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Fortune AIQ 75

The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

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Fortune AIQ 50

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are home equipment and furnishings and household and personal products.

Fortune Sector Leaders: Household Products

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The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

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The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

The 300 companies on this list are transforming industries from the inside out.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

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The consumer packaged goods giant Procter &amp; Gamble, famous for products ranging from Tide detergent to Pepto Bismol, saw revenue increase 5% in 2022, to $80.2 billion. 
<ul> 
 	<li>As inflation raged in 2022 and into 2023, P&amp;G was among the most prominent companies criticized by consumer activists for “greedflation,” as it repeatedly raised prices for consumers in attempts to offset its own rising costs.</li> 
 	<li>P&amp;G raised its year-end sales outlook in April 2023 from a 1% decline to a 1% increase, a sign it believes it’s turned the corner on inflation.</li> 
 	<li>The company is diversifying away from traditional retail channels; its e-commerce sales grew 11% in 2022 and now make up 14% of total sales.</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

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Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022-Procter and Gamble

Procter &amp; Gamble makes and sells familiar household brands such as Tide laundry detergent, Gillette razors, Crest toothpaste, and Old Spice deodorant. Like other consumer goods giants, P&amp;G has faced a tricky balancing act: It is benefiting from rising sales in a recovering economy (it brought in $76.1 billion in revenue in its last fiscal year, a 7.3% increase from the year prior) while also striving to protect its profit margins from inflation. The company also faced a potential self-inflicted wound going into 2022: The detection of benzene, a potential carcinogen, in some of its aerosol deodorants led P&amp;G to institute a recall in November 2021, and the problem has since prompted multiple lawsuits.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

WMAC 2021-21-Procter and Gamble

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500 128 Procter & Gamble

The consumer products giant emerged from the COVID-19 crisis with strong profits, exceeding its own fiscal year 2020 goals with 6% organic sales growth and 13% core earnings-per-share growth. That was partially thanks to a spike in demand for home-goods brands like Charmin, Bounty, Downy, and more. Procter &amp; Gamble experienced a substantial leap in revenue almost across the board, including net sales of $19.7 billion in the second quarter of fiscal year 2021, up 8% from the year before. P&amp;G’s share price has weathered market volatility, rising 15.4% from March 2, 2020, through May 24, 2021. The company even increased its quarterly dividend by 10% in April 2021, making this the 65th consecutive year that P&amp;G has boosted its dividend.

This year’s Fortune 500 marks the 67th running of the list.

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For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

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The consumer products giant emerged from a major reorganization in 2019 and ended the calendar year with an optimistic outlook for investors across the board, including net sales of $17.8 billion in the first quarter of fiscal year 2020, up 7% from the year before. What would be welcome news during normal times became a bulwark in the age of the novel coronavirus. P&amp;G’s share price weathered the stock market volatility that marked the early weeks of the pandemic’s spread, and even as other companies cut their quarterly dividends, P&amp;G made its payout for its 64th consecutive year.

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F500-2020-050-Proctor-and-Gamble

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The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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The consumer packaged goods company Procter &amp; Gamble operates in five segments: beauty; grooming; health care; fabric and home care; and baby, feminine, and family care. Founded in 1837 when a British candlemaker and an Irish soapmaker merged their businesses in Cincinnati, its holdings include Tide, Pampers, Downy, Gillette, and Oral-B.

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Procter & Gamble (PG): Company Profile, Stock Price, News, Rankings

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Procter & Gamble

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Good morning, and welcome to Procter and Gamble's Quarter End Conference Call. Today's event is being recorded for replay. This discussion will include a number of forward looking statements. If you will refer to P and G's most recent 10 ks, 10 Q and 8 ks reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, Procter and Gamble needs to make you aware that during the discussion, the company will make a number of references to non GAAP and other financial measures.

Procter and Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non GAAP financial measures. Now I will turn the call over to P&G's Chief Financial Officer, Andre Scholten.

Good morning. Joining me on the call today are John Moller, Chairman of the Board, President and Chief Executive Officer and John Chevalier, Senior Vice President, Investor Relations. I'll start with an overview of second quarter results. John will add perspective on our results and strategy and we'll close with guidance for fiscal 2025 and then take your questions. 2nd quarter results were largely in line with our going in expectations despite a high degree of volatility within the quarter, ultimately acceleration in organic sales growth, EPS growth, strong cash return to share owners.

Organic sales for the quarter grew 3%. Volume contributed 2 points to organic sales growth, mix added 1 point and pricing was roughly in line with prior year. The top line results were better than anticipated in early December. Our team was able to fully overcome the 2 week outage of our global transportation management system provider and support strong late December customer orders ahead of early January merchandising events. Growth was broad based across categories with 9 of 10 product categories growing organic sales for the quarter.

Family Care was up double digits. Home Care and Skin and Personal Care were up mid singles. Personal Health Care, Hair Care, Oral Care, Feminine Care, Fabric Care and Grooming grew low single digits. Baby Care was down low singles. Organic sales in focus markets grew 4% and enterprise markets were in line with prior year.

Organic sales in North America grew 4%, driven by 4 points of volume growth. Over the last 6 quarters, North America has grown organic sales 7%, 5%, 3%, 4%, and now again 4%, on volume growth of 3% to 4% each quarter. The region delivered broad based market share growth this quarter with 8 of 10 categories holding or growing volume share and 8 of 10 categories holding or growing value share. Europe Focus Markets organic sales were up 4%, driven by 4 points of volume growth. Over the last 6 quarters, Europe Focus Markets have grown organic sales on average 6% on volume growth of 3%.

Latin America and European enterprise markets each grew low single digits and the Asia, Middle East and Africa region declined low singles. Greater China organic sales declined 3%. While down versus prior year, this is a solid step forward in our 2nd largest market from a 15% decline last quarter. Notably, SK II in Greater China grew 5% with strong growth during the 2011 key consumption period and modest growth in travel retail. Underlying market conditions remain soft and we are trending back toward growth in Greater China.

Global aggregate value share was in line with prior year with 28 of our top 50 category country combinations holding or growing share for the quarter. On the bottom line, core earnings per share were $1.88 up 2% versus prior year. On a currency neutral basis, core EPS increased 3%. The quarter included roughly 0 point 0 $2 per share of incremental cost to manage through the transportation services disruption almost entirely in cost of goods sold. Core gross margin was down 30 basis points and core operating margin declined 80 basis points.

Currency neutral core operating margin decreased 50 basis points. The quarter included strong productivity improvement of 2 60 basis points. Adjusted free cash flow productivity was 84%. We returned over $4,900,000,000 of cash to share owners this quarter, dollars 2,400,000,000 in dividends and $2,500,000,000 in share repurchases. To summarize results, accelerating organic sales growth, solid core EPS growth and cash return to share owners, keeping us on track to deliver within our fiscal year guidance ranges, overall good performance and what continues to be a challenging economic and geopolitical environment.

Thanks, Andre. Our team continues to execute our strategy with excellence, enabling strong results over the past 6 plus years, pre COVID, during COVID, through historic inflationary and pricing cycle and through geopolitical tensions. They've now delivered 26 consecutive quarters of 2% or better organic sales growth averaging 5.5% organic sales growth over those 6.5 years. We've now delivered 8.5% fiscal years of 2% or better core earnings per share growth averaging nearly 8% over that period. This is the type of long term sorry, turning my page here, balanced top and bottom line growth we strive to deliver.

Solid consistent growth over time. As we expected heading into the fiscal year, first half results were below the guidance ranges we set for the full year. And while recent consumer trends and FX rates make the balance of the year more challenging, we continue to expect stronger results in the second half. Andre will discuss this more in the guidance update. We remain committed to the integrated strategy that has enabled our strong results and that is the foundation for balanced growth and value creation.

We highlighted many of the reasons we're confident in the strategy at our Investor Day in November. If you weren't able to attend, I encourage you to listen to the replay on our IR website. To recap, we remain very disciplined in our portfolio choices, including some moves over the past year to strengthen our ability to generate U. S. Dollar based returns.

We're doubling down on superiority across all five vectors. No single vector of superiority can carry the day itself. It's all 5 together. The innovation plans to create and extend superiority across the business are very strong and we continue to leverage recent innovations by driving more trial and household penetration. A few examples, Charmin Smooth Tear with its patented scalloped edge, the biggest innovation in toilet paper in 100 years continues to drive Charmin volume and value share growth in the U.

S. We were first to launch the whole body deodorant sprays now across the Old Spice, Secret and Native brands, and we continue to drive trial in the growing segment in this growing segment of the category. P and G U. S. Deodorant volume and value share are each up nearly a point over the last year.

Dawn Powerwash continues to drive market share up more than a point in the U. S. Market after nearly 3 years in the market. Swiffer Power Mop has become the largest innovation in Swiffer's history, contributing to 40% growth of the brand portfolio and driving a remarkable 35% growth in the category. We've launched our most advanced power toothbrush, Oral B io10, early last year.

We followed up with io2, the first io designed to help consumers trade up from a manual toothbrush to a power brush. Early results in the U. S. Are very encouraging and we're expanding io2 across major markets over the next several months. We just launched our best ever whitening toothpaste, Crest 3dWhite deep stain remover.

The new formula works in just one day to dissolve the bonds that lock stains to your teeth and better prevent stains from occurring. The early trial period for deep stain remover is off to a great start. We're expanding Xevo, our insect killing sprays, mosquito and tick repellents and insect traps with worry free ingredients inspired by plants' natural defenses against bugs. We're building distribution and trial and receiving very strong consumer ratings and reviews. Tide OxyBoost Power Pods have just launched online with a great response from retailers and customers.

OxyBoost includes 2 times the OxyPower to provide Tide's most powerful clean. OxyBoost PowerPods will be available in stores soon and we'll be following up quickly with additional innovations in laundry detergents and fabric enhancers. Finally, Tide EVO, our new laundry detergent developed on our breakthrough functional fibers platform, continues to exceed expectations in our Colorado test market, surpassing our year 1 performance goals in just the 1st 12 weeks after launch. We're progressing through the last phase of supply chain readiness and we'll be assessing our expansion plans in the coming months. There are many more examples we could share considering the next 6 months of innovations across Tide, Gain, Downy, Febreze, Dawn, Cascade, Mr.

Clean, Pampers, Luvs, Tampax, always discrete, Bounty, Old Spice, Crest, Gillette and Venus brands. And that's just in the U. S. I hope you can see this is one reason we're confident in our prospects going forward. We're improving productivity in all areas of our operations to fuel investments and superiority, mitigate cost and currency headwinds and drive margin expansion.

We've extended our visibility to productivity improvement with each business unit building 3 year cost savings master plans, mirroring what we've done for years in our innovation program. We're driving constructive disruption of ourselves and our industry, a willingness to change, adapt and create new trends, technologies and capabilities that will shape the future of our industry and extend our competitive advantage. We've designed and continue to refine and strengthen P and G's organization structure so that it enables P&G people to be fully empowered, agile and accountable focused on business outcomes to deliver the greatest value creation. We call this an integrated strategy for a reason. Each part of the strategy needs to be delivered.

It's not a menu to pick and choose from. Each element is incredibly important. The real advantage comes from being able to do all of these things at the same time. The strategy is inherently dynamic. It adapts to the changing needs of consumers, customers and society.

It demands that we not sit still. We continue to believe our best path forward is to double down on this integrated strategy operating with a focus on driving market growth, creating business versus taking business to deliver balanced top and bottom line growth and value creation. With that, I'll hand it back to Andre to discuss guidance.

Thank you, John. So with half of the fiscal year complete, our guidance ranges for fiscal 2025 are unchanged and remain consistent with our long term algorithm. We've highlighted we continue to expect the environment around us to remain volatile and challenging from input costs to currencies to consumer, competitor, retailer and geopolitical dynamics. On the top line, we are maintaining our organic sales growth guidance in the range of 3% to 5%. We continue to expect the markets in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year and our objective remains to grow organic sales modestly ahead of the underlying growth of these markets.

On the bottom line, our core EPS guidance range for fiscal 2025 remains at growth of 5% to 7% versus fiscal 2024 core EPS of €6.59 This guidance equates to a range of €6.91 to €7.05 per share. Our outlook for commodity costs remains consistent our most recent guidance, expecting a commodity cost headwind of approximately $200,000,000 after tax, which equates to a headwind of $0.08 per share for fiscal 2025. Since last earnings, foreign exchange rates have moved sharply against us, we are now expecting a headwind of approximately $300,000,000 after tax, which equates to a headwind of $0.12 per share for fiscal 2025. We continue to expect lower non operating income benefits this fiscal year and a somewhat higher tax rate versus the prior year. Combined, these additional headwinds amount to $0.10 to 0 point 12 dollars dollars to core EPS on top of the commodities and FX headwinds I mentioned.

With projected softer market growth and stronger foreign exchange headwinds, we currently have good visibility towards the lower end of the top and bottom line guidance ranges. However, we will continue to push all levers in our control to offset these headwinds that are largely not in our control. We expect adjusted free cash flow productivity of 90% for the year and we have plans to pay around $10,000,000,000 in dividends and to repurchase $6,000,000,000 to $7,000,000,000 in common stock combined returning $16,000,000,000 to $17,000,000,000 of cash to share owners for the fiscal year. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions or store closures are not anticipated within the guidance ranges. Now I'll hand it over to John for closing thoughts.

We're very pleased with the results PNG People have delivered in a very challenging and volatile environment, a good first half of the year and a stronger outlook for the second half. We remain focused on excellent execution of our integrated dynamic market constructive strategy aimed at delivering balanced top and bottom line growth and value creation, starting with a commitment to deliver irresistibly superior propositions to consumers and retailers. With that, we'll be happy to take your questions.

Your first question comes from the line of Dara Mohsenian of Morgan Stanley. Please go ahead.

Hey, good morning guys. I just wanted to drill down a bit more short term into organic sales growth for the back half of the year given some of the volatility over the last year. You've talked historically about the OSG split between the robust 85% in country mix versus a lagging 15% in the last few quarters. Can you just give us a bit of update on the performance in fiscal Q2 in each of those buckets? Do you think you're on track for continued improvement in the 15% in the back half of the year as you look versus Q2?

And also just sustainability of growth in that 85% that's stronger presumably driven by the U. S. And Europe? Thanks.

Good morning, Dara. Thanks for the question. I'll take a crack at it and John you'll jump in. So if you look at quarter 2 and I apply the same logic that we've been using to explain the divergence of the majority of the business versus some of the tougher markets, 85% of the business, so comprising of the U. S, Europe, Latin America, the Latin America and Europe Enterprise Markets, that 85% continues to grow at around 4%.

What has improved is the 15%, so the performance of the balance of the markets, mainly the Asia, Middle East, Africa markets, but the significant improvement in Greater China. So China was down 15% organic sales in quarter 1 and was down, as we mentioned in the prepared remarks, only 3% in quarter 2. So we see encouraging momentum towards recovery and hopefully more neutral picture as we go into half 2. That's exactly what we're expecting as we go into the second half of the year. We expect the U.

S. To continue to grow at the pace that we've seen in quarter 2 and quarter 1. We expect some increased momentum across Europe and Latin America, specifically as comps ease versus the base period. And with that, if we are combining hopefully a little bit stronger growth in North America, easier comps in Europe, L. A.

And Asia, Middle East, Africa. And if China continues to move towards a more neutral contribution to sales growth, that would actually allow us to be at the midpoint of organic sales growth guidance, maybe a little bit higher. Conversely, if we saw weakening across some of the core markets of North America and Europe Or we saw China returning to more negative territory that would move us to the lower end or slightly below the current organic sales growth guidance. Our base case, Dara to summarize, continued strong performance around 4% in the 85% of the business, continued recovery on the 15%.

The next The next question will come from Lauren Lieberman of Barclays. Please go ahead.

Thanks. Good morning. So Andre, I think you were kind of running through projected performance for P and G's business, but I was hoping you could also comment on what you're seeing in terms of consumer behavior and dynamics. I think in December, you guys had flagged a little bit of a softening in the consumer environment in the U. S.

As a maybe it's something that sticks, maybe it doesn't. But we'd just love to get a read on that and same in Europe sort of the consumer dynamic, not just your own performance and market share trajectory. Thanks.

Yes. Hey, Lauren. Generally, I would describe the consumer in our categories, which are again nondiscretionary and very focused on performance as stable. In Europe specifically, the market continues to grow at around 4% in focus markets and in double digits actually in enterprise markets. Our ability to continue to grow ahead of that, I think is visible in the volume share numbers.

We are growing volume share about 50 basis points in Focus Markets and 60 basis points in Enterprise Markets. Inflation is down in Europe to about 2%, and we see a relatively stable environment, which we expect to continue going into half 2. And we are investing in strong innovation in half 2 to benefit from that stable consumer environment. In the U. S, the current quarter has been a bit more volatile in terms of phasing of consumption.

We saw very strong consumption in October driven by hurricanes and by port strikes easing off a little bit in October in November and then coming back in December. So it was volatile, but when I step back, I would characterize the situation very similarly to the European consumer, stable in our categories, market growth continues to be around 4%, Volume growth continues to be around 3%. And again, our job is to encourage consumption in our categories with strong innovation and communication, which we're doing and continue to do across half 2.

The only thing I would add to Andre's comments is in terms of reflecting on consumer behavior. We're also seeing continued flat to declining private label shares in both the United States and in Europe. So that again is relatively reassuring in terms of the stable consumer that Andre rightly referred to.

Next question will come from Steve Powers of Deutsche Bank. Please go ahead.

Thank you. Good morning. I guess, Andre, I'm a little surprised that your currency outlook as it relates to the impacts on the top line didn't move off the negative 1% call you had in place as of October, even as the after tax profit impact stepped up by the $300,000,000 So maybe you could just talk about any key moving parts there and whether you've assumed further currency movements or if the full year now sort of effectively assumes spot rates as we've seen in the last few weeks? And then relatedly, I guess I'd love a little bit more discussion of the productivity and pricing levers you have available to you as an offset to those dynamics? And whether you see any limitations to implementing them over the balance of the year?

I'm asking that in the context that historically 3Q, 4Q gross margins stepped down sequentially. So I think your guidance seems to have fairly strong operating leverage over the balance of the year in SG and A, but just wanted to see if you could clarify those moving parts. Thank you.

Good morning, Steve. I think we'll we are forecasting right now at spot rates as we always do, both on the P and L side and the organic sales growth side. And Europe, we'll see we're seeing high volatility in currencies obviously that are moving on a daily basis based on commentary. So we'll reserve our ability to update here, but for now we're reflecting spot rates. The impact of foreign exchange rate will mostly hit in the second half.

So we saw a lot of the commodity impact in the first half and the corresponding impact of FX will be mostly in half 2. That is built into our guidance logic that we've communicated. Our ability to deal with foreign exchange as with any headwind is a combination of productivity, which we feel very good about for the year across all productivity buckets. So we're confident in our $1,500,000,000 productivity guidance on cost goods sold and the $2,000,000,000 guidance overall including SG and A. And pricing levers, pricing is probably most pronounced in enterprise markets, where we see strong foreign exchange rate exposure, but it's going to be a combination of both.

All of that is baked in, in our guidance commentary. But again, we'll watch this closely because there's a lot of volatility in this, as you know.

Just on pricing, Steve. Our business model is hopefully was reflected again in my comments this morning is heavily innovation based. It's at the heart of everything we do. And that's the primary enabler of modest amounts of pricing as we move forward. If you look at our history, again, as a source of potential confidence in our ability to continue to execute modest amounts of pricing even as Andre said in the focus markets.

Pricing has been a neutral or positive contributor to our top line growth for 2019 of the last 20 years and for 54 of the last 57 quarters. Andre mentioned, we have very strong second half innovation programs across markets. And so that should enable us to continue to put some upward pressure on the top line. Again, modest, but we're in a pretty good position with all of that innovation.

The next question will come from Bryan Spillane of Bank of America. Please go ahead.

Thank you, operator. Good morning, guys. So just a question or maybe 2 on China. 1, just the 3% in the quarter, just how did Chinese New Year's impact that? So I guess is that kind of reflective of consumption?

Or is there any timing shift shipment versus the consumption? And then maybe just more broadly, John, the market is changing and does it create opportunities? Are you looking now to kind of use your position as a position of strength and expand in China while the market is soft? Just curious if the change in the marketplace at all has changed the way you're thinking about the market strategically?

I can. Hey, Brian. So I think the China results are not impacted by heavy phasing. Within the quarter, there was phasing in China on the timing of pre shipment for 11.11, but that kind of evened out across the quarter. So the progress is really what we had anticipated.

that is SK II is returning to growth in China at 5%, which is encouraging to see. And the last point I'll make is on the core brands, we're making progress. We are innovating on hair care across Pantene, Head and Shoulders. We're innovating on fabric care. We're innovating on Olay and that is driving progress.

We are carefully investing in the fastest growing channel in Douyin to ensure that we create value there, but that allows us to now grow share in that channel. And the last element is I think the go to market interventions that we've made. We talked about in the last call where we improve our collaboration and synchronization with our core distributors is paying dividends. So all of that is moving in the right direction. I want to be clear, I don't think China is out of the woods.

This will continue to be difficult. It will continue to be volatile. As reflected in my guidance commentary, that volatility can drive us to the midpoint or the lower end of the guidance. And so we don't want to get ahead of ourselves, but it's good to see the trend going more positive.

And you make a very, very good point on taking advantage of significant change that's occurring in the marketplace, both with regard to consumer behavior and with regard to customer behavior and channels. And we intend to do exactly as you described, which is take advantage of those changes. One of the there are a couple of things that I just want to bring a little bit more focus to that are very, very important. One is if you look at our distributor channels, largely feeding the wholesale markets and smaller grocery stores, they were being paid based on total P and G business and we've changed that. So they're now being paid by category.

So they have to deliver against each of the categories that we have products in in order to be fully compensated. That might not seem like a big deal. That's a big deal. It changes behavior significantly. We've also moved we've taken advantage of all the changes that are going on to move our China operations even closer to, for example, how we manage things in the U.

S. Or Focus Europe in terms of end to end, meaning that the categories own everything from the front end of innovation all the way through to the customer discussions. And that wasn't fully the case, say, 2 years ago, even a year ago. So those are big changes. The 3rd big change is really reoriented the conversation that we're having internally and externally with our customers to one of market growth and demonstrating how we can be the biggest drivers, their strongest partners in driving that market growth, which is something that everyone wants badly.

So that's another example of taking advantage of the current situation to become even stronger and more relevant to our customers. So thanks for asking that question. I think it's an excellent one and it's something we're very much focused on.

Your next question will come from Peter Grom of UBS. Please go ahead.

Thanks, operator, and good morning, everyone. Hope you're doing well. I wanted to get just some perspective on the input cost environment. I recognize you maintained your outlook for the $200,000,000 after tax headwind, but we've seen some volatility across some of your key raw materials over the past few months. So Andre, can you maybe just give us or unpack what you're seeing or expecting across your key cost buckets?

And then just kind of looking at the first half impact in the full year guidance, you kind of alluded to this to Steve's question. Are you anticipating input cost deflation in the back half of the year when we think about our gross margin bridge? Thanks.

Good morning, Peter. Input costs for us, obviously, you can appreciate is a wide variety of different materials and commodities. What I'll tell you, which I think is most relevant for what you're after is any variation that we see now versus what we already incurred in half 1, which is the majority of the €200,000,000 impact that we are talking about, will likely not hit the current year P and L. Because of variance holding and because of our contract structures, any major deviation in terms of oil prices outside of maybe transportation will impact half 1 of next fiscal year. Most of our materials and commodities will impact the first half of next fiscal year.

So we feel relatively good about that end of the equation because it provides stability for the second half where more of the volatility is again in foreign exchange rates. That doesn't mean we don't look at our input costs carefully because as we said, we need to get ready to deal with it in the first half of next fiscal year, which then comes to John's point on appropriately developing pricing plans with innovation, productivity programs, etcetera. But the variability in the current year, we believe, is going to be limited.

Our next question will come from Andrea Teixeira of JPMorgan. Please go ahead.

Thank you, operator. Good morning, everyone. If we step back from the tone on the Q1 and then now the Q2 fiscal, in regards to the range of guidance for both organic and EPS growth, is it fair to say you're feeling a bit better about getting to the midpoint on the top line, but EPS more pressured given the increased headwinds in FX? I mean, I just want to understand how it changed. And then if so, if any changes, it seems like your productivity is coming in or even your operating leverage is coming in better than anticipated or better than feared, if you will.

And related to that, just a clarification about the disruptions you called out in December in one of your suppliers. I've been getting questions regarding there is anything in terms of selling, sell out. I understand there wasn't anything material in the quarter either like catching up to that or anything that we should be aware of into the fiscal Q3? Thank you so much.

Good morning, Andrea. So related to guidance, what I'd tell you is what I mentioned in the prepared remarks, right? At the moment, when we when you look at foreign exchange rates, you look at what we've delivered in the front half of the year, we would say we have good visibility and confidence to the lower end of the guidance range, both on organic sales growth and on core EPS. That doesn't mean that we don't have a shot at delivering the middle of the range. And as I said, if we continue to make good progress in China, if we continue to see some easing of the tensions in the Middle East and therefore business picks up, if Europe and North America continue to deliver, we have a good shot at the top line around the midpoint of the range and corresponding EPS.

But at the moment, I would point you to the lower end. On Transportation Management system interruption, look, we wanted to give you guys visibility to what we were seeing. We when we experienced the disruption, we saw a backlog of orders building up that would have been worth about 60 to 70 basis points of the quarter. And we had assumed at that point that we would get rid of half of that backlog through intense work by the team to operate a backup solution and get us back on the main operating system. The team did way better.

They were able to not only work through the full backlog and get us back on the operating system faster, they were also able to then process strong orders in late December. There is no impact quarter over quarter driven by the transportation management system outage, so no unusual effect to consider there. Just great work by the team to get us through this without any impact on the quarter.

Question will come from Robert Ottenstein of Evercore ISI. Please go ahead.

Great. Thank you very much. Just first a clarification on China and apologies if I missed it, but I know that you're doing better, your brands are doing better, SK II is doing better, but just wanted to get any commentary on the Chinese consumer, the health of the Chinese consumer as the quarter developed and then into January. So just a follow-up on that. And then my main question is on innovation this year.

You sound more upbeat, positive on this and excited in terms of what you're bringing out in calendar 2025. Is there any way to quantify that versus prior years? Any way to think whether it's incremental shelf space or the expected impact of the business on the top and bottom line so that we can kind of try to model that? Thank you.

Thanks, Robert. From a Chinese consumer standpoint, as Andre intimated in some of his commentary, it's still a challenge. So that really hasn't changed significantly. There are signs though of some improvement. What am I talking about?

So for example, if we just look at the number of Chinese travelers to Korea and Japan, it's up pretty significantly quarter on quarter. We actually see that reflected in our SK II business in those countries. So that would indicate more confidence and a willingness to spend. The growth of SK II itself and actually consumption growth in that business is a little bit ahead of even our shipment growth. It's an indication of confidence.

That's, as you know, a very premium price product. But the broad swath of society is not confident and is still struggling. And that's why Andre says we're not out of the woods. I agree with that statement and that it will take some time still to get to dependable growth

And the best data we have, Robert, to confirm what John was describing, past 3 months market in all categories in dollar terms is down 5%, past 12 months was down 5%. So macro consumer environment pretty much stable but not positive.

Relative to innovation, I don't have a numerical ability to describe the strength of our the innovation that's coming to market over the next 6 months visavis a year ago. But we are relatively we have gained confidence in that program in part because of what we're seeing in the marketplace and what we're seeing in terms of consumer response to, for example, the Tide EVO test market in Colorado. Again, we've delivered what we expected to deliver in the 1st year, we've delivered in 12 weeks. We're looking at the continued growth of some of our premium innovations in terms of household penetration and market share. I went through a litany of those examples earlier.

And then of course there are some things that I'm not at liberty to talk about. But in general, your observation in terms of as you describe excitement or confidence in our innovation program is strong.

Our next question will come from Bonnie Herzog of Goldman Sachs. Please go ahead.

Thank you. Good morning. I guess thinking about your guidance this year, if your organic sales come in at the lower end as you kind of touched on, if trends decelerate further and thinking about gross margin tailwinds likely moderating this year, Curious how much flexibility you have to deliver on your EPS guidance range? And then in the context of that, do you see a potential that you might need to lower your reinvestment levels to deliver on your bottom line guidance? Any color on just how to think about your ability to continue to reinvest in your business?

Bonnie, when we went through the years with really significant headwinds in terms of currency, commodities and FX. And I'm talking there about a 50%, five-zero percent reduction in our profit over a 2 year period because of those items. We increased our spending on innovation. We increased our spending on commercialization of that innovation and we grew earnings modestly. So that's our mindset.

And I just described a strong innovation pipeline. We will fully support that pipeline. And frankly, I don't think it will. But if that means that we come in a little bit lower, then that's what we need to accept. And we'll be very transparent and clear about that if that were to be the case.

Currently, it's not. But we're going to continue to invest in both innovation and commercialization of that innovation.

Next question will come from Filipino Fulorini of Citi. Please go ahead.

to ask a little more color on the enterprise market business. You talked about Europe enterprise market still growing solidly. Maybe can you give a little more color on Latin America? How is the consumer general health there in key countries like Brazil and Mexico? And then on the Middle East, you're starting to cycle easier comps.

Is your expectation of a return to growth in the second half of twenty twenty five? Thank you.

Good morning, Filippo. L. A. In aggregate delivered 3% growth in this quarter on a base of 17%, so quite impressive base period and continued growth across the markets. If you look at the consumers, I would describe Mexico as more difficult right now, but we are making good progress.

Procter & Gamble (PG) Q2 2025 Earnings Call Transcript

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