Procter & Gamble outlines up to 4% organic sales growth target for fiscal 2026 amid CEO transition and restructuring

Earnings Call Insights: The Procter & Gamble Company (PG) Q4 2025

Management View

• Jon R. Moeller announced his transition to Executive Chairman effective January 1, 2026, with Shailesh Jejurikar appointed as the incoming President and CEO. Moeller stated Jejurikar “has a distinguished track record throughout his 36-year P&G career and has been an integral part of P&G’s leadership team for the past 12 years.”
• Moeller emphasized, “Our strategy is working. Our bench is strong,” noting the planned CEO transition as a move to guide the next chapter of growth and value creation.
• Andre Schulten highlighted, “Execution of our integrated strategy enabled the company to grow organic sales and core EPS and to return cash to share owners in line with our target range in a challenging fiscal ’25 despite volatile macroeconomic, geopolitical and consumer dynamics.”
• Schulten reported organic sales for the year grew 2%, with nine of ten product categories growing organic sales and e-commerce sales up 12%, now representing 19% of total company sales.
• Moeller cited a new two-year restructuring program focused on portfolio simplification, supply chain optimization, and organization design, including up to 7,000 nonmanufacturing role reductions, representing roughly 15% of the nonmanufacturing workforce.
• Schulten stated, “We increased our dividend by 5% and returned $16 billion of value to shareowners, nearly $10 billion in dividends and $6.5 billion in share repurchase, consistent with our guidance at the start of the fiscal year.”

Outlook

• Schulten guided for fiscal 2026 organic sales growth “in line to up 4% versus prior year,” including a 30 to 50 basis point headwind from brand and product discontinuations as part of restructuring.
• Core EPS guidance is “in line to plus 4% versus fiscal year ’25, core EPS of $6.83,” representing a range of $6.83 to $7.09 per share.
• Schulten outlined, “Our outlook includes $1 billion before tax in higher costs from tariffs in fiscal ’26…tariffs alone are a 5-point headwind to core EPS growth in fiscal ’26.”
• The company plans to return approximately $15 billion in cash to shareholders through $10 billion in dividends and $5 billion in share repurchase.

Financial Results

• Core earnings per share for the fourth quarter were $1.48, up 6% versus the prior year, including a $0.03 impact from tariffs.
• Organic sales in the fourth quarter were up 2%. Volume was in line with the prior year, and pricing and mix were each up 1%.
• Core gross margin declined 70 basis points, while core operating margin increased 150 basis points, with productivity improvement of 560 basis points.
• Adjusted free cash flow productivity reached 110% for the quarter, with $3.3 billion of cash returned to shareowners.
• Global aggregate market share was down 20 basis points in the quarter.

Q&A

• Stephen Robert R. Powers, Deutsche Bank: Asked about the CEO transition and efforts to create tailwinds for fiscal ’26. Moeller responded, “The restructuring program…is a very good example of that, building financial headroom to invest in innovation, invest in commercialization.”
• Lauren Rae Lieberman, Barclays: Noted narrowing outperformance versus categories and asked about strategies to widen the gap. Moeller acknowledged, “We do have categories where we’ve lost superiority. And we simply must regain that level of superiority that allows us to outgrow the market.” Schulten added, “When we put innovation on Luvs with Platinum Protection, the category part we accelerated, our share reaccelerated and our organic sales reaccelerated.”
• Dara Warren Mohsenian, Morgan Stanley: Asked about the restructuring’s impact on organizational capabilities and the timing of the CEO change. Moeller described, “There is immense opportunity to tear down some of those silos, and in the process, build better and quicker decision-making, more efficient work processes and a much higher employee value proposition.”
• Bonnie Lee Herzog, Goldman Sachs: Queried about the wider guidance range and EPS phasing. Schulten explained, “You have incremental volatility coming from tariff negotiations that are ongoing…the category acceleration is expected to happen later in the year, so it will be an upward trajectory from quarter 1 upwards.”
• Peter K. Grom, UBS: Sought clarity on category growth trends and guidance realism. Schulten stated, “We see consumption trends consistently decelerating…there is a level of baseline uncertainty that we reflect in the guidance range.”
• Filippo Falorni, Citi: Focused on U.S. market deceleration and inventory destocking. Schulten responded, “We continue to see strength in the online channel…these effects are visible not only in the U.S. but also in other parts of the world.”
• Christopher Michael Carey, Wells Fargo: Asked about China market durability. Moeller said, “The trend continues to be more positive…the Chinese consumer continues to be very responsive to innovation.”

Sentiment Analysis

• Analysts pressed on visibility, competitive positioning, category outperformance, and mitigation strategies, with a tone ranging from slightly negative to neutral. Repeated questions challenged management on guidance breadth, inventory trends, category growth, and pricing power.
• Management maintained a confident and strategic tone in prepared remarks and Q&A, with Moeller stating, “We remain as confident as ever in our strategy and our ability to drive market growth; to deliver balanced growth and value creation.” During analyst exchanges, management was open about challenges but reiterated focus on innovation and restructuring, occasionally using phrases like “we know we’re not superior, we know we need to adjust, and we’re on it.”
• Compared to the previous quarter, analyst skepticism was more pronounced, especially around growth prospects and inventory, while management’s tone shifted from constructive to more defensive in Q&A, reflecting heightened uncertainty.

Quarter-over-Quarter Comparison

• Guidance range for organic sales growth in fiscal 2026 is in line to up 4%, compared to previous quarter’s guidance of approximately 2% organic sales growth for fiscal 2025.
• A significant management change was announced, with Moeller stepping down and Jejurikar taking over as CEO.
• New restructuring program was detailed, targeting 7,000 nonmanufacturing role reductions, portfolio simplification, and supply chain optimization, not present in the previous quarter.
• Analysts’ focus shifted from general volatility and innovation to specific concerns about inventory destocking, category deceleration, and the impact of tariffs.
• Management’s confidence in innovation and productivity was consistent, but current tone was more cautious due to greater macro uncertainty and wider guidance ranges.

Risks and Concerns

• Management highlighted volatile macroeconomic and geopolitical conditions, decelerating category growth, and inventory reductions as ongoing headwinds.
• Schulten detailed, “Our guidance includes a 30 to 50 basis point headwind from brand and product form discontinuations as part of our 2-year restructuring program.”
• Tariffs present a major risk, with a $1 billion before tax headwind to core EPS in fiscal 2026.
• Management acknowledged uncertainty in pricing power, category acceleration, and potential for further geopolitical or currency disruptions.
• Analysts questioned the durability of recovery in China, the sustainability of premium pricing, and the impact of retailer inventory practices.

Final Takeaway

Procter & Gamble enters fiscal 2026 with a planned leadership transition, a comprehensive restructuring program, and a focus on driving modest organic sales and core EPS growth despite ongoing volatility. The company is prioritizing innovation, portfolio simplification, and supply chain efficiency to navigate cost headwinds, particularly from tariffs, while seeking to regain brand superiority and improve execution. Management remains confident in its integrated strategy and ability to deliver balanced growth and value creation for shareholders in a challenging environment.

Read the full Earnings Call Transcript