Procter & Gamble (NYSE:PG) executives used the company’s quarter-end earnings call to frame the second quarter of fiscal 2026 as the “softest quarter of the fiscal year,” while emphasizing plans to accelerate growth in the back half through innovation, sharper brand communication, and improved in-market execution.
Chief Financial Officer Andre Schulten said second-quarter results were heavily influenced by base-period dynamics tied to “trade and consumer pantry loading” in early October and late December, driven by port strikes and hurricanes, as well as fears of additional disruptions. He said those effects were concentrated in the U.S., with the biggest impacts in the baby, feminine and family care sector and the fabric and home care sector.
Quarterly results reflected U.S. softness and base-period impacts
By category, management said seven of 10 product categories held or grew organic sales. Hair care grew mid-single digits; skin and personal care, personal health care, home care, and oral care were each up low single digits. Grooming and fabric care were in line with the prior year. Baby care and family care were down low single digits, with family care down about 10% “primarily due to the base period dynamics.” Schulten added that organic sales excluding family care were up 1% for the quarter.
Regionally, management said seven of 10 regions grew organic sales, while “focus markets were down 1%.” North America organic sales declined 2%, with volume down three points, including an estimated two-point headwind from base-period trade inventory impacts; price mix added a point. European focus market organic sales rose 1%, with strength in France, Spain, and Italy offset by a softer period in Germany.
Greater China organic sales grew 3% despite what executives described as a challenging consumer environment. Schulten said Pampers and SK-II led, each up “mid-teens or more.” Enterprise Markets grew mid-single digits, including 8% organic growth in Latin America and 6% growth in Europe Enterprise Markets. Asia-Pacific, Middle East, Africa enterprise region growth was 2%.
Global market share declined 20 basis points, with management noting that 25 of the company’s top 50 category-country combinations held or grew share in the quarter.
Margins dipped as P&G maintained investment levels
On the bottom line, core earnings per share were $1.88, in line with the prior year. Schulten said core gross margin declined 50 basis points and operating margin fell 70 basis points, even as productivity improvement totaled 270 basis points, which he said helped fund “healthy reinvestment in innovation and demand creation.” Currency-neutral operating margin was down 80 basis points.
Adjusted free cash flow productivity was 88%. The company returned $4.8 billion to shareholders in the quarter, including $2.5 billion in dividends and $2.3 billion in share repurchases.
Asked later about margins, Schulten declined to provide a margin outlook for the back half, saying margin will be an “outcome” based on decisions around investment needed to drive growth. He described investment priorities as primarily centered on product improvements, consistent media support, and trade-related spending aimed at trial and in-store visibility rather than deep discounting.
CEO highlights near-term interventions and a longer-term “reinvention”
Chief Executive Officer Shailesh Jejurikar said the company is confident that “interventions and investments” now underway will improve near-term performance, pointing to examples where P&G has already accelerated results through insight-driven innovation and sharper execution.
Jejurikar highlighted Greater China baby care as an example of a “step change,” describing Pampers Prestige as incorporating “real silk ingredients” and positioning around softness and comfort in addition to dryness. He said the reframed premium line has driven double-digit organic sales growth in Greater China baby care over the past 18 months and increased share by nearly three points.
He also cited Mexico fabric enhancers, where Downy Intense uses a “high-intensity perfume” proposition aimed at a “gold standard smell of clean,” supported by in-store displays and messaging around “24/7 smelling like freshly washed hair.” Jejurikar said Downy achieved double-digit organic sales growth and more than two points of value share growth in Mexico.
Other areas where management said results have accelerated include Brazil hair care, U.S. Old Spice, and U.S. liquid laundry detergents.
Beyond near-term actions, Jejurikar described a longer-term “reinvention” of P&G, which he framed as the next phase of “constructive disruption.” He pointed to faster-changing consumer media habits, inflation pressure on household budgets, and evolving retail dynamics—including retailers becoming media platforms—as factors requiring the company to adapt more quickly.
Jejurikar outlined three opportunity areas tied to data, technology, and capability building:
- Deeper consumer insight and faster innovation: leveraging a growing flow of consumer data and technologies such as AI-enabled molecular discovery.
- Brand building in a fragmented media environment: integrating campaigns across connected TV, online video, social media, e-commerce, and stores using AI and GenAI tools.
- Closer integration with retail partners: using supply chain and merchandising capabilities, including “Supply Chain 3.0,” to respond more quickly to retail demand signals.
Jejurikar said P&G has already built key platforms—such as a “structured data lake stocked with petabytes of relevant data”—and the next step is “connect the dots” across the end-to-end consumer and retail system. When asked about timing, he said the company could see the “future evenly distributed” across businesses and regions in roughly 12 to 18 months, while acknowledging progress will not occur uniformly.
Guidance maintained as company expects stronger second half
Schulten said fiscal 2026 has had a challenging start amid “softer consumer markets, aggressive competition, and a dynamic geopolitical landscape,” but management expects stronger results in the second half and maintained full-year guidance ranges.
P&G reiterated expectations for:
- Organic sales growth: in line to +4%, including a 30 to 50 basis point headwind from product and market exits tied to restructuring.
- Core EPS growth: in line to +4% versus the prior year, with Schulten citing a range of $6.83 to $7.09 per share. He said commodity costs are expected to be roughly in line with the prior year and foreign exchange is expected to be an after-tax tailwind of about $200 million.
- Adjusted free cash flow productivity: 85% to 90% for the year, including higher capital spending to add capacity in several categories and cash restructuring costs.
Schulten also said the outlook assumes approximately $500 million before tax of higher costs from tariffs. Below the operating line, management expects modestly higher interest expense and a core effective tax rate of 20% to 21% for fiscal 2026, which Schulten said represents a combined $250 million after-tax headwind to earnings growth.
For shareholder returns, P&G expects to pay about $10 billion in dividends and repurchase about $5 billion in common stock, for approximately $15 billion returned in fiscal 2026.
U.S. focus: improving execution, value, and share momentum
Management repeatedly returned to the U.S. as the key near-term swing factor. Schulten said confidence in acceleration is supported by underlying strength outside the U.S., while U.S. performance is expected to improve as base-period inventory headwinds ease and as the company deploys the same “playbook” used earlier in other regions.
Executives pointed to several U.S.-relevant initiatives, including the Tide liquid upgrade (“Tide Boosted”) now in full distribution as of December, Olay packaging and campaign updates, baby care innovations in phases, and the planned launch of Tide evo in the back half of the year.
When asked about underlying demand, Schulten said usage volume growth has been slow—“honestly flat” in the front half in the U.S. and Europe—and re-accelerating household penetration and user growth is a major focus. Jejurikar said the company expects the future to be “a lot more about user growth as the foundation” after a period in which category growth was more price-driven during inflation.
Schulten said the company’s base expectation is around 2% value growth for U.S. category growth in the back half. He added he would not expect significant inventory build in the second half and suggested a slight inventory headwind may be reasonable as retailers continue to pursue efficiencies.
On market share, Schulten said the company’s objective is to leave the year with share growth in the U.S. and globally, but he described share improvement as dependent on execution and competitive conditions. Jejurikar said P&G is focused on strengthening propositions—often without changing price—to make value more tangible to consumers, while continuing to use a portfolio approach across price tiers in categories such as baby care and laundry.
About Procter & Gamble (NYSE:PG)
Procter & Gamble (NYSE: PG) is a multinational consumer goods company headquartered in Cincinnati, Ohio. Founded in 1837 by William Procter and James Gamble, P&G has grown into one of the world’s largest producers of branded consumer packaged goods. The company focuses on developing, manufacturing and marketing a broad portfolio of household and personal care products sold to consumers and retailers worldwide.
P&G’s product offering spans several core business categories, including Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care.
