Procter & Gamble Company

10/24/2025 | Press release | Distributed by Public on 10/24/2025 14:24

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, in the following sections: "Management's Discussion and Analysis," "Risk Factors" and "Notes 4 and 9 to the Consolidated Financial Statements." These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result" and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.
Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial risks, including foreign currency fluctuations, changes in global interest rates and rate differentials, currency exchange, or pricing controls and tariffs; (2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments; (3) the ability to successfully manage uncertainties related to changing political and geopolitical conditions and potential implications such as exchange rate fluctuations, market contraction, boycotts, variability and unpredictability in trade relations, sanctions, tariffs or other trade controls; (4) the ability to manage disruptions in credit markets or to our banking partners or changes to our credit rating; (5) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to various factors, including ones outside of our control, such as natural disasters, acts of war or terrorism or disease outbreaks; (6) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials and costs of labor, transportation, energy, pensions and healthcare; (7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products; (8) the ability to manage and maintain key customer relationships; (9) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, ingredients, efficacy, packaging content, supply chain practices, social or environmental practices or similar matters that may arise; (10) the ability to successfully manage the financial, legal, reputational and operational risk associated with third-party relationships, such as our suppliers, contract manufacturers, distributors, contractors and external business partners; (11) the ability to rely on and maintain key company and third-party information and operational technology systems, networks and services and maintain the security and functionality of such systems, networks and services and the data contained therein; (12) the ability to successfully manage the demand, supply and operational challenges, as well as governmental responses or mandates, associated with a disease outbreak, including epidemics, pandemics or similar widespread public health concerns; (13) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits, evolving digital marketing and selling platform requirements and technological advances attained by, and patents granted to, competitors; (14) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Company's overall business strategy and financial objectives, without impacting the delivery of base business objectives; (15) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes while successfully identifying, developing and retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited; (16) the ability to successfully manage current and expanding regulatory and legal requirements and matters (including, without limitation, those laws, regulations, policies and related interpretations involving product liability, product and packaging composition, manufacturing processes, intellectual property, labor and employment, antitrust, privacy, cybersecurity, data protection and data transfers, artificial intelligence, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates; (17) the ability to manage changes in applicable tax laws and regulations; and (18) the ability to continue delivering progress towards our environmental sustainability ambitions. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from those projected herein is included in the section titled "Economic Conditions and Uncertainties" and the section titled "Risk Factors" (Part II, Item 1A) of this Form 10-Q.
Purpose, Approach and Non-GAAP Measures
The purpose of Management's Discussion and Analysis (MD&A) is to provide an understanding of Procter & Gamble's financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The
Amounts in millions of dollars except per share amounts or as otherwise specified.
14 The Procter & Gamble Company
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and accompanying Notes.
The MD&A is organized in the following sections:
•Overview
•Summary of Results - Three Months Ended September 30, 2025
•Economic Conditions and Uncertainties
•Results of Operations - Three Months Ended September 30, 2025
•Segment Results - Three Months Ended September 30, 2025
•Liquidity and Capital Resources
•Measures Not Defined by U.S. GAAP
Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per common share (diluted EPS) and operating cash flow. We also refer to a number of financial measures that are not defined under U.S. GAAP, consisting of organic sales growth, Core earnings per share (Core EPS), adjusted free cash flow and adjusted free cash flow productivity. The explanation at the end of the MD&A provides the definition of these non-GAAP measures, details on the use and the derivation of these measures, as well as reconciliations to the most directly comparable U.S. GAAP measure.
Management also uses certain market share and market consumption estimates to evaluate performance relative to competition despite some limitations on the availability and comparability of share and consumption information. References to market share and consumption in the MD&A are based on a combination of vendor-purchased traditional brick-and-mortar and online data in key markets as well as internal estimates. All market share references represent the percentage of sales of our products in dollar terms on a constant currency basis relative to all product sales in the category. The Company measures quarter and fiscal year to date market share through the most recent period for which market share data is available, which typically reflects a lag time of one or two months as compared to the end of the reporting period. Management also uses unit volume growth to evaluate drivers of changes in net sales. Organic volume growth reflects year-over-year changes in unit volume excluding the impacts of acquisitions and divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales. In the presentation of data in tables or other charts, certain columns and rows may not add due to rounding.
OVERVIEW
P&G is a global leader in the fast-moving consumer goods industry, focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world. Our products are sold in about 180 countries and territories, primarily through mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to individual consumers. We have on-the-ground operations in about 70 countries.
Our market environment is highly competitive with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands. Additionally, many of the product segments in which we compete are differentiated by price tiers (referred to as super-premium, premium, mid-tier and value-tier products). We believe we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position.
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The table below lists our reportable segments, including the product categories and brand composition within each segment.
Reportable Segments Product Categories (Sub-Categories) Major Brands
Beauty
Hair Care (Conditioners, Shampoos, Styling Aids, Treatments)
Head & Shoulders, Herbal Essences, Pantene, Rejoice
Personal Care (1)(Antiperspirants and Deodorants, Personal Cleansing)
Native, Old Spice, Safeguard, Secret
Skin Care (1)(Facial Moisturizers, Cleaners and Treatments)
Olay, SK-II
Grooming
Grooming (Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming)
Braun, Gillette, Venus
Health Care
Oral Care (Toothbrushes, Toothpastes, Other Oral Care)
Crest, Oral-B
Personal Health Care (Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care)
Metamucil, Neurobion, Pepto-Bismol, Vicks
Fabric & Home Care
Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents)
Ariel, Downy, Gain, Tide
Home Care (Air Care, Dish Care, P&G Professional, Surface Care)
Cascade, Dawn, Fairy, Febreze, Mr. Clean, Swiffer
Baby, Feminine & Family Care
Baby Care (Baby Wipes, Taped Diapers and Pants)
Luvs, Pampers
Feminine Care (Adult Incontinence, Menstrual Care)
Always, Always Discreet, Tampax
Family Care (Paper Towels, Tissues, Toilet Paper)
Bounty, Charmin, Puffs
(1) Effective July 1, 2024, the Beauty reportable business segment separated Skin and Personal Care into individual operating segments, Skin Care and Personal Care. This transition included separation of the management team, strategic decision-making, innovation plans, financial targets, budgets and management reporting.
Throughout the MD&A, we reference business results by region, which are comprised of North America, Europe, Greater China, Latin America, Asia Pacific and India, Middle East and Africa (IMEA).
The following table provides the percentage of net sales and net earnings by reportable business segment (excluding Corporate) for the three months ended September 30, 2025:
Three Months Ended September 30, 2025
Net Sales Net Earnings
Beauty 19 % 19 %
Grooming 8 % 10 %
Health Care 15 % 15 %
Fabric & Home Care 35 % 33 %
Baby, Feminine & Family Care 23 % 23 %
Total Company 100 % 100 %
RECENT DEVELOPMENTS
Limited Market Portfolio Restructuring
In the fiscal year ended June 30, 2024, the Company started a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. During the period ended September 30, 2024, the Company completed this limited market portfolio restructuring with the substantial liquidation of its operations in Argentina and recorded incremental restructuring charges of approximately $0.8 billion after tax, comprised primarily of non-cash charges for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income/(loss). The total incremental restructuring charges incurred under the program beginning in the three-month period ended December 31, 2023, through the three-month period ended September 30, 2024, were approximately $1.2 billion after tax.
Focused Portfolio, Supply Chain and Productivity Plan
In June 2025, the Company announced a portfolio and productivity plan to streamline its portfolio and organization to improve its cost structure and competitiveness. The Company expects to incur approximately $1.5 to $2.0 billion in before-tax restructuring costs over a two-year period. The Company expects to incur half of the costs under this plan by the end of fiscal 2026, with the remainder incurred in fiscal 2027. The restructuring activities will be executed across the Sector Business Units
16 The Procter & Gamble Company
as well as the Enterprise Markets, Corporate Functions and Global Business Services. These restructuring activities include a plan for a reduction of up to 7,000 non-manufacturing overhead personnel by the end of fiscal 2027.
Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs are reported as non-core charges. For more details on the restructuring program, refer to Note 11 to the Consolidated Financial Statements.
Glad Joint Venture Agreement
The Company and The Clorox Company (Clorox) have jointly decided not to renew the Glad joint venture agreement. Under the terms of the agreement, Clorox will purchase the Company's minority interest in the venture at fair market value as of the agreement termination in January 2026. Subject to market conditions and the parties' negotiations with respect to fair market value, the Company expects to receive cash proceeds of approximately $500 million and record an after-tax gain in the range of $250 to $300 million in the third quarter of the fiscal year ended June 30, 2026.
SUMMARY OF RESULTS - Three Months Ended September 30, 2025
The following are highlights of results for the three months ended September 30, 2025, versus the three months ended September 30, 2024:
•Net sales were $22.4 billion, an increase of $649 million, or 3%, versus the prior year period. Net sales increased mid-single digits in Beauty and Grooming and low single digits in Health Care, Baby, Feminine & Family Care and Fabric & Home Care. Organic sales, which exclude the impacts of acquisitions and divestitures and foreign exchange, increased 2%. Organic sales increased mid-single digits in Beauty and low single digits in Grooming and Health Care. Organic sales in Fabric & Home Care and Baby, Feminine & Family Care were unchanged.
•Net earnings were $4.8 billion, an increase of $794 million, or 20%, versus the prior year period due primarily to higher restructuring charges related to the substantial liquidation of operations in certain Enterprise Markets, including Argentina in the prior year period.
•Net earnings attributable to Procter & Gamble were $4.8 billion, an increase of $791 million, or 20%, versus the prior year period.
•Diluted EPS increased 21% to $1.95 due to the increase in net earnings. Core EPS, which excludes incremental restructuring charges, increased 3% to $1.99.
•Operating cash flow was $5.4 billion. Adjusted free cash flow, which is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the 2017 U.S. Tax Act, was $4.9 billion. Adjusted free cash flow productivity, which is defined as adjusted free cash flow as a percentage of net earnings, was 102%.
ECONOMIC CONDITIONS AND UNCERTAINTIES
Global Economic Conditions.Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 21% of our net sales in fiscal 2025. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to various risks due to economic, political and social instabilities, market volatility, natural disasters, debt and credit issues, currency controls, new or increased tariffs, foreign exchange and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the ongoing war between Russia and Ukraine. Our Russia business accounted for 1% of consolidated net sales, net earnings and net assets as of June 30, 2025.
Foreign Exchange.We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the U.S. dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.
Commodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and
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general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.
Government Policies.We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD/G20 Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy". Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements, including tariffs, can also impact our financial performance.
For additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2025.
RESULTS OF OPERATIONS - Three Months Ended September 30, 2025
The following discussion provides a review of results for the three months ended September 30, 2025, versus the three months ended September 30, 2024.
Three Months Ended September 30
Amounts in millions, except per share amounts 2025 2024 % Chg
Net sales $ 22,386 $ 21,737 3%
Operating income 5,856 5,797 1%
Earnings before income taxes 6,034 5,140 17%
Net earnings 4,781 3,987 20%
Net earnings attributable to Procter & Gamble 4,750 3,959 20%
Diluted net earnings per common share 1.95 1.61 21%
Core net earnings per common share 1.99 1.93 3%
Three Months Ended September 30
COMPARISONS AS A PERCENTAGE OF NET SALES 2025 2024 Basis Pt Chg
Gross margin 51.4 % 52.1 % (70)
Selling, general & administrative expense 25.2 % 25.4 % (20)
Operating income 26.2 % 26.7 % (50)
Earnings before income taxes 27.0 % 23.6 % 340
Net earnings 21.4 % 18.3 % 310
Net earnings attributable to Procter & Gamble 21.2 % 18.2 % 300
Net Sales
Net sales for the quarter increased 3% to $22.4 billion. The increase in net sales was due to higher pricing of 1%, favorable mix of 1% and favorable foreign exchange of 1%. Volume had a neutral impact on net sales. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 2%.
18 The Procter & Gamble Company
The following table summarizes key drivers of the change in net sales by reportable segment:
Net Sales Change Drivers 2025 vs. 2024 (Three Months Ended September 30) (1)
Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix
Other (2)
Net Sales Growth
Beauty 4 % 4 % 1 % 2 % (1) % - % 6 %
Grooming 1 % 1 % 2 % 4 % (2) % - % 5 %
Health Care (2) % (2) % 1 % 1 % 2 % - % 2 %
Fabric & Home Care (2) % (2) % 2 % 1 % - % - % 1 %
Baby, Feminine & Family Care - % - % 1 % - % - % - % 1 %
Total Company - % - % 1 % 1 % 1 % - % 3 %
(1)Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
(2)Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.
Operating Costs
Gross margin decreased 70 basis points to 51.4% of net sales for the quarter. The decrease in gross margin was due to:
•100 basis points of decline from unfavorable product mix,
•70 basis points of product and packaging investments,
•60 basis points of higher costs from tariffs,
•20 basis points of unfavorable foreign exchange impacts,
•20 basis points of higher restructuring costs and
•10 basis points of higher commodity costs.
These impacts were partially offset by:
•140 basis points of manufacturing productivity savings,
•50 basis points of increase due to higher pricing and
•20 basis points of other items and rounding.
Total SG&A spending increased 2% to $5.6 billion versus the prior year period due to increased marketing spending and overhead costs. SG&A as a percentage of net sales decreased 20 basis points to 25.2% due to a decrease in marketing spending as a percentage of net sales. Marketing spending as a percentage of net sales decreased 20 basis points due to productivity savings. Overhead costs as a percentage of net sales were unchanged as wage inflation and foreign exchange headwinds were offset by productivity savings. Other operating expenses as a percentage of net sales were unchanged. Productivity-driven cost savings delivered 90 basis points of benefit to SG&A as a percentage of net sales.
Operating income increased $59 million, or 1%, to $5.9 billion and operating margin decreased 50 basis points to 26.2% versus the prior year period due to the decrease in gross margin, partially offset by a decrease in SG&A as a percentage of net sales, the components of which are described above.
Non-Operating Expenses and Income
Interest expense was $197 million for the quarter, a decrease of $41 million versus the prior year period. Interest income was $108 million for the quarter, a decrease of $27 million versus the prior year period. Other non-operating income/(expense) was $268 million, which is an increase of $822 million versus the prior year period due primarily to a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina in the prior year period.
Income Taxes
The effective income tax rate for the three months ended September 30, 2025, was 20.8%, compared to 22.4% for the three months ended September 30, 2024.The decrease in the effective tax rate was primarily driven by the prior year charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina of 300 basis points and discrete impacts related to uncertain tax positions, partially offset by a 200 basis-point increase due to lower excess tax benefits of share-based compensation in the current year.
Net Earnings
Net earnings were $4.8 billion, an increase of $794 million, or 20%, versus the prior year period due to the increase in operating income, the increase in other non-operating income and the decrease in the effective tax rate. Foreign exchange had a negative impact of approximately $4 million on net earnings for the quarter, including both transactional and translational impacts from
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converting earnings from foreign subsidiaries to U.S. dollars. Net earnings attributable to Procter & Gamble were $4.8 billion, an increase of $791 million, or 20%, for the quarter. Diluted EPS increased 21% to $1.95 versus the prior year period.
SEGMENT RESULTS - Three Months Ended September 30, 2025
The following discussion provides a review of results by reportable business segment. Analysis of the results for the three months ended September 30, 2025, is provided based on a comparison to the three months ended September 30, 2024. The primary financial measures used to evaluate segment performance are net sales and net earnings. The table below provides supplemental information on net sales, earnings before income taxes and net earnings by reportable business segment for the three months ended September 30, 2025, versus the comparable prior year period (dollar amounts in millions):
Three Months Ended September 30, 2025
Net Sales % Change Versus Year Ago Earnings/(Loss) Before Income Taxes % Change Versus Year Ago Net Earnings % Change Versus Year Ago
Beauty $ 4,143 6 % $ 1,132 6 % $ 879 5 %
Grooming 1,817 5 % 585 12 % 463 9 %
Health Care 3,220 2 % 937 (2) % 718 (3) %
Fabric & Home Care 7,793 1 % 2,042 (2) % 1,579 (3) %
Baby, Feminine & Family Care 5,171 1 % 1,446 5 % 1,105 4 %
Corporate 242 N/A (108) N/A 36 N/A
Total Company $ 22,386 3 % $ 6,034 17 % $ 4,781 20 %
Beauty
Three months ended September 30, 2025, compared with three months ended September 30, 2024
Beauty net sales increased 6% to $4.1 billion, as a unit volume increase of 4%, the positive impacts of pricing of 2% and favorable foreign exchange of 1% were partially offset by unfavorable product mix of 1%. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 6%. Global market share of the Beauty segment decreased 0.5 points.
•Hair Care net sales increased mid-single digits. Positive impacts of an increase in unit volume, innovation-driven pricing (primarily in North America and Europe) and favorable foreign exchange were partially offset by unfavorable product and geographic mix. The volume increase was driven by growth in Europe and Latin America (both due to innovation). Organic sales increased low single digits due to double-digit growth in Europe and high single-digit growth in Latin America, partially offset by a low single-digit decline in North America. Global market share of the Hair Care category decreased 1 point.
•Personal Care net sales increased double digits. Positive impacts from an increase in unit volume, innovation-driven pricing (primarily in North America and Latin America) and favorable foreign exchange were partially offset by negative impacts from geographic mix. The volume increase was across all regions, led by growth in North America, Greater China and Europe (all due to innovation). Organic sales increased high single digits due to mid-teens growth in Europe and high single-digit growth in North America and Greater China. Global market share of the Personal Care category increased 0.2 points.
•Skin Care net sales increased mid-single digits. Positive impacts from favorable product mix, higher pricing (primarily in North America) and favorable foreign exchange were partially offset by a decrease in unit volume. The volume decrease was driven by Europe (due to distribution loss). Organic sales increased mid-single digits due to high single-digit growth in Greater China and Asia Pacific. Global market share of the Skin Care category decreased 1 point.
Net earnings increased 5% to $879 million due to an increase in net sales, partially offset by a 40 basis-point decline in net earnings margin. Net earnings margin decreased due to a decrease in gross margin and a higher effective tax rate, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decline of 80 basis points was driven by higher cost of tariffs, unfavorable category mix and higher commodity costs, partially offset by productivity savings. SG&A as a percentage of net sales decreased due to the positive scale impacts of the net sales increase and a decrease in overhead spending. The higher effective tax rate was driven by unfavorable geographic mix.
Grooming
Three months ended September 30, 2025, compared with three months ended September 30, 2024
Grooming net sales increased 5% to $1.8 billion as innovation-driven pricing of 4% (primarily by North America and Europe), favorable foreign exchange of 2% and a unit volume increase of 1% were partially offset by the negative impacts of unfavorable product mix of 2%. Unit volume increased as growth in Latin America (due to increased distribution) was partially offset by a decline in IMEA (due to competitive activity). Excluding the impact of acquisitions and divestitures and foreign
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exchange, organic sales increased 3% driven by high single-digit growth in Latin America and mid-single-digit growth in Europe, partially offset by low single-digit growth in North America. Global market share of the Grooming segment decreased 0.8 points.
Net earnings increased 9% to $463 million due to an increase in net sales and a 80 basis-point increase in net earnings margin. Net earnings margin increased due to an increase in gross margin and a decrease in SG&A as a percentage of net sales, partially offset by a higher effective tax rate. The gross margin improvement of 10 basis points was primarily driven by increased pricing, partially offset by higher cost of tariffs and unfavorable product mix. SG&A as a percentage of net sales decreased due to the positive scale impacts of the net sales increase and a decrease in marketing spending. The higher effective tax rate was driven by unfavorable geographic mix.
Health Care
Three months ended September 30, 2025, compared with three months ended September 30, 2024
Health Care net sales increased 2% to $3.2 billion as the benefits of favorable product mix of 2%, higher pricing of 1% and favorable foreign exchange impacts of 1% were partially offset by a 2% decline in unit volume. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 1%. Global market share of the Health Care segment increased 0.3 points.
•Oral Care net sales increased low single digits driven by positive impacts of favorable product mix (due to growth of power brushes and premium paste, which have higher than category-average selling prices) and favorable foreign exchange, partially offset by a unit volume decline. Unit volume decreased across all regions (due to market contraction and increased competitive activity) except unit volume increased in Latin America (due to distribution gains). Organic sales were unchanged as low single-digit increases in North America and Latin America were fully offset by a double-digit decrease in Asia Pacific and a high single-digit decrease in Greater China. Global market share of the Oral Care category decreased 0.3 points.
•Personal Health Care net sales increased low single digits driven by positive impacts of higher pricing (driven by Latin America and North America) and favorable foreign exchange, partially offset by a unit volume decrease. The unit volume decrease was driven by a decline in North America (due to a shift in customer order timing ahead of the respiratory season), partially offset by a unit volume increase in IMEA (due to innovation). Organic sales increased low single digits driven by a mid-teens increase in Latin America and a mid-single-digit increase in Europe, partially offset by a mid-single-digit decline in North America. Global market share of the Personal Health Care category increased 0.5 points.
Net earnings decreased 3% to $718 million due to a 120 basis-point decrease in net earnings margin. Net earnings margin decreased due to a decrease in gross margin, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decrease of 170 basis points was driven primarily by unfavorable geographic mix and higher cost of tariffs, partially offset by productivity savings. SG&A as a percentage of net sales decreased due to the positive scale impacts of the net sales increase.
Fabric & Home Care
Three months ended September 30, 2025, compared with three months ended September 30, 2024
Fabric & Home Care net sales increased 1% to $7.8 billion driven by favorable foreign exchange of 2% and the benefits of higher pricing of 1%, partially offset by a unit volume decrease of 2%. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales were unchanged. Global market share of the Fabric & Home Care segment decreased 0.4 points.
•Fabric Care net sales were unchanged as positive impacts from favorable foreign exchange were fully offset by negative impacts from a unit volume decrease. The unit volume decrease was driven by a decline in Europe (due to increased competitive activity), partially offset by an increase in Asia Pacific and Latin America (both due to market growth). Organic sales decreased low single digits driven by a double-digit decline in Europe, partially offset by a low single-digit increase in North America. Global market share of the Fabric Care category decreased 0.9 points.
•Home Care net sales increased low single digits driven by the positive impacts of higher pricing (primarily in North America and Europe) and favorable foreign exchange, partially offset by a decrease in unit volume. The decrease in volume was due primarily to a decline in Europe (due to increased competitive activity), partially offset by an increase in North America (due to innovation). Organic sales increased low single digits driven by a low single-digit increase in North America, partially offset by a high single-digit decrease in Asia Pacific. Global market share of the Home Care category increased 0.4 points.
Net earnings decreased 3% to $1.6 billion due to a 70 basis-point decrease in net earnings margin. Net earnings margin decreased due to a decrease in gross margin, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decrease of 130 basis points was driven by unfavorable product mix, higher cost of tariffs and higher commodities, partially offset by productivity savings. SG&A as a percentage of net sales decreased due to a decrease in marketing spending.
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Baby, Feminine & Family Care
Three months ended September 30, 2025, compared with three months ended September 30, 2024
Baby, Feminine & Family Care net sales increased 1% to $5.2 billion driven by favorable foreign exchange of 1%. Unit volume was unchanged. Excluding the impacts of foreign exchange and acquisitions and divestitures, organic sales were unchanged. Global market share of the Baby, Feminine & Family Care segment decreased 0.3 points.
•Baby Care net sales increased low single digits driven by the positive impacts of favorable foreign exchange, premium product mix and an increase in unit volume. The unit volume increase was driven by Greater China and Europe (both due to distribution gains), partially offset by a unit volume decrease in North America (due to competitive activity). Organic sales increased low single digits driven by a 20% increase in Greater China and a mid-single-digit increase in Latin America, partially offset by a low single-digit decline in North America. Global market share of the Baby Care category increased 0.1 points.
•Feminine Care net sales increased low single digits driven by positive impacts of premium product mix, favorable foreign exchange and innovation-driven pricing (primarily in North America), partially offset by a unit volume decline. The unit volume decrease was driven by declines in IMEA (due to distribution losses) and Greater China (due to market contraction). Organic sales were unchanged as the impact of a low single-digit growth in North America was offset by a high single-digit decline in IMEA and a low single-digit decline in Europe. Global market share of the Feminine Care category increased 0.1 points.
•Net sales in Family Care, which is predominantly a North America business, decreased low single digits driven by lower pricing (due to merchandising investments). Unit volume was unchanged. Organic sales also decreased low single digits. North America market share of the Family Care category decreased 0.8 points.
Net earnings increased 4% to $1.1 billion due to an increase in net sales and a 50 basis-point increase in net earnings margin. Net earnings margin increased due to a decrease in SG&A as a percentage of net sales, partially offset by an increase in the effective tax rate and a decrease in gross margin. The gross margin decrease of 10 basis points was primarily due to unfavorable category mix and higher cost of tariffs, partially offset by productivity savings and lower commodity costs. SG&A as a percentage of net sales decreased primarily due to a decrease in marketing spending. The higher effective tax rate was driven by unfavorable geographic mix.
Corporate
Corporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities, certain impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.
For the three months ended September 30, 2025, Corporate net sales increased $79 million to $242 million due to an increase in net sales of incidental businesses managed at the corporate level. Corporate net earnings increased $743 million to $36 million for the quarter due primarily to restructuring charges related to the substantial liquidation of operations in certain Enterprise Markets, including Argentina, in the prior year period.
LIQUIDITY & CAPITAL RESOURCES
Operating Activities
Operating cash flow was $5.4 billion fiscal year to date, an increase of $1.1 billion versus the prior year period. Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation expense, deferred income taxes and gain/loss on sale of assets), generated $5.7 billion of operating cash flow. Working capital and other impacts consumed $304 million of cash in the period. Accounts receivable increased, consuming $305 million of cash, driven primarily by sales growth. Days sales outstanding were flat. Total inventories increased, consuming $303 million of cash, driven primarily by increased safety stock levels and new product initiatives. Days inventory on hand decreased by one day. Trade payables increased, generating $648 million of cash, driven primarily by increased supply chain activity in line with the increase in inventory. Other impacts consumed additional cash of $344 million primarily driven by the payment of the transitional tax related to the 2017 U.S. Tax Act and a reduction in postretirement benefit and compensation accruals, partially offset by current year income tax accruals in excess of estimated payments.
Investing Activities
Investing activities used $1.5 billion of cash fiscal year to date primarily driven by capital expenditures.
Financing Activities
Financing activities used $2.2 billion of net cash fiscal year to date, mainly due to dividends to shareholders and treasury stock purchases, partially offset by a net debt increase.
22 The Procter & Gamble Company
As of September 30, 2025, our current liabilities exceeded current assets by $10.9 billion. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We have strong short- and long-term debt ratings that have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in commercial paper and bond markets. In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide sufficient funding to meet short-term financing requirements.
MEASURES NOT DEFINED BY U.S. GAAP
In accordance with the SEC's Regulation S-K Item 10(e), the following provides definitions of the non-GAAP measures and the reconciliation to the most closely related GAAP measure. We believe that these measures provide useful perspective on underlying business trends (i.e., trends excluding non-recurring or unusual items) and results and provide a supplemental measure of period-to-period results. The non-GAAP measures described below are used by management in making operating decisions, allocating financial resources and for business strategy purposes. These measures may be useful to investors, as they provide supplemental information about business performance and provide investors a view of our business results through the eyes of management. These measures are also used to evaluate senior management and are a factor in determining their at-risk compensation. These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measures but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted.
Organic sales growth.Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions and divestitures and foreign exchange from year-over-year comparisons. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. This measure is used in assessing the achievement of management goals for at-risk compensation.
The following tables provide a numerical reconciliation of net sales growth to organic sales growth:
Three Months Ended September 30, 2025 Net Sales Growth Foreign Exchange Impact
Acquisition & Divestiture Impact/Other (1)
Organic Sales Growth
Beauty 6 % (1) % 1 % 6 %
Grooming 5 % (2) % - % 3 %
Health Care 2 % (1) % - % 1 %
Fabric & Home Care 1 % (2) % 1 % - %
Baby, Feminine & Family Care 1 % (1) % - % - %
Total Company 3 % (1) % - % 2 %
(1)Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.
Adjusted free cash flow.Adjusted free cash flow is defined as operating cash flow less capital spending and excluding payments for the transitional tax resulting from the 2017 U.S. Tax Act. Adjusted free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. We view adjusted free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investments.
The following table provides a numerical reconciliation of adjusted free cash flow ($ millions):
Three Months Ended September 30, 2025
Operating Cash Flow Capital Spending 2017 U.S. Tax Act Payments Adjusted Free Cash Flow
$ 5,408 $ (1,200) $ 688 $ 4,896
Adjusted free cash flow productivity.Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings. We view adjusted free cash flow productivity as a useful measure to help investors understand P&G's ability to generate cash. Adjusted free cash flow productivity is used by management in making operating decisions, in allocating financial resources and for budget planning purposes. This measure is also used in assessing the achievement of management goals for at-risk compensation.
The following table provides a numerical reconciliation of adjusted free cash flow productivity ($ millions):
Three Months Ended September 30, 2025
Adjusted Free Cash Flow Net Earnings Adjusted Free Cash Flow Productivity
$ 4,896 $ 4,781 102 %
Core EPS.Core EPS is a measure of the Company's diluted EPS excluding items that are not judged by management to be part of the Company's sustainable results or trends. Management views this non-GAAP measure as a useful supplemental measure of Company performance over time. This measure is also used in assessing the achievement of management goals for at-risk
The Procter & Gamble Company 23
compensation. The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following items:
•Incremental restructuring:The Company has historically had an ongoing level of restructuring activities of approximately $250 - $500 million before tax. On June 5, 2025, the Company announced a portfolio and productivity plan to streamline its portfolio and organization to improve its cost structure and competitiveness. In the fiscal year ended June 30, 2024, the Company started a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. During the period ended September 30, 2024, the Company completed this limited market portfolio restructuring with the substantial liquidation of its operations in Argentina. The adjustment to Core earnings includes the restructuring charges that exceed the normal, recurring level of restructuring charges.
We do not view the above items to be part of our sustainable results, and their exclusion from Core earnings measures provides a more comparable measure of year-on-year results. These items are also excluded when evaluating senior management in determining their at-risk compensation.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
Three Months Ended September 30, 2025
Amounts in millions except per share amounts As Reported (GAAP) Incremental Restructuring Core
(Non-GAAP)
Cost of products sold $ 10,887 $ (39) $ 10,848
Selling, general and administrative expense 5,643 (77) 5,566
Operating income 5,856 116 5,972
Other non-operating income/(expense), net 268 7 275
Income taxes 1,253 23 1,276
Net earnings attributable to P&G 4,750 100 4,850
Core EPS
Diluted net earnings per common share (1)
$ 1.95 $ 0.04 $ 1.99
(1)Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble.
CHANGE VERSUS YEAR AGO
Net earnings attributable to P&G 20 %
Core net earnings attributable to P&G 2 %
Diluted net earnings per common share 21 %
Core EPS 3 %
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
Three Months Ended September 30, 2024
Amounts in millions except per share amounts As Reported (GAAP) Incremental Restructuring Core
(Non-GAAP)
Cost of products sold $ 10,421 $ 20 $ 10,441
Selling, general and administrative expense 5,519 (25) 5,494
Operating income 5,797 5 5,802
Other non-operating income/(expense), net (554) 789 235
Income taxes 1,152 (7) 1,145
Net earnings attributable to P&G 3,959 801 4,761
Core EPS
Diluted net earnings per common share (1)
$ 1.61 $ 0.32 $ 1.93
(1)Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble.
24 The Procter & Gamble Company
Procter & Gamble Company published this content on October 24, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 24, 2025 at 20:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]