact. So now that the tariff impact is half of what it was before curious on how that affects your pricing strategy, if at all? And then on LATAM, we've heard from competitors of consumer weakness and from a challenging macro backdrop, are you seeing this impact your trends at all? And if so, how are you performing so well? And did you gain other category share in the region?
  Response: U.S. pricing (~2–2.5% across portfolio) was largely innovation‑driven and remains unchanged by tariff shifts; Latin America performance was strong (broad‑based innovation/execution), delivering growth and share gains despite mixed macrobackdrop.

Contradiction Point 1

Consumer Behavior and Product Pricing Strategy

It involves the company's approach to consumer behavior and pricing strategy, which are crucial for market positioning and revenue stability.

Is affordability now a key factor in consumer decisions, and how is P&G responding? - Robert Ottenstein (Evercore ISI)

2026Q1: Value, not affordability, is key. Pricing integrated with performance is crucial. Innovations across value tiers are succeeding. Price ladders are optimized, and competitive pricing is maintained. - Andre Schulten(CFO)

How is Procter addressing trade-down risk with its premium portfolio? - Kevin Michael Grundy (BNP Paribas Exane, Research Division)

2025Q4: Procter aims to maintain superiority by offering value across price ladders. Recent innovations like Tide evo demonstrate its commitment to affordability and value. - Andre Schulten(CFO)

Contradiction Point 2

Impact of Restructuring on Competitive Advantage

It relates to the company's strategic restructuring efforts and their anticipated impact on competitive advantage, which is vital for long-term growth and market leadership.

How is the restructuring's organizational change being received internally? How does the reorg affect P&L's competitiveness in the CPG landscape? - Dara Mohsenian (Morgan Stanley)

2026Q1: Progress on restructuring execution is on track, with the aim to reduce 7,000 non-manufacturing roles. Organization is evolving to smaller, more focused teams. The changes involve portfolio discipline, supply chain interventions, and digital enablement. The restructuring is an enabler for a stronger portfolio and organization, enhancing profitability to support innovation investments. - Andre Schulten(CFO)

How is the restructuring impacting organizational capabilities given external technological advancements? - Dara Warren Mohsenian (Morgan Stanley)

2025Q4: The restructuring is about creating financial headroom for innovation and commercialization. With technology advancements, faster decision-making is possible, with fewer functional silos. This will create more integrated ways of working and increase individual contribution. - Jon R. Moeller(CEO)

Contradiction Point 3

Chinese Market Recovery and Strategic Focus

It highlights a shift in P&G's strategic focus and expectations for the Chinese market recovery, which is critical for global growth and market strategy.

What factors are driving Greater China's improved performance? - Stephen Robert Powers (Deutsche Bank AG)

2026Q1: Greater China's organic sales grew 5%, with positive momentum. Interventions in digital commerce and distributor business have been effective. Growth is broad-based across categories, driven by SK-II, Pampers, and SK-II. - Andre Schulten(CFO)

Can you provide an update on Q2 performance in the bottom 15% of your business, especially in weaker markets such as China, and whether you expect continued improvement in the back half of the year? - Dara Mohsenian (Morgan Stanley)

2025Q2: The 85% of the business continues to grow at around 4%, including North America and Europe. The 15% saw improvement, with China down only 3% after a 15% decline in Q1. We expect continued recovery in China and that the U.S. and Europe will maintain their growth. China's progress is promising, and we expect to be near the midpoint of our guidance if China continues to improve. - Andre Schulten(CFO)

Contradiction Point 4

Tariff Impact and Cost Management

It involves the company's expectations and strategies related to tariff impacts and cost management, which are critical for financial forecasting and operational planning.

How is Procter addressing value in low-income segments, particularly in diapers? - Andrea Teixeira (JPMorgan)

2026Q1: Tariff impact is manageable through productivity, sourcing, and pricing interventions. Pricing for innovation, flexibility in sourcing, and formulation changes are being explored. - Andre Schulten(CFO)

好的，我现在需要处理用户的问题，他们希望我作为专业的金融文章作者，总结并精简来自美股上市公司财报电话会议中的问题。用户给出的例子是“How is P&G approaching channel shifts, particularly in mass channels and clubs?”，而正确的简化版本是“How is P&G addressing shifts in mass channels and clubs?”。我需要仔细分析这个例子，理解用户的需求，然后应用到其他可能的案例中。首先，用户的要求是：1. 输出符合美式英语习惯；2. 仅输出简化后的问题，且必须保留问号；3. 问题需要简洁、精准，去除多余的装饰词，同时不改变原意。用户特别指出问题来自现场提问，因此原始问题可能比较冗长，需要简化。现在，我需要分析用户提供的例子。原始问题：“How is P&G approaching channel shifts, particularly in mass channels and clubs?”。简化后的问题：“How is P&G addressing shifts in mass channels and clubs?”。对比两者，发现“approaching”被替换为“addressing”，而“channel shifts, particularly in mass channels and clubs”被简化为“shifts in mass channels and clubs”。这里，“channel shifts”被简化为“shifts”，因为后面的“particularly in mass channels and clubs”已经明确了是哪些渠道的变动，所以可以省略“channel”重复的部分。同时，“approaching”改为“addressing”，后者更直接，更符合美式英语的习惯，因为“addressing”在商业语境中常用来指处理或应对问题，而“approaching”可能稍显笼统。接下来，我需要确保自己理解用户的需求。用户希望将冗长的问题精简，去除不必要的词，同时保留原意。例如，“particularly in”可以简化为“in”，因为问题的核心是关于mass channels和clubs的变动，所以直接点明即可，不需要强调“particularly”。此外，“approaching”改为“addressing”更准确，因为“address”在商业语境中更常用于处理或应对策略，而“approach”可能更多指方法或方式，但在这里，用户的问题是询问公司如何处理这些渠道的变动，所以“addressing”更合适。接下来，我需要考虑其他可能的案例。例如，如果原问题中有重复的词汇，比如“How is the company managing the transition to digital sales channels, especially in the e-commerce sector?”，简化后可能为“How is the company handling the shift to e-commerce?”。这里去掉了“transition to digital sales channels”中的“digital sales”，因为“e-commerce”已经涵盖了数字销售渠道，同时“especially”被省略，直接点明重点。同时，“managing”改为“handling”更简洁，且符合美式英语的习惯。另一个例子：如果问题中有多个修饰词，比如“What strategies is the company implementing to adapt to the changing retail landscape, specifically in the mass market segment?”，可以简化为“What strategies is the company using to adapt to the mass market retail landscape?”。这里去掉了“changing”和“specifically”，因为问题的核心是关于mass market segment的适应策略，直接点明即可，无需重复强调“specifically”。在处理过程中，需要注意以下几点：1. 识别并去除冗余的修饰词，如“particularly in”、“specifically in”等，直接保留核心信息。2. 替换动词，使用更简洁、直接的词汇，如“approaching”→“addressing”，“managing”→“handling”。3. 保持问题的结构，确保问号结尾，并且符合美式英语的拼写和语法习惯。4. 确保简化后的句子仍然准确传达原问题的意图，没有改变原意。现在，假设用户给了一个新的问题，我需要应用同样的逻辑进行处理。例如，如果原问题是：“Could you elaborate on the company's strategy for navigating the current market volatility, especially in the context of the global economic slowdown?”，简化后的问题可能是：“How is the company addressing market volatility amid the global economic slowdown?”。这里，“Could you elaborate on the company's strategy for navigating”被简化为“How is the company addressing”，直接询问应对策略；“current market volatility, especially in the context of the global economic slowdown”简化为“market volatility amid the global economic slowdown”，使用“amid”来连接两个因素，更简洁。另一个例子，原问题：“What measures are being taken by the company to enhance customer engagement, particularly through digital platforms and social media?”，简化后：“What steps is the company taking to boost customer engagement via digital platforms?”。这里，“measures”改为“steps”，“enhance”改为“boost”，更直接；“particularly through”简化为“via”，同时省略了“social media”，因为“digital platforms”已经涵盖了这一部分，或者如果需要保留，可以调整为“via digital platforms and social - Mark Astrachan (Stifel)

2025Q3: Tariffs are clearly impacting things, but we think productivity and innovation will offset most of it. We certainly think it will be a headwind, but we believe we've got the tools to manage it. - Andre Schulten(CFO)

Contradiction Point 5

Innovation and Market Share Growth

It highlights differences in P&G's approach to innovation and market share growth, which are key drivers for long-term success and market penetration.

Can you explain how Procter is addressing value in low-income segments, especially diapers? - Andrea Teixeira (JPMorgan)

2026Q1: Innovation across value tiers is key. Luvs Platinum and Baby Dry are targeted at value segments. This strategy is driving volume and value share growth. - Andre Schulten(CFO)

What is your outlook on the Chinese consumer and 2025 innovation? - Robert Ottenstein (Evercore ISI)

2025Q2: Regarding innovation, our plans for calendar 2025 are strong, with many new products and plans to drive trial and household penetration. - Andre Schulten(CFO)