Procter & Gamble maintains profitability despite sales decline

Overview

Procter & Gamble delivered modest growth in Core EPS and organic sales in Q3 FY2025 (January – March 2025), navigating a complex consumer and macroeconomic landscape. Despite a slight decline in reported net sales, strong pricing and productivity helped maintain profitability.

Chairman and CEO Jon Moeller emphasized the company’s resilience and commitment to long-term value: “We’re making appropriate adjustments to our near-term outlook to reflect underlying market conditions while remaining confident in the longer-term growth prospects for our brands and the markets where we compete. We remain committed to our integrated growth strategy of a focused product portfolio of daily use categories where performance drives brand choice, superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization. We’re maintaining investments in superior innovation across price tiers to improve value for consumers and drive category growth.”

Q3 FY2025 vs. Q3 FY2024:

• Net sales were on a slightly downward trend, reaching the value of $19.78bn (-2% YoY).
• Organic sales grew very slightly (+1% YoY), driven by higher pricing.
  • Beauty sales increased +2% YoY, driven by premium mix in Personal Care, while Hair Care was flat due to volume declines in Greater China.
  • Grooming sales grew +3% YoY, supported by growth in Latin America, Europe, and North America.
  • Health Care sales were +4% YoY, with strong growth in Personal Health Care and innovation in Oral Care.
  • Fabric & Home Care sales were flat YoY, with Fabric Care stable and Home Care down on lower volume.
  • Baby, Feminine & Family Care sales declined -1% YoY, with Baby and Family Care down due to volume declines, while Feminine Care were flat.
• GAAP and Core EPS increased very slightly to $1.54 (+1% YoY), while Currency-neutral Core EPS grew +3% YoY.
• Net earnings recorded a value of $3.79bn (flat YoY).
• Operating margin rose to 23.0% (+90 bps YoY), reflecting disciplined cost control and supply chain efficiency.
• Gross margin decreased very slightly to 51.0% (-20 bps YoY), with productivity gains offset by unfavorable mix and commodity costs.
• SG&A as % of sales were 27.9% (-120 bps YoY), helped by productivity and lower compensation payouts.
• Operating cash flow recorded a value of $3.71bn, while free cash flow was $2.85bn, with free cash flow productivity of 75%.
• P&G returned $3.8bn of cash to shareowners via $2.4bn of dividend payments and $1.4bn of share repurchases.
• The dividend increase announced earlier this month marks the 69th consecutive year that P&G has increased its dividend and the 135th consecutive year that P&G has paid a dividend since its incorporation in 1890.

Procter & Gamble updated its full-year FY2025 guidance, now expecting all-in sales to remain flat compared to the prior year, with organic sales projected to grow approximately 2% year-over-year. The company anticipates diluted net EPS growth in the range of 6% to 8% versus $6.02 in FY2024, and core EPS between $6.72 and $6.82, reflecting a 2% to 4% increase. P&G also noted anticipated headwinds of approximately $0.16 per share from commodity costs and foreign exchange, along with minor EPS impacts from interest rate changes and recent divestitures.

Reporting quarterly results below Wall Street analysts’ estimates was not well received by investors, with PG’s share price falling by approximately -5.5% immediately after the market opened on April 24. Reported since the beginning of this year, PG’s stock price has experienced approximately the same depreciation, with increased volatility attributed to trade tariffs imposed by President Donald Trump.

Author: Ionuț-Adrian Lazar