Procter & Gamble Stock

Good morning, and welcome to Procter & 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&G's most recent 10-K, 10-Q and 8-K 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 & 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 & 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 Schulten.

Good morning, everyone. Joining me on the call today are Gary Coombe and John Chevalier, our Senior Vice President of Investor Relations. I'll start with an overview of results for the first quarter of fiscal '27 and discuss the progress we are making against our near-term priorities and longer-term transformation efforts. I close with guidance for fiscal and then we will take your questions. We are pleased with the continued acceleration in top line results in our first quarter of fiscal year '27.

Bottom line results reflect the strength of the top line progress and productivity to offset the higher costs from raw materials, energy and increasing freight costs, primarily in North America. We expect these headwinds to increase in the next few quarters. Taken together, we remain on track to deliver within our guidance ranges for the fiscal year. Before I share the detailed results, you may have noticed in the press release, beginning this fiscal year, we will report sales growth to 1 decimal place at both the company and the sector level and with that, organic sales increased 4.0% versus the prior year.

We see sequential progress from our targeted interventions at the category and country level. By delivering superiority, we are winning with consumers and driving improved consumption semester over semester into this first quarter. Volume increased 2.4 points Pricing was up 0.4 points and mix was up over 1 point for the quarter, a solid balance across top line drivers and with the majority of growth driven by volume.

We delivered broad-based growth across the business with each of our 10 product categories growing organic sales. Fabric Care, Home Care, Baby Care, Hair Care, Skin and Personal Care and Grooming grew mid-singles. Family Care, Feminine Care, Oral Care and Personal Health Care each grew low single digits. Growth was also broad-based geographically, with each of our 6 regions growing organic sales. Focused markets were up 4%. Organic sales in North America grew 3% and the U.S. market also was up 3%.

And in North America, volume was up 3 points, driven by continued improvement in consumption across categories. We now have over 70% of our top U.S. customers holding or growing share, up from less than 10% in the first half of fiscal '26 and 50% in the second half of last fiscal year. Europe region was up 4% and with all key markets growing, led by high single-digit growth in the U.K.

Greater China organic sales grew 8%, continued strong growth in what remains a challenging consumer environment. Temps and SKI led the growth with SKI up 12% and Pampers up close to 50%, benefiting from near-term competitive dynamics. Enterprise markets in aggregate grew 5% for the quarter. Note, the makeup of enterprise markets has changed this fiscal year, now made up of Latin America, Asia Pacific Enterprise and our newly combined IMETA or India, Middle East, Turkey and Africa region. This change emphasizes the growth opportunity across emerging markets and creates a One Europe region structure to simplify the Europe operating framework.

Latin America organic sales grew 4%, led by Mexico, up double digits and Brazil up low single digits. Organic sales in the IMETA region grew 8%. APAC Enterprise was up 2% and still impacted by our portfolio restructuring impacts. Global aggregate market share is flat versus prior year across all time periods. 9 of our top 50 category country combinations held or grew share fiscal year-to-date, up from 25% in the second half of last fiscal year, also a reflection of the progress being made across the portfolio.

On the bottom line, core earnings per share were $2, up 1 point versus prior year. On a currency-neutral basis, core EPS was in line versus prior year. Core gross margin was down 150 basis points, and core operating margin was down 80 basis points versus prior year. Strong productivity improvement of 250 basis points was offset by commodity and freight costs in addition to demand creation investments. Currency-neutral core operating margin was down 90 basis points. Free cash flow productivity was 93%. We returned EUR 3.9 billion of cash to share owners in this quarter, EUR 2.6 billion in dividends and $1.3 billion in share repurchase. In summary, this was a strong start to the year, positive sales and share trends across markets Consistent with the semester to semester progress we expected behind the interventions being executed across categories, countries and customers.

As we move forward, the fundamental elements of our strategy remain unchanged. We are in the right categories to deliver against our growth goals. These categories are our core competency. We know how to grow these categories and win with superior innovation, better execution and clear communication. We know how to create value in these categories and we have a proven track record to fund growth via productivity.

We have an organization focused on delighting consumers and winning with our retail partners. What we are changing is nearly every part of our execution framework to identify superiority gaps even faster and respond quickly to change needed to product, package, communication, retail execution or value to ignite user growth of our brands. The adjustments we have made are starting to take hold. Let me share a few examples. U.S. Pantene abundant and strong, started with a deep insight and consumer connection.

More than 50% of women will experience noticeable hair loss in their lifetime. In the United States alone, female pattern hair loss affects approximately 30 million individuals. [ Tantan's ] abundant and strong technology grew from research linking scalp oxidative stress to poor scalp conditions and hair quality. This led to the development of Content bundle and strong collection with a pro vitamin complex proprietary formulation, Consumers are delighted with improvements in hair strength and less shedding with the light for fragrance and a tingling sensorial experience in the shower -- is delivering mid-single-digit sales growth in the U.S. and is growing share.

AMORE Plus Prestige has been a significant growth driver of our China Baby Care business with mid-teen growth consistently over the past 8 quarters. So we took the same consumer insight and brought the very best diaper available to the U.S. with the AMORE launch in the second half of last fiscal year. AMORE is our most advanced and premium diaper, combining proprietary skin health technologies and premium materials for superior protection and cashmere like skin comfort built on an engaging social-first brand building model and inspired by insights that fewer babies in each household means parents spend more per baby.

AMORE has been 1 of the most successful launches across multiple retailers, contributing to Pampers share growth and projected to exceed $100 million in sales in year 1. In the Gulf cluster, UAE, Oman, Qatar, Kuwait and Bahrain. The percentage of sales growing household penetration increased fourfold from 15% in fiscal '25 to over 60% in fiscal '26 despite the market volatility. Ferry Dish delivered double-digit growth in fiscal '26 into the first quarter of fiscal '27 after the team transformed how consumers engaged with Ferry.

They created a consumer-led user-generated content campaign that brought to life the toughest dishwashing moments, consumers face generating a record-breaking engagement at 20x our branded content benchmark. As a result, Ferry reclaimed its position as the market's leading equity brand and grew the category by 4 points and P&G's share by 2 points. The other examples we've discussed recently also continued to deliver strong results, including U.S. tight boosted and EVO Mexico fabric enhancers, Brazil Hair Care and U.S. Personal Care.

While we continue to execute our plans in the near term to return to sustainable growth, we're also making progress on a long-term reinvention of P&G capabilities to become what we call the CPG company of the future. We are adapting our capability, systems and organization structure to take advantage of significant growth opportunities we see across our markets. and overcome the external landscape changes impacting our industry. We are leveraging the deepest and most extensive consumer understanding in the industry driven by learning and data for millions of consumers.

This understanding leads to insights and signals that drive faster and better innovations, grounded in industry-leading research, development, modeling and testing capabilities. We have the strongest ability to authentically engage consumers building on our trusted and loved brands. We have widespread access to consumer path to purchase via strong retailer partnerships, and our supply chain is a differentiator where a resilient agile supply chain is critical to respond to global volatility and cost pressures. We have the highest output productivity program in the industry.

Winning with consumers is what matters and the companies that can best respond to the changing environment and leverage the fast evolving technologies and capabilities to follow the consumer closely are the ones that will truly lead the industry. We intend this to be P&G moving to guidance. As you saw in our press release this morning, we are maintaining our fiscal 2017 guidance ranges across organic sales, core EPS and free cash flow productivity.

We expect the environment around us to remain volatile and challenging from cost to currencies to consumer competitor retailer and geopolitical dynamics. Our all-in GAAP outlook now includes the Thorn business, which closed in early October. We continue to expect sales growth of 1% to 3%. We started the year above this range, but we expect growth to be volatile quarter-to-quarter due to base periods dynamics. Also, we'll be closely watching consumer demand as high fuel and energy costs persist into the fall and winter. As a reminder, our top line guidance includes roughly 30 to 50 basis points headwinds and from product and market exits that are part of our restructuring work. Our bottom line guidance is for core EPS growth of 0% to 3% versus prior year, and this equates to a range of EUR 689 million to $7.11 per share.

This outlook includes a cost headwind of approximately $1.4 billion after tax, driven by higher raw material, energy and transportation costs and other premiums resulting primarily from the conflict in the Middle East. This estimate assumes an effective Brent crude oil price of $100 a barrel. Due to the duration of higher oil prices, we now expect materially higher cost headwinds in Q2 and the second half of fiscal '27. We expect the foreign exchange headwind of approximately $50 million after tax. We also expect approximately $300 million of higher net interest expense after tax, around EUR 150 million higher due to the debt issuance related to recent M&A activity. These impacts start in the second quarter.

Finally, we still forecast $150 million after tax of lower nonoperating income. We now expect that our core effective tax rate will be in the range of 20% to 21%. We combined input costs, foreign exchange items below the operating line will be roughly $1.9 billion after-tax headwind of earnings in fiscal '27 or $0.79 per share 11% of fiscal '26 core EPS versus the $0.56 per share or 8% impact shared in July earnings call. We expect capital spending will be between 4.5% to 5.5% of sales. We are forecasting free cash flow productivity at 85% to 90% for the year. We expect to pay over $10 billion in dividends and to repurchase approximately $5 billion of common stock, combined a plan to return $15 billion of cash to shareowners in fiscal '20.

The guidance range reflects the continued acceleration towards our long-term algorithm. It is a balanced outlook between top line and bottom line despite significant cost pressures and reflecting current market realities for consumer demand. We will maintain strong investment in the business balanced by a strong productivity program with an intent to improve results semester by semester and year-by-year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, tariffs, major supply chain disruptions or store closures are not anticipated within the guidance range.

In summary, challenging markets, like the ones we compete in today are an opportunity for P&G to lead. We have the brands, the capability, and most importantly, the people required to win. We are confident in the short-term progress we are making behind deliberate plans to drive user growth of our brands and executional excellence across each category and country combination. It won't be a straight line, especially quarter-to-quarter and volatility will remain a near to midterm reality, but we are building momentum with consumers and customers, and we are excited about the long-term opportunities ahead. With that, we'll be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Lauren Lieberman of Barclays.

Great. We had to go back a ways in our model to find the last time that P&G posted volumes up more than 2% and organic at 4%. But when we found that time, which was back in in optically, margins are up a lot more this time around. And I was just curious if you could talk about if that's something specific to the quarter, mix dynamic, comp dynamics, or if something has changed structurally so that you're going to see much greater operating leverage at this level of volume growth?.

Lauren, thanks for the question. I think it's a combination of quarter specifics and structurals. Let me start with the structural maybe. When we see growth around 4% and volume growth at or above 2%. We've always seen leverage. I think that leverage structurally is increasing. Number one, on the cost of goods side, the level of productivity we're generating is increasing and the amount of automation and digitization is helping us as we talked for many times as we execute supply chain 3.0.

So there's operating leverage on the COGS side. The restructuring program, including the 15% headcount reduction in nonmanufacturing headcount is starting to impact the quarter this fiscal year. Recall, we started the execution last fiscal year, first semester, so we're starting to get impact flowing through the P&L, and that is helping our SG&A leverage. The third structural component as we transform our brand-building efforts to include the revised consumer path to purchase and drive engagement at every 1 of those touch points.

We remain fully invested in the business, but we find ways to make that spending work harder for us. So that's driving top line growth at flat spending and that is giving the third structural element of the leverage. I think what is more specific to the quarter is the fact that we've only seen partial flow-through of the commodity impact in the first quarter. Again, the oil price and petro complex keeps increasing.

So we've outlooked at $100 a barrel, $1.4 billion of after-tax impact. That's 8% for the year of earnings headwind. In quarter 1, we only saw a 5% headwind year-over-year. So that's a little bit of a onetime that will be correcting itself as we get towards the ongoing oil price impact through the P&L. And for sure, if oil stays at the levels that we saw this morning, north of 110 that will continue to be an increasing headwind for the year.

The last point I'll give you is we had the second part of the EPA tariff refund in quarter 1 of about $90 million. And so those are the 2 ones that are more specific to the quarter. I think most encouraging for us for the first 3, we truly drive leverage because we're improving the structural leverage within the P&L.

Your next question will come from the line of Steve Powers of Deutsche Bank.

Great. Good morning. Thank you very much. Andre, obviously, a very strong start to the year. I wanted to ask around the sustainability of the momentum that we've seen start to emerge from 2 perspectives. One is just very, very tactically in the short term as we think about this first semester in the December quarter, were there any shipment timing, competitive factors or other dynamics that may have materially flattered 1Q with the expense of 2Q in your mind? Just want to get underneath that, if I could. And then stepping back more generally, as you look at the underlying performance across your 10 categories, I think you said growth across all 10 where do you feel sustainable momentum is maybe best established versus where you feel there's still more work to do within those categories.

In summary, what I'd tell you is Q1 was a great start. Every region growing every category growing. And most encouragingly, if we look at the last few weeks, share is trending up consistently. So that gives me confidence. I'd still tell you we expect half 1 to be at about 3% organic sales growth. That's what we want to deliver that sequential acceleration semester by semester. You recall, have 1 of last year, 1 half 2. And we think the right estimate and the right approach for cadence here is 3% in the first half and then acceleration into the second half.

As you know, there's always a little bit of wobble between merge events of when they ship. That's been a little bit of an effect that we saw in Europe, for example. And so there might be a point shifting from 1 quarter to the other. But I think the overarching headline that I want you to take away is 3% for half 1 and slight acceleration in half 2, which means consistent value and volume share growth throughout the next quarters. I'm excited, quite frankly, about the progress we are making across each of the categories. I mean you look at Fabric and Home Care growing strongly, with North America now growing at 5% in Fabric Care. We're growing across laundry and we're growing across fabric enhancers and there's tons of runway.

Baby Care consistently growing at a global level. Even if you exclude the China acceleration, we have very strong results in baby, Femcare doing great adult incontinence, improving. Beauty Care at 5%, very strong and across all 3 segments within Beauty Care. So I could continue. But basically, you're getting the point. Every category is showing great progress and momentum.

I'll tell you, we're about 60% down the path of fixing each category country combination. We're running at 29 out of 50 top category country combinations growing or holding share. We need to conquer the rest, and that's the task ahead. I'll tell you, our beauty team is in content with 5% of growth. There's way more opportunity in that space that we need to capture. Family Care is not yet back to share growth. The interventions we are making across price point corrections in the club channel, the launch of Charmin and Bounty Essentials, all of those are pushing momentum in the right direction, but we haven't yet seen the share turn.

Our health care business has been impacted by a slow cold cut season over the last 2 years. We've now seen in the most recent couple of weeks in acceleration, if that holds, there's more growth to be had there. Don't get too excited. I come back to where I started, 3% in the front half, hopefully, a bit of acceleration in the back half consistent share growth quarter-over-quarter.

Yours' next question will come from the line of Dara Mohsenianof Morgan Stanley.

So Andre, you're expecting a pronounced level of commodity pressure this fiscal year of $1.4 billion and up another $100 million -- $400 million versus last quarter. Unfortunately, that's also looking more sustainable than we hoped originally after the run up earlier this year. So just in light of how severe the commodity backdrop looks, how are you thinking about pricing as an offsetting lever to that cost pressure.

And the context of the question is still seemingly difficult industry backdrop in theory with a weak developed market consumer, promotional competitive environment, even some retailer pushbacks. So just how do you weigh all those competing forces as you think about pricing in the remainder of the year and also the internal progress that you're making from a top line perspective that you just mentioned in response to Steve's question..

Dara. Yes, I think that's an important place to pause for a moment. Obviously, EUR 1.4 billion, 8% headwind is significant. And again, if we see the most recent development, this might increase for the year. We will deal with this the same way we always do. And I do feel that the team is well equipped to handle even the higher level of cost pressure. But it will take 3 things. It will take record productivity levels which we have identified. The project list is complete and sufficient and it's being executed across every 1 of our businesses.

So I feel very good about a sustained record level of productivity output that will help us overcome a good portion of this cost pressure while we maintain investment in the business. The second component is pricing with innovation. And honestly, I think the momentum we are starting to generate gives us confidence to price with innovation because we gain the balance between pricing and product improvements, patch improvements, claims, communication and retail execution right.

But it's also a very fragile balance that we want to make sure we don't compromise on. So we will price and we will price with innovation, not jeopardizing the top line momentum. The third component here is time. We will take the right amount of time to recover the dollar impact of the commodity hurt. And time will be largely driven by what we described in the second point, making sure we maintain the right balance of price, product, package, communication and in-store execution.

We have worked -- the team has worked so hard over the last 9 months category by category, customer by customer, country by country to improve this balance. So I think we're probably closer to this dynamic than we've been in a long time. I feel good about the plans that I see. The last point I'll leave you with at this level of commodity pressure, not a projection just the fact the industry generally is pricing up because there is no way to recover this level of commodity pressure PAUSE without pricing.

That's a fact of the past. It doesn't have to hold true for the future. So I can just only give you my perspective on the 3 welcome.

Your next question will come from the line of Robert Ottenstein of Evercore ISI.

Great. And congratulations on the strong start. From everything we're seeing, clearly, a lot of the U.S. categories are improving, you're regaining share. But as you know, it's a very dynamic environment. So I was wondering if you could talk a little bit about what you're seeing or expecting in terms of competitor reactions? And then also, how are you dealing with ongoing affordability issues in terms of dealing with competitors as well as maintaining the market share momentum.

Thanks for the question, Robert. I think the competitive environment has been peers over the last few quarters. And I think that has led us to make adjustments where we needed to make adjustments -- we've talked about our Baby Care business where we needed to get value competitive with the new competitive reality. And I think we've done that, and I feel very good about being balanced. I think we got to a point where we reacted to be competitive on those hygiene factors, I would call them. And then add superiority in terms of product performance, communication, better retail execution to drive category growth and our growth within that. So I still see the same formula playing out growth going forward is not about taking share.

Growth going forward is about growing our categories. And I'm encouraged to see that in North America, the category is now approaching 3% value growth. In many places, innovation that we're launching with pricing is driving true category growth. You heard our examples in the prepared remarks on user growth, for example, in the Middle East, that topic of consistent user growth or penetration growth in our categories is relevant and being pushed around the world.

So I view the competitive dynamic as unchanged and yes, intense. I view our role within that as growing categories with innovation, better offerings for consumers. Affordability within that is that careful balance that we were describing in every pricing decision. And I think also here, we are executing what we have designed for we have a portfolio of brands that spans across different value tiers and we have a portfolio of tech sizes and executions within each brand that go from very affordable value offering to high tax size premium offerings depending on the cohort depending on the channel.

And I think we're continuously getting sharper in the execution. My favorite example was the Sharman and Bounty Essentials execution. When we came out of COVID, we deprioritized that part of the business simply because we didn't have the capacity. And when we went into this period, we said we need to reignite user growth in that part of the value segment within Family Care. The team redesigned the proposition, adjusted the value, redesigned the packaging and the proposition is working extremely well, growing significant users.

At the same time, we're innovating at the higher end with a Sharminstrong innovation on wider sheets, which is very intuitive and very consumer relevant. We'll continue to do both. And I think we've made the investments over the last 9 months to get us into the right starting place, and now it's pushing forward from here with the balanced portfolio execution and again, carefully watching value equation at each part of our portfolio.

Your next question will come from the line of Bonnie Herzog of Goldman Sachs.

All right. I had a question on Baby Care. It's encouraging to see the sequential acceleration in growth this quarter. And then you highlighted North America and China as key drivers. So I guess against the backdrop of increased promo intensity in the U.S. and then disruption at 1 of your key competitors in China, what has been your strategy in Baby Care? And how sustainable do you think the recent improvements are.

Thanks, Bonnie. Global Baby Care is up. Top line is growing 5%, shares growing 80 bps. Baby Care in the U.S. is up 3% on sales volume and up both in volume share and value share. We have not yet addressed many parts of the portfolio. We have just launched the mid-tier upgrade, which will not be the last to get to superiority. We have not yet fixed our wipes business, and we have not yet launched the innovation that we want to launch on Swaddlers and some other parts of the premium portfolio.

We have fixed what I would call the hygiene factors, value versus close competition. And we are building on the trends that we see as the future growth engine for this category, which is less babies mean more spending per baby. And that holds true in every part of the world, and it holds true in the U.S., it holds true in China. And when we launch truly superior propositions that feed into what the premium consumer is looking for, superior dryness, softness, premium materials safety on the highest level, ingredient safety.

We win, and that's why a more ores going to $100 million brand in a few quarters. And I think that will be the success model for the future. China has been doing this now for 8 quarters. The mid-tier is effectively not existent in China anymore. And even when I take out the most recent competitive issue in China, the business would have consistently grown in high teens and low 20s. So I do believe that the model is very sustainable that the strategy of being superior and trading consumers up as we are doing on tape diapers.

It's the same model we can apply on pants, the same model you can apply on wipes. And I do think that is a solid growth path for the business. And I'm excited about the innovation that's coming, and I think that does exactly that.

Your next question will come from Filippo Falorni of Citi.

I wanted to ask about the U.S. business, Andre. You mentioned 70% of top U.S. customers holding or growing share that's a significant improvement, as you called out versus last year. Where do you think it's coming mainly from like -- and how much more do you have to realize in the balance of the year within your guidance, what are you assuming in terms of improvement in share.

And then in terms of the gap relative to consumption, last year, you had a lot of volatility, a lot of quarters where shipments were below consumption. This quarter, it seems to have closed quite more. How should we think about that gap from an inventory gross to net sales levels as we think about the balance of the year?

Filippo, thanks for the question. I think the answer to the first question is more, we are where we said we would be. We wanted to be -- at the end of the year, we want to be north of 80% end of the calendar year that is. And I think we're -- the North American team is working towards that objective. The recipe doesn't change where we don't grow users, we very quickly go into diagnosis mode, and we're very quickly in a combination of the customer, the customer team on the P&G side, the category team develop an action plan.

And we fund that action plan when it cannot be funded within the category commitments. And that cycle time is only improving. We're having these conversations in a structural way every quarter, but we're having them at how almost every week. So I feel good about the urgency. I feel very good about the clarity of being consumer-led in those conversations because the secret here is not to try to buy more share. The secret here is to tailor the adjustments to superiority to the specific needs of that retailer shopper, be it price points, be it claims, be it part of the portfolio that we present at the retailer.

That will continue. Again, our objective that we stated before is 80% by the end of the calendar year. Inventory dynamics, you said it, the base period is going to be the source of volatility here. As you know, we had a significant inventory shift in quarter 3 in the U.S. that will impact this quarter 3 as well. But we'll have to see how the flow of promotion events, how the flow of innovation evolves.

I feel confident in the semester guidance that we just gave you, 3% organic sales in the front, a little bit more in the back half. Quarter-by-quarter, this might shift a little bit because of those dynamics. But I feel confident in 3 and 3 plus front half, back half.

Your next question will come from the line of Chris Carey of Wells Fargo Securities.

Question. Andre, I just wanted to clarify that last statement and then I have a follow-up. Just regarding the fiscal Q2 deceleration despite the easier compare. We need to think about a roughly 1-point shift in Europe and then it sounds like you're just more broadly assessing strength of consumer as we get into the end of the calendar year, given the higher inflation backdrop, is that really the premise of just embedding that deceleration for now into fiscal Q2?

And then just from a category perspective, I think this is the best Fabric Care top line growth we've seen in a few years. Can you just give us a bit of context on category growth rates globally and perhaps some of the market share dynamics that are underway, most specifically in the U.S. and Europe, given some of the innovation and competitive activity you've seen in those regions?

Thanks, Chris. I think you answered your first part of the question. I think it's exactly that. Look, gas prices are continuing to come up. midterms and related outcomes in the Middle East are still a source of significant volatility going into quarter 2 base period dynamics, inventory shifts. So you put it all together, we don't want to get ahead of ourselves. We think 3% is a healthy growth rate within this context. And we know there's volatility quarter-over-quarter. So we want to be realistic in assessing the strength and straight line of the underlying momentum. The strength is real, but it won't be a straight line. Fabric Care, specifically, you're right. In the U.S.

Fabric Care business is growing at 4%. So strong results. In Europe, we're growing 5%, and we're growing share in both regions. North America share -- value shares up 70 bps, Europe value share is up 60 bps over the last 3 months. and also the 2 largest markets in Fabric here. Fabric enhancers are growing, and the laundry part of the business is growing. So it's consistent across the portfolio. And if you look at what is driving it, the innovation, I think the improvements we're making in delivering superiority EVO, the Tide liquid, boosted innovation -- we innovated on gain, both on liquid and on unit dose, and that's driving growth.

We have innovation on fabric enhancers, the Lux edition, that's driving growth. So I think, again, the return to a consumer-centric assessment of superiority, are we growing users. If we're not growing users, what are the right interventions have led the fabric teams both in Europe and in North America to make the right calls and I think those calls are playing out in growth. And I feel good about the type of growth we're generating slightly ahead of market.

But every one of these initiatives is growing the market, given the premium of game, the premium of Tide, the premium of EVO, it's actually expanding the category by delighting the consumer at each value tier more than anybody else.

Your next question will come from the line of Nik Modi of RBC Capital Markets.

One. Andre, maybe you can just peel back the onion on China. There's been a lot of macro volatility, a lot of commentary that the macro backdrop remains poor. I think you made the same comments. But the business is doing really well. So I just wanted to kind of understand exactly like what's going on? Is this a beauty specific thing? Any context would be helpful.

Sure. Thanks for the question, Nik. Let me start by stepping back for a second. The China business has been strong for 6 consecutive quarters now. Why? Because the China team coming out of COVID, I think we're the first 1 to realize that the structures in the market have changed from strong consumer demand to market decline, -- all parts of the business were shifting towards digital and social, and retailer interactions were very different, and the traditional distributor system didn't really work.

So they adjusted every part of that equation completely reinvented the distributor network, built a social-first marketing machine, built an execution machine that could deal with the social selling channels and online retailers and, at the same time, strengthen brick-and-mortar execution and strengthened the innovation machine. All of that together, I think, has led to a well-equipped team that is executing brilliantly, and that's been driving 6 consecutive quarters of sales growth and now delivering 8% in quarter 1 with 5% volume growth.

In terms of categories, let me get the obvious 1 of the way. Baby Care has been consistently growing at around 20%. In quarter 1, now it's growing almost 50%. And that's obviously driven by the competitive issue that existed in the market, which is driving a ton of trial for Pampers. And I think the team is doing brilliantly in keeping up with the trial machine and then ensuring that we can retain those users over time. But yes, we've benefited somewhat about 3 points. So if you take that out, that China would still be growing at the 5% that it has been growing, so mid-single digits.

The rest of the portfolio is also doing well. SK-II growing 13%, fabric up 5%, Samca up 9, Hair care is up but we also still have significant opportunities. So our a business in China, for example, is in the middle of reinvention. It's not growing. We need to get it back to growth, similar to North America.

Those interventions are underway. So we're not firing on all cylinders yet. But we're very happy with the China structural progress, and I have very high levels of confidence that we will fix the remainder of the portfolio and see even more sustained growth in China in a difficult market because market growth is still below 100 in our channels and categories. And quite frankly, consumer sentiment is not improving. So a big congratulations to the China team for winning in a tough environment.

Your next question will come from Peter Galbo of Bank of America.

Andre, I know we've covered a lot on the call, but maybe just wanted to follow up back on Dara's earlier question, particularly around the cost environment, just given that you did raise the input cost outlook I just wanted to assess, I mean, based on your commentary, clearly, we're tracking towards, I think, the higher end of organic sales range based on the outlook you provided.

But just like what's your confidence level still in at least achieving the midpoint range on EPS just given the elevated cost environment? It seems like you were still relatively confident in it, but I just wanted to clarify that.

Thanks, Peter. Sorry, I don't want to evade your question, but the confidence I have is that we'll be in the range. We're in the range Hey, it's 1 quarter. So give us a bit of time to solidify the top line momentum. Give us a bit of time to get our hands around the commodity impact, pricing plans, productivity. And that's why we're reiterating the range. So I'm confident in the range but we'll need time to figure out where that range will end up.

Your next question will come from the line of Peter Grom of UBS.

So I wanted to just ask a follow-up on the inflation. So Andre, you touched on the fact that it was a 5% headwind in 1Q, but expect it to be an 8% headwind for the year. Can you unpack how you see that phasing based on where things stand today? And then you mentioned the team is well equipped to handle this higher inflation. But as we think about productivity and pricing -- are there any quarters where you would expect to see a greater gap between those offsets relative to the inflation that could result in more outsized profit pressure.

Yes. Thanks for the question, Peter. Let me carefully circle this one. So the -- yes, quarter 1, obviously, COGS reflect a lower input cost right, with inventory holding and those effects. So that's why you see 5%. Quarter 2 has been produced at $100 a barrel. So when I look at a reflecting $100 a barrel, my assumption of IOU would be that flows through in quarter 2. Oil at 113 means more is coming in Q3 and Q4. For Q3 and Q4, we have more time to react. For Q2, we have little, so I'll leave it at that.

Your next question will come from the line of Andrea Teixeira of JPMorgan.

And Andre, you spoke about like the pricing phasing and the costs. So should we assume, with the comments you just made now that you be negotiating with retailers at some point given this outlook and given that you've been helping in a way of just 40 basis points of pricing, realization. Is that something that we should be thinking as you progress the quarter? And then thinking about how you gave this guidance and reiterated this guidance. I'm assuming in the guidance, you did not include the pricing that you alluded to that potentially being negotiated.

So I would just want to double check on that. And then in terms of the phasing of productivity, you had this 250 basis point improvement in the operating margin. How we should be thinking of the phasing as we go through the balance of the year?

Andrea, look, I really won't be able to tell you more about future pricing. Obviously, I can't announce pricing, and I won't announce pricing in any way, shape or form. The only thing I'll leave you with is we price with innovation. Innovation is generally timed with modular resets. So you kind of get the drift here. On productivity, we've delivered about EUR 500 million, EUR 550 million BT productivity in Q1. And we delivered EUR 2.8 billion last year.

So again, I think I would expect a similar run-up in terms of productivity generally. We get heavier on productivity in the back half. And I think you should expect the same. I don't see that pattern changing.

Your next question will come from the line of Kevin Grundy of BNP Paribas.

Congrats on the strong results. Andre, can we zoom out, I guess, a bit? And maybe just talk about industry growth. which despite all the discussion about pressure on the consumer, it seems like the consumer is still fairly resilient and the category growth really hasn't changed dramatically at this point. So maybe you can just sort of comment -- take us around sort of key geographies and comment broadly on industry growth.

And just reaffirm my understanding that really in key geographies were relatively little changed relative to your fiscal -- or fiscal results, excuse me, just a few months ago. So thank you for that.

Thanks Kevin. You're right. In aggregate, the consumer is resilient -- we see 2% to 3% -- 2.5% to 3% value growth across our categories globally, and that is unchanged, maybe a little bit better than what we saw and reported last quarter. We see improvements in the U.S. So we talked about 2% last quarter. We're running up to 3% now in terms of value growth. We'd like to think that we are part of that acceleration as we launch innovation, and we drive growth in our more premium lineup. We see enterprise markets continuing to grow strongly in the 4% to 6% range, maybe accelerating to 6 to 7 million in the most recent reading, so those consumers are holding up well.

And Europe continues to be stable but muted at about 1%. So you put it all together, there's a little bit of positivity here, 1 in the U.S., upwards to 3%. And I think enterprise markets represent a huge opportunity for us. And that's why we are talking about user growth and the progress we're making on user growth in the Middle East. Our user growth in India is actually fantastic. So we're really encouraged about both the market conditions but also our ability to drive further market expansion and consumer development penetration here in those regions.

Your next question will come from the line of Kaumil Gajrawala of Jefferies.

Andre, everybody I'm still struggling, I guess, to reconcile your commentary versus your guidance. It sounds like interventions are working. It sounds like shares are moving in the right direction. It sounds like accelerations across a bunch of these. And your comparison, I think, in every division, with the exception of health care gets easier, not harder.

And so other than I know you had mentioned macro and that sort of thing, are there any real business reasons. Do you expect such a deceleration into the second quarter versus the first quarter, given everything that you've said about how the initiatives are working across the different divisions. The consumer is the key variable here. Look, we're looking at fuel prices, gas prices around the world that are creating turmoil. You look at France, -- you look at the conversation in the U.S.

So there's clearly pressure on the consumer in the short term. And so far, the consumer has held up. We don't know if that's going to continue. There's a bull case to be made, but there's a bear case to be made here. So we want to be straight in the middle. That's why we come back to 3%. There are some pre-shipment to merge events, specifically in Europe that I mentioned.

That is part of the balance between Q1 and Q2. And all we want to avoid if you're getting ahead of yourselves in terms of straight-line projections. Yes, I think we feel very good about the elements we control, we feel very good about the progress we're making in our brands. And if the consumer holds up and there's no other disruptions, could we see improvement on the top line?

Yes, we could. But there's too many moving pieces right now. PAUSE to confidently tell you that, that's going to happen in quarter 2.

Your next question will come from the line of Olivia Tong with Raymond James.

Andre, clearly, a nice start to the year. So just building on some of your earlier comments, can you talk about how you expect demand to evolve on a category level from here? And how much of that second half potential acceleration you're planning for is based on category improvement versus your own initiatives? And I realize that those are obviously very much related. But we talked about some of the interventions in tissue towel, earlier. What about other categories? And your thoughts on what you've learned from the interventions you've already done and the competitive response to that and how that might influence the next phase of execution. And thanks for the extra decimal on revenue growth.

Thanks, Olivia. Look, I'll say high level here. Category-wise, we continue to expect 2.5% to 3% value growth in our categories. We will make progress on those categories where we're not yet fully recovered. And clearly, our objective is to get to share growth in every 1 of our global categories. We clearly expect family care to return to share growth in the second half. We are working hard to accelerate beauty even further, and we hope for a great cold cost season, if I can say it that way. So those are the 3 most acceleration prone categories in the back half.

On the rest of them, I think steady as she goes, Baby Care has to retain the trial we're generating in China and making progress with innovation in the second half. I feel good about that. Same for me. And we have a very robust plan on Fabric Care to maintain. And I can only repeat 1 more time, it won't be a straight line. Competitive environment was mentioned. That's very valid, consumer volatility very valid, supply chain disruption, cost, pricing, very valid. So the things we control are all in control.

There are many things that impact our short-term results that we don't fully control. That's why we maintain the range.

Your next question will come from the line of Robert Moskow of TD Securities.

Andre, you've talked about the strategy and the rationale for buying Thorne a couple of months ago. But I wanted to clarify a little bit more. Thorne has some aggressive growth objectives over the next couple of years. To what extent does Procter help enable that, I think the plan is to have it run separate from Procter's operations. And then in addition to that?

What are you doing to make sure you retain the people who made Thorne so successful over the last couple of years?

Thank you, Robert. I will only give you the headlines. I think this will be a perfect conversation to have with Paul at our Investor Day, and he's certainly more equipped to talk about it than I am. But at the core, job #1 is to retain what made Thorn a successful brand within the VMS space.

And Paul is 100% focused on that. The people who built this business are fantastic and fantastically equipped to continue to do so. And we certainly have every intent to retain their knowledge and their capabilities.

Where do we add? I think we can add in international expansion because this brand and the benefit space is relevant not only in the U.S. but way beyond the U.S. and Thorne has proven that by shipping and launching in parts of the world. We can help by scaling Thorne once ready across different categories. At the time is not now, the time is later.

And I think we can help where needed by the team in terms of capabilities, supply chain capabilities, ingredient qualification and marketing scale and marketing support. I think the principle Paul will bring you towards is we let the Thorn team lead us. So this is not P&G integrating Thorn. This is thorn leveraging P&G to maintain what is at its core and leverage where we can complement.

Your next question will come from the line of Edward Lewis of Rothschild & Co Redburn.

Just 1 for me, Andre. Just wondering, you made quite a few changes in terms of the international or I think, more developing market category country combinations over the past 12 months. You're clearly sounding more positive about the outlook in those markets relative -- in your commentary just now. Just wondering how much have they helped the changes you made? How much did they help that international performance and your international outlook?

Thanks, Ed. I think it's still early. I wouldn't attribute the -- I wouldn't attribute the majority of the progress in enterprise markets. So the structure change only went into fly -- but I do attribute a lot to the intentionality that Charles and others and our sector CEOs put on growth in those enterprise markets. Putting India into a separate cluster from the rest of the Asia, Middle East, Africa region increases intentionality to grow. Combining Turkey into that cluster helps. And I think we will see even more potential as we focus on user growth in each of those clusters.

The second component clearly is Europe today is basically 1 big focus market. The retailer structures are similar, the go-to-market and consumer structures are similar. So simplifying the go-to-market approach in Europe was another key component here. Honestly, what gives me confidence is the leaders we have in each of those businesses, the commitment of the sector CEOs and, quite frankly, the fact that even with the restructuring impact that we're seeing in the current quarter, we're seeing mid-single-digit growth, which if you take the restructuring out would be even higher. So I think we're on the right trajectory here.

Your final question will come from the line of Michael Lavery of Piper Sandler.

But just 1 follow-up to your answer to, I think it was Peter's question about how just the second half you'd have more time to react to higher oil prices. You're obviously pushing restructuring and savings or productivity and savings already quite aggressively. You've been clear how you price with innovation. I guess maybe could you just elaborate a little bit on what levers you would focus on and push harder to offer some mitigation and maybe what expectations for mitigation might be baked into your outlook as well?

Everything we know is baked into the outlook. -- again, there's always a balance between commodity input costs and how hard you want to drive productivity within the year. There's always a way to pull forward things or to push out depending on whether it's needed or not needed. There's always time to adjust pricing with innovation, the ability to pull forward innovation or push it out. So those are the components that we'll manage again, all of the gives and takes are the reason we have the range.

So -- but more time basically allows us to shift productivity, shift pricing and innovation, and that's really the flexibility that we have in the second half -- and as you can imagine, within the current quarter, that flexibility is limited on those levers.

Okay. I want to thank you for your time. Again, we had a reasonably good start to the year. We are excited about the progress the teams are making around the world, which is consistent and grounded in the interventions that we wanted to make. They are showing signs of holding, sticking and delivering results. It's going to be a volatile right. So I just want to bring us all back to reality. One quarter makes no upper end of the guidance range for the year. We still have a lot of work to do, but we're excited about where we are.

We want to remind you quickly that Investor Day is on November 19. Shales and the broader executive team will be there and we can go much deeper into the long-term transformation that is happening at P&G to build what we call the CPG company of the future. We hope to see you there and welcome you at our global headquarters next month. Thank you for your time.

That concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

Good morning, everyone. To kick off the HPC portion of the day, we're so glad to welcome back P&G. We have the company's CFO, Andre Schulten with us. And of course, from Investor Relations, we have Keri Cowan who's going to be taking over as Head of Investor Relations early next year; and John Chevalier, who's going to be retiring, and I promised him and everyone else, there's no tears on this stage this year, so I'm going to keep it tight and just say, we've known each other a really a long time, and this isn't goodbye, and thank you for everything over so many years on behalf of everyone because everyone feels the same way.

Thank you.

Okay. See, very tight, very tight. Okay. So Andre, over the past 9 months, since Shailesh has been CEO, he's been really clear that P&G does not need a full reset of the integrated growth strategy, but it's more a matter of improving execution and that we start to see sales and market shares accelerating again in a 12- to 18-month time frame, again, with the context that he's been CEO for about 9 months. So first question, just to play devil's advocate, why doesn't P&G need to change its strategy? Because you could argue market shares are stabilizing, but maybe you need to do something bigger or shake things up to get shares growing in a more sustainable material way.

Look, the strategy we're executing is the same strategy this company has been on for 189 years now, which is grounded in understanding the consumer better than everybody else in categories where we can truly add value. The categories we're in are the right categories. We know how to play in them, we have the R&D capabilities, the supply chain capabilities and the consumer understanding to win. They are expandable categories, daily use and performance makes a difference, so our capabilities are relevant to consumer. We know how to deliver superiority. We know how to define it, we know how to measure it and better understanding the consumer and then delivering against those needs is the way that we grow categories, we grow share and we grow our business on a sustainable way. We need outstanding productivity to fuel that momentum consistently and that productivity muscle is well developed. And lastly, we need an organization that is capable and enhancing themselves to continue to develop against those core elements of the strategy.

None of that needs to change because everything is very basic. The art in the strategy is not the articulation, the art in the strategy is the consistent execution. And while we are not changing the strategy, we are changing every piece of wiring under the hood. And that's really what it's all about. How do we act faster when we recognize that our propositions are not superior, how do we cut through functional barriers in that conversation so it doesn't become a R&D versus supply versus go-to-market versus marketing conversation, but an integrated conversation on what does the consumer need and how do we get there quicker.

That was one of the fundamental decisions we made is to declare the moment you don't grow users, you are not superior, and we don't care whether it's one, two, three, four or five of the vectors, but you, dear General Manager, are uniquely responsible for fixing that superiority. That has been the success model in -- where we see turnaround in the business. Literally every category country combinations where we've declared you're not growing users and the organization has accepted the diagnosis and then gone into deep dive of what is the consumer part of the value equation that we're missing, addressed it, the business turns, and it doesn't turn in 12 months. It turns within 60 days, 90 days. We are building capabilities to do that even better by having more data, easier, available to the organization on every KPI that determines what we call superiority. We've talked about our data lake. We talked about the capability that we have in extracting data from that. But now the potential of making that data available using technology, using AI to help us analyze data quantities that otherwise we weren't able to at that speed with that precision, is a whole new world for us to better understand and even faster diagnose where the consumer need is that we haven't met reducing internal work processes. So everything that has to do with reporting, forecasting, stewardship, internal analysis, all of that, we're automating, digitizing which frees up the organization to focus externally on those opportunities.

Supply Chain 3.0, we've been talking about that for 1.5 years, is in full execution, meaning maximum automation of the supply chain, integrated digital capabilities from quality measurement and execution to inventory management to warehouse execution, unattended shifts that will give us productivity runway for the next 5 to 10 years. And then integrated in that superiority conversation is R&D capability, where we're using technology to discover new elements in the innovation toolbox. Molecular discovery suite is one of those elements where we're using AI to just get access to new technologies faster and scale them faster. So the -- to get back to the question, Lauren, the core strategy is not changing, but how we deliver against that strategy is fundamentally shifting, and I think every element of the company is gearing up to leverage technology, to go faster, be more agile in diagnosing and addressing potential outages and delivering the productivity we need as a fuel to actually be able to afford all of that while delivering.

Okay. Great. And then my second question on this topic is the 12- to 18-month time frame still the right one to anchor to in the context of since Shailesh became CEO? Or does that change in an environment where we've had continued slower category growth in the U.S.?

I think it's still the right time frame. We all wake up every morning and something else happened. So certainly, those headwinds that I think everybody is seeing don't help. Category growth being one of them, cost and commodity pressures being another, transportation cost increases due to driver shortage, so you name them, you've heard them all. I don't think it changes the ambition, and the ambition is to return this business to strong growth in that 12- to 18-month time frame. And if I quickly walk around the regions, enterprise markets are consistently in the 4% to 6% range. China is growing share and now growing five quarters in a row, low singles, accelerating to mid-singles. Europe is slow in terms of growth. Market growth is only 1%, but we're growing share. I think we're on path to reaccelerating. And in the U.S., we now stabilized share category growth around 2%, we're growing at around 2.5% on a consumption basis.

So I would say the next -- this quarter, next quarter, we're solidifying the base. And I think that gives us confidence that in half 2, we can start growing in the U.S. more consistently and Europe should be reaccelerating, so I think we're on that trajectory. As you know, Lauren, there are many things that can happen, so there's never a guarantee. But if I look at the trajectory the business has been on, if I look at the patchwork of category country combinations that we are fixing one by one, the total patchwork gets greener and the greener it gets, the more comfortable I get that sustained momentum will only accelerate.

Okay, great. Before we get into some of the near-term interventions that are underway, I wanted to go a little deeper on some of the longer-term capability reinvention work that's going on. So you mentioned Supply Chain 3.0 already yielding stronger productivity. We've spoken about scaling these integrated data platforms. But when would you say we'll start to see how these capabilities translate into a core competitive advantage for the company?

I think it will gradually happen over the next 2 years, different stages of visibility. I think that we will be able to demonstrate on the media transformation. I believe that will become more visible over the next 12 to 18 months as we fully scale the media capabilities across social integrated content creation. We bring -- we now have broad content creation fully in-house. We're leveraging AI capabilities to create more content with higher quality. We're able to deploy that content fully automated across all platforms. We still are working on the measurement side. But I think you'll see those elements becoming a bigger part of the marketing framework and everywhere where I think we're scaling those capabilities, we see great market response. So that is one that I think will become more visible. You see it at Investor Day. You see all of them at Investor Day, but I think that one will be clearly having a more immediate impact on the business.

The Supply Chain 3.0. I think we've already talked about many of the elements, will share again at Investor Day the rollout schedule, but that's well underway. We're well on our way in terms of unattended shifts. RTTQ, real time touchless quality, is being rolled out globally; fully automated dark warehouse technologies rolled out, including loading and unloading of trucks, so that's just a matter of scaling it over the next 24 months around the world.

R&D capability, I don't think we will disclose in much more detail for all the right reasons, but let me just give you one data point. We're using molecular discovery suite and that sounds great, but it's not that tangible. But to make it tangible, over the last decade, we discovered two new molecules in our Fabric Care business. One decade, two molecules, and every time we discover them, it moves us to a new S curve of performance. In the last 6 months, I think Victor, our Chief R&D Officer told me we've discovered six or seven. So 6 months, six or seven, a decade, two, that makes it relevant.

So the ability to, I think, increase our flexibility and formulation, increase product performance is tangible as an outcome of these technologies, the same across perfumes and many others. Just the integration of data across categories is a huge enabler for our R&D organization, but it also enables faster and earlier integration with the commercial side, because we look at the same consumer insights, the same consumer data, the same consumer testing data. We use the same proprietary consumer digital twins to test propositions including the commercial idea behind the proposition. So if you put that together, you can see how the innovation cycle is just speeding up. The error rate is decreasing and the alignment across functions is just much stronger. So again, some of that will be able to bring to life, many of those things are more internal than external.

Okay. Let's talk about the evolving retail landscape. So Shailesh has described retailers as media platforms and media platforms as retailers. And you've also talked about joint work with retailers around traffic, profitability, supply chain, impact size. What does the best-in-class retail partnership look like today? Or will it look like in this ideal state versus a few years ago?

It starts with an agreed mission to grow the categories we operate in. I think once we have agreement with the retailer that, that's the objective that we have, between them and us the rest of the conversation flows more easily. And I think with even the most difficult retailers, I think we're at that point, and I'll tell you when you have that conversation with a German hard discounter, and they agree that that's the mission, that's a breakthrough versus where we've been. So once you have that, then it becomes, okay, what's the breadth of the value creation chain that we have available to us.

And when you open up that aperture and you say, well, it's not about a margin conversation on the products that you list, it is on that but it is on innovation. It is on media spending and media activation. It is how we bring the product to life in-store and online. It's about the supply chain cost and the supply chain reliability and quality. Then suddenly, you have a different conversation because you can create more value across a broader set of measures. And then if you can turn that into not a 1-year plan, but into a 3-year plan, which allows you to make fundamental changes to the way you collaborate and operate, that's what we call best in class.

I think the other element I give you here is on the strategic alignment at the leadership level is generally easy. Operationalizing that alignment down to the buyer level, down to each department in their organization, our organization is not that easy. But the other core element that we found is critical is an escalation mechanism that very quickly allows us when we see misalignment at the operating level, we can elevate the conversation to leadership and resolve those issues not within weeks, but within days. And I think that's one thing that, for example, the North American team has done a fabulous job of to say, "We need an escalation mechanism so we don't store teams for weeks and weeks because of operational issues that never come to the surface." so if you have alignment on the mission, you can turn that into a broader set of value creation. You have a 3-year plan and you can get out of operational issues quickly by elevating, you've got a best-in-class relationship.

Okay. Great. So one thing also on this topic is you've always talked about country category combinations growing share, but this quarter was new to us, as I mentioned, the percentage of customer brand combinations in North America, and that number moved from less than 10% in the first half to 50% in the second half. Can you tell us about this new metric and kind of what -- like why we're looking at it in this way? And what changed specifically to see that big of an improvement in such a short period of time in North America?

We quoted the metric because it's the metric we use internally. If you look at some of our U.S. customers, they are bigger than markets. So it's completely fair to look at them and look at category customer combination while we look around the world at category country combinations simply because of the size of them. More importantly, it's how we're organizing the effort in the U.S. to say by category or by brand and by customer, do we really understand, a, are we growing? And if we're not growing users and share, do we understand why? And do we have an aligned plan how to fix it?

And I think the -- to your question on how did we accelerate from 7% at the beginning of the year to now 50%, and I think we will accelerate to 80% plus by the end of the calendar year, it's that intentionality to say every category and every customer needs to have a plan that either is already in execution or will be in execution within the next 60 to 90 days to grow users and grow share. And once you have that clarity of mission, then it's only a matter of doing the work, sitting down at the customer team level, identify the issue, align priority, funding and resource allocation and grow. And I think that intentionality that Shailesh was driving with the North America team helped focus. And I think also gave a clear measure because trust me, the one conversation you don't want to have is be part of that red customer category combination for a series of months. So I think it's just good, very disciplined management of what we want to accomplish.

Okay. Great. In North America, it does like there's been much more volatility in your performance over the last year, so why do you think that's been the case? And then specifically in the fourth quarter, there was a 3-point gap between sell-in and sellout. Has that gap continued into 1Q? Or are you seeing narrowing of that between shipment and consumption dynamic?

Yes. I think Q4 was a was an unfortunate confluence of multiple factors that provided the disconnect between consistent sellout at 2% and the sell-in that was significantly lower. I don't see that in the current quarter. I hope that, that's not something we'll see in the future. .

But the real answer to your question is why we're not growing fast enough. We're not growing fast enough in the U.S. I think once the category returns to 3% growth, that will be growing at 4%, that volatility will go away because you have enough velocity in the retail that they will have to maintain the stock levels, inventory levels to serve that flow through. And once that pipe is stable, it is just that, it's stable. But if you're growing at 2% and the pipe is built for 4%, you can turn off the pipe for a period of time and wait and then you refuel, so it creates more volatility. So I think the real underlying mission here is we got to get back in the U.S. to 3% to 4% growth.

Okay. Let's shift gears to China, market that has been pretty encouraging proof point in the portfolio, as you mentioned earlier. What is in the one or two most important changes implemented in China that are responsible for the improvement? And how much of that playbook do you think is transferable to other markets, particularly in North America that have been a little bit more challenged?

Yes, you recall the China surgery was probably one of the more [indiscernible] inventions we've made. About 2 years ago, we started by changing the go-to-market model, we reduced the number of distributors, higher capability distributors, increased our intentionality on which channels, offline and online, we want to win in and staffed accordingly. We changed and transformed our brand building model, much in line with what I was talking before, way more focused on social and digital because the market was ahead and still is ahead of the rest of the world in social penetration.

We changed our innovation strategy, our research strategy to be more local and locally relevant. So all of those elements I view as the right interventions at the time, and they majorly contributed to the turnaround in China. So we saw with the investment in innovation, with the investment in go-to-market, we're now growing share offline, and we're growing share online. And that's in all honesty, without all categories firing. So we still have a significant opportunity in Oral Care, we still have a significant opportunity in mass skin on our Olay brand, we still have not reached potential on Fabric Care, for example, but you can see how the team is freed up to focus on the consumer and how it's working in every channel consistently.

There's a bit of a tailwind on the diaper business right now. But even before that tailwind, the China business was growing consistently now for five quarters, 3% to 5%. The diaper opportunity is a great opportunity for us now to build trial and that's what the team is focused on. So I do believe it's very sustainable because it's grounded in the right interventions to get the team focused. And in that sense, I think it's reapplicable to the rest of the world, and that's exactly what I was describing to different degrees, but it's the same underlying playbook.

Okay. Great. Let's talk a little bit about some of the near-term interventions that are on the work more broadly. On the call, the fourth quarter call, you'd mentioned some pricing intervention, have these been put in the market? In the cases where we're already in, are you seeing any improvement in sales or market share performance?

We've said we'll be competitive on the diaper business. I think we have been now competitive on the diaper business, and we regained our share. I think that's done. We said we would be competitive in the Oral Care business. We've done that. We have told you, I think, before that we were out of range and some price points in the club channel simply because of the nature of the pack size, not necessarily the value per sheet on some of our family care business, so we have fixed that and we see the business responding, Lauren.

So it's one of the fundamental things that if you have a superiority issue and it is a value issue, that is grounded in price or promotion, we will be competitive. We don't view this as a growth muscle, so this is not the way we will grow. But we have to remain competitive in some of those categories. I think we've done that, and I see -- actually, I see more stability going forward.

Okay. I mean the risk of being redundant. We definitely have heard other companies discussing P&G is being more promotional over the summer. I think there's always going to be a situation where everyone's pointing fingers at each other on where it all started. But just, I guess, any thoughts, how would you respond to that in terms of P&G sort of being the instigator on promotional activity, particularly U.S. and Europe?

It's hard to say, and there might be instances where others feel that we are leading the instances where we feel others are leading. I think it comes back to the same principle. We will be competitive. And if we're not, we'll make the right interventions.

Okay. What other activities beyond pricing would fall into the near term intervention bucket? And where, again, do you think there's still proven it's too early to call, but things beyond pricing that kind of fall into the near-term bucket?

I would describe it as the continuation of the diligent work category by category, customer by customer or country by country. Literally, it's that simple. We continue to chuck through the category country combinations and fix them one by one. You can't do them all at the same time, resource both financial and human. It takes some time to diagnose, but it's literally that, go step by step. As I said, we expect -- I expect the U.S. to be closer to 80% of share growth plans by customer. And I think once we see that, we will see the acceleration in the second half. So that's why I was starting Lauren, I think the next -- this quarter, next quarter will still be solidifying the progress, so we have a really solid growth trajectory. And then innovation will kick in. And so I see honestly more positive momentum in the back half then.

One more thing I'd add is that as the businesses are going through the diagnosis of the media spend over the last couple of years, they're identifying the places where the spend didn't really deliver, the results we thought it might. And as they redeploy spend to different vehicles, maybe moving from more awareness building long term kind of advertising into more activation oriented social spend, that's helping turn the trajectory of the brands too.

Okay. Great. I just wanted to stick quickly with fiscal '27 guidance, just sort of housekeeping question to get out of the way around costs, any notable changes in input costs, freight, logistics in your outlook since July?

We had outlooked $1 billion AT of headwinds, that was for Brent at $90. I think this morning, we were at $102.50 upward trajectory, so that obviously has an impact. Transportation costs in the U.S., we have a driver shortage now, that has an impact. And then you see Canadian retaliatory tariffs coming just this week, so that has an impact.

None of this is not manageable. So I would argue we have enough time and enough flexibility to deal with that. It makes it harder, but I'm still confident that we are in the right range. I think the pressure on pricing will increase with some of the cost pressures sustaining. And again, the longer oil stays at above $100, the harder it will get, I think, for everyone to manage, and I think the higher the combined pressure on pricing will be. But at this point in time, we acknowledge the headwinds, but I think they're manageable.

Okay. Great. And we know to expect the greatest hit to margins from raw materials in the first quarter, but anything else that you want to share on gross margin progression?

I shouldn't say that I don't care, but I really don't.

I can ask you a different question.

I know. No, but listen, what we're focused on is to return to the top line growth that we want from an algorithm standpoint, and return to the EPS line that we want. How that works in between, between gross margin and operating margin is an outcome, and it is different by business. As I said last night at dinner, if we can have a fantastic innovation that compresses gross margin by 3 points and accelerates growth by 3 points, that's a trade-off we would make any given day. So what is important to us is we need to deliver productivity for us to be able to continue to fuel innovation. We have delivered significant productivity last year, we will deliver even more this year. And I don't see the pipeline drying up. That's important because that will sustain gross margin at a level that is manageable even as we invest in innovation.

What is important, to John's point, is that we get more efficient in our media spending because we've been not as efficient as we should have been. We've talked about media experiments and pushing reach to see how far that can become a viable tool to acquire new users, I would declare that experiment as not successful. And therefore, we're now shifting and that's part of the media transformation I was talking about, so we need to get the media spend to be more efficient. We need our organization freed up to become more efficient, driven by technology. So those are the underlying efficiency measures that I'm looking at. And again, gross margin is just an outcome of that.

Okay. Great. Let's talk a little bit about M&A. So you acquired Thorne. This was prior -- announced after 4Q earnings, so would love to take the opportunity to have you talk a little bit about the rationale for acquiring this business. And is this the start of something kind of acquiring fast-growing brands to reshape the portfolio?

I think it's the execution of the strategy we've been articulating all along. We said we will look for value-accretive acquisitions in the beauty space and in the health care space. We prefer bolt-ons. I think we've proven now that we can very successfully scale bolt-ons, either within category or across categories, aka native, so we will continue to look for those opportunities.

Thorne in our mind, was -- is a great opportunity for us. In a very fragmented VMS space where a few brands are able to stand out, Thorne has built an incredible equity over the last decade. Doctor endorsement, high quality of ingredients, high efficacy, high levels of trust, a very powerful campaign, so that's attractive to us. We see a huge opportunity in the asset platform that allows us to drive synergies with our supply chain. We see the opportunity to scale this across multiple categories. We see an opportunity for international expansion, so you put all of that together, it's just a fantastic bolt-on opportunity for us that we can apply our capabilities to. And at the same time, fully leverage and harvest what the team at Thorne has built over the last decade, which is fantastic.

To preempt maybe the next question, we have not lowered our payout threshold. So the objective here is to build a business plan that delivers the same rate of return that we require from every M&A activity that we've pursued. So there's no change in strategy on where we would acquire, there's no change in strategy of bolt-on that's transformational and there's no change in strategy in terms of acceptable payout all the same. Thorne was just a great opportunity.

Okay. We've definitely -- I mean you sort of answered it, but we've definitely gotten questions on the multiple. So I don't know, anything else that you can share with regard to sort of financial discipline as you look at these kinds of acquisitions?

No, just what I said, I think it's the same hurdle rate that we apply to every acquisition, and the construct of the business plan and Paul will talk more. Paul's, our CEO for the health care business. He will talk more about it, and certainly more eloquent than I can, on what really the business opportunity is. But we see an enormous potential in a brand that is growing 30%, has more than 30% EBITDA margin and enormous potential to build franchise that goes way beyond just the core health care VMS space. And that justifies the premium with, in my mind, relatively conservative assumptions.

Okay. So you've touched on it a couple of times, the upcoming Investor Day, but just anything we should be looking forward to as key topics heading into the Investor Day other than John's final goodbye?

Right. Absolutely. That will be the highlight of the event, but what we want to be able to demonstrate is a couple of things. Number one, the alignment, agility, discipline and intentionality, which you will hear every President talk about their focus on the consumer. Every time they refocus on the consumer, they identify the outage in terms of superiority, the intentionality and clarity with which they fix it and then the immediate turn of results, which is fascinating to see. We just had our Global President Leadership Council last week in Cincinnati, and it was amazing to see the consistency of diagnosis, fix, results. So I hope you'll see that come through.

You will see the transformation under the hood in more detail across each of those elements, the media transformation, brand building transformation, what we're doing to -- with the organization and with internal work processes, supply chain, R&D, so we spent a good amount of time on those capabilities. And I think demonstrating what that means for a consumer. So to your question, how does this come to life? We will showcase innovation capability and what the consumer ultimately will see in terms of what innovation we can deliver, breakthroughs we can deliver, how we can communicate them, so that's really the three-part agenda that we have.

Okay. Great. Well, I can't wait. So please join me in thanking P&G for being here today this week at the conference.

Good morning, and welcome to Procter & 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&G's most recent 10-K, 10-Q and 8-K 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 & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial -- Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its Investor Relations site www.pginvestor.com, a full reconciliation of non-GAAP financial measures.

Now I will turn the call over to P&G's President and Chief Executive Officer, Shailesh Jejurikar.

Good morning. Joining me on the call today are Andre Schulten, Chief Financial Officer; and John Chevalier and Keri Cowan, Senior Vice President of Investor Relations. Before I hand over the call to Andre to begin the earnings portion of this call, I want to make a few comments on the second press release we issued this morning announcing Jon Moeller's upcoming retirement from the Board of Directors and the Procter & Gamble Company.

I want to thank Jon for his many years of tireless and steady leadership at P&G having served in key roles, including Executive Chairman, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. In fact, some of you first interacted with Jon when he became P&G's Treasurer in 2007. Jon's strategic vision has been instrumental in shaping the company P&G is today, including his leading role in focusing P&G's portfolio and in designing our current operating structure.

We have benefited from his unwavering courage and its profound care for this institution and its people. Again, I want to thank Jon for his 38 years of dedicated service to the company and congratulate him from all of us on a very successful career.

Now I'll hand the call over to Andre to lead the earnings discussion.

Thank you, Shailesh, and good morning, everyone. I'll start with an overview of results for fiscal '26 and the fourth quarter, Shailesh will add perspective on our strategic focus areas and capabilities. And we will close with guidance for fiscal '27 and then take your questions.

For fiscal '26, we met our core objectives despite unexpected headwinds. We managed through a very volatile environment and delivered organic sales, core EPS and cash returned to share owners within our initial guidance range. We built plans to return the business to consistent growth across all categories and regions.

We stabilized global market share, and we identified and are deploying the capabilities needed to create the CPG company of the future to generate long-term growth and value creation, progress in light of many challenges.

Looking closer at fiscal '26 on a semester basis, we delivered an acceleration in top line results up about 1 point in the first half and 2 points in the second half. We also saw improvement in market share in the second half despite some softening in underlying market growth as inflation increased. Positive trends we will build on in the new year.

Moving to the details. Organic sales grew more than 1%, volume was up modestly. Pricing added a point at mix had a neutral. This includes around 40 basis points of headwinds from product form and go-to-market portfolio choices. Growth was broad-based across regions and categories. 9 of 10 product categories held or grew organic sales for the year.

Hair Care and Skin & Personal Care each grew mid-single digits. Personal Care, Baby Care, Home Care, Fabric Care, Feminine Care, Grooming and Oral care were each in line to up low singles. Family Care was down for the year. All 7 regions held or grew organic sales. Focus market organic sales were up 1% for the year. North America and Europe focused markets each grew modestly. Greater China organic sales were up 4% for the year.

Enterprise markets were up 4%, led by Latin America, with 6% organic fit growth. E-commerce sales increased 6%, now representing 20% of total company sales. 26 of our top 50 category country combinations held or grew share for the fiscal, 5 of 10 product categories held or grew share globally. In aggregate, global value and volume share trends improved in the back half exiting the year flat. Core earnings per share were $6.89, up 1% in fiscal '26. Core gross margin declined 40 basis points and core operating margin decreased 70 basis points.

$2.8 billion before tax of productivity improvement across cost of goods sold and SG&A, enabled an increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was in line with prior year, and core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 100%.

We increased our dividend by 3% and returned over $15 billion of value to shareholders, over $10 billion dividends and $5 billion in share repurchase, consistent with our guidance at the start of the year. For the fourth quarter, we saw improving global share trends versus prior period, but headline results were impacted by trade dynamics in the U.S. and the spike in input costs.

Organic sales increased modestly, rounding down to in line versus prior year. Adjusting for brand product and go-to-market restructuring impacts, organic sales for the ongoing business were around 1% for the quarter. 2% when adjusting for 1 point of pull forward into Q3, consistent structural growth of 2% across the second half of the year. As we mentioned before, the growth trajectory hasn't been and won't be a straight line quarter-to-quarter.

Volume rounded down to flat for the quarter. Pricing at Mix were also neutral for the quarter. 6 of 10 product categories held or grew organic sales, Personal Health Care, Hair Care and Skin and Personal Care each grew mid singles. Baby Care, Fabric Care and Grooming, each were in line to up low singles. Home Care, Femcare, Family Care and Oral Care were down for the quarter. 5 of 7 regions held or grew organic sales.

Focus markets were down 1% for the quarter. Organic sales in North America were down 1% versus prior year. While consumption and market share of P&G brands improved through the quarter, there was a notable disconnect between sell-out and sell-in with sellout or consumption at plus 2% and sell-in at minus 1%. The shift of Amazon Prime Day to late June versus early July drove an increased merchandising spending recognized in the quarter.

Retailer inventory reductions, including the pull forward into last quarter also contributed to the 3-point gap between sell-out and sell-in. European focus markets organic sales were down 1%, like the U.S., P&G sales trailed consumption due to inventory dynamics and value interventions. Greater China organic sales grew 4%, another quarter of positive momentum heading into fiscal '27. Enterprise markets grew 4% for the quarter.

Europe enterprise markets grew 5% and Latin America organic sales were up 4%, and the Asia Pacific, Middle East, Africa Enterprise region grew 3%. Global aggregate market share was in line with prior year, 23 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.43, down 3% versus prior year. On currency-neutral basis, core EPS decreased 5%. These results include approximately $0.06 of higher costs driven by spike in energy, transportation and material costs, which were mostly offset by tariff refund receipts. For gross margin was in line versus prior year, and core operating margin decreased 130 basis points. Very strong productivity improvement of 460 basis points with healthy reinvestment in innovation and demand creation.

Currency-neutral core operating margin decreased 130 basis points. Adjusted free cash flow productivity was 133%. We returned $3.5 billion of cash to shareowners in this quarter, $2.6 billion in dividends and roughly $900 million in share repurchase.

In summary, a year of progress and foundational work to enable accelerated future growth. Momentum with consumers is improving, results within guidance in a challenging macroeconomic and geopolitical environment, progress, but more work to do.

Now I'll pass it over to Shailesh.

Thanks, Andre. I'll start with a few thoughts on results before moving to our strategic focus areas. As mentioned, we delivered the fiscal within our going-in espite a very challenging operating environment. It's encouraging that growth was broad-based with all 7 regions and 9 out of 10 categories growing or holding organic sales.

We exited the year holding global share with trends improving in the second semester. This was visible in our largest market, the U.S., as we measure the percentage of top customers growing or holding share. We had less than 10% holding or growing share in the first half of the fiscal year and improved in the second half to around 50%.

We will build on the improvement to further accelerate growth in the U.S., our largest and most profitable market. I am pleased with the progress we are making and confident the plans in place will continue to drive the momentum. The organization is focused on the right strategic choices and executional plans to deliver sequential progress we expect going forward. We remain committed to the integrated growth strategy as the road map for growth and value creation. This strategy starts with the port of categories where performance matters, in performance-driven categories, we must deliver irresistible superiority across product package, brand communication, retail execution and value.

We continue to drive productivity with multiyear visibility to fund innovation and demand creation and to mitigate cost headwinds. Constructive disruption is key to stay ahead of and to create emerging trends and opportunities in our fast-changing industry.

Finally, an organization that is fully engaged, enabled and excited to serve consumers and to win in the marketplace. P&G's point of difference, our competitive advantage comes from outstanding integrated execution of these strategies across all activity systems in the company and from anticipating what capabilities are needed next to delight our consumers. We continue to believe the strategy is right. but we must continue to adapt to the world that is changing around us.

As I shared in CAGNY, there are 3 notable landscape changes defining the path ahead. These include media fragmentation, the changing retailer landscape and inflation. We are making multiple interventions to address these changes. The first is to have a deeper more complete connection with consumers. Nothing matters more than putting the consumer first in everything we do.

The second is transforming brand building, adapting how we build awareness of our brands and benefits drive consumer engagement and reduce time and steps from awareness to purchase. The next is building holistic partnerships with retailers across the entire value chain, not just in their traditional role as merchants. This is critical as we see the convergence of retail and media, including digital commerce and how shopping agents and AI-based search will affect our consumers shop.

And finally, we need a stronger core and a bigger more. One of P&G's biggest strength is our portfolio of leading brands, the core of our business, we need to make sure the score is healthy and growing through impactful innovations that elevate the superiority of the brand and represent a good holistic value for consumers. These interventions are aimed at improving the vectors of superiority to win the consumer value equation.

We know we are winning the consumer value equation when we are growing users of our brands. The simplicity of linking superiority to user growth in this way increases the urgency to adjust the vectors as needed versus assessing each element individually. When we get the equation right, we accelerate growth, growing users, leading market growth and growing market share, sales and profit. Here are a few examples.

Greater China Baby Care continues to lead the growth of the premium and super premium segments behind consumer insight-driven innovation. Chinese parents want only the best for their baby, softness, comfort and dryness. The China team translated that insight into a diaper using materials to deliver skin comfort and protection wrapped in a unique soft-feel package that conveys superiority at first touch. The result is double-digit organic sales growth in each of the past 6 quarters and nearly 5 points of value share over this period.

Latin America cough and cold is winning through deeper consumer connection. The team identified the insight that consumers perceive products as more effective when they deliver a sensorial experience. Consumers need to feel the immediate sensation of relief to believe the product is working. The Vicks team brought this insight to life through upgraded packaging, brand communication and retail execution that made fast relief more visible at every touch point.

The result, Vicks became the #1 cough and cold brand in Latin America with mid-teen organic sales growth and over 1 point of share growth while growing the category this year.

Germany Pantene is a great example of a brand team responding to media landscape shifts to transform brand building and accelerated growth. The team increased investments in social media and influencer partnerships including top German beauty opinion leaders and hair experts and culturally relevant brand events, including Oktoberfest and Berlin Fashion Week to meaningfully improve brand superiority awareness. The result was a fourfold increase in influencer content and tripling total reach.

Pantene grew new users, resulting in value sales growth of 14% and with value share up 50 basis points versus a year ago. To win on social media and e-commerce platforms that combine lifestyle content with online shopping, shifted the focus from a functional message to a lifestyle approach. The team connected SKI to the moments and routines, consumer cares most about. -- encouraging them to live lighter, freer and more authentically backed by product performance that delivers on its promise.

As more consumers brought SK 2 on their life journey, brand buzz, ROI and business growth naturally followed. Over the past year, SK 2 facial sense treatment led discussion volume on a top social commerce platform, improving the brand discussion ranking by 5 spots to third place. SK2 has grown organic sales double digits over the past 6 quarters with value share growth. P&G Mexico elevated its strategic partnerships with retailers by transitioning from short-term tactical planning to longer-term joint business planning. They focused on having winning consumer propositions and aligning objectives and priorities across P&G and each of the retailers creating shared accountability for winning with the consumer.

As a result, P&G strengthens its position as a preferred supplier to these customers, achieving record levels of in-store visibility and support behind our joint priority growth initiatives. These efforts enable P&G to capture 60% of category growth approximately twice fair share. P&G Mexico grew organic sales high single digits and gained over 1 point of value share in fiscal '26.

Mr. Clean continues to innovate on its core proposition and solve more cleaning jobs across the home. Brand has launched new innovations on the Magic Eraser platform that improves the longevity with the denser form and a wider microscrubbing structure that now lasts 2x longer. The packaging was updated to reflect room and mess specific users. At the same time, we launched Mr. Clean Shower and Tubscrubber to address Home's #1 most disliked clean core. Mr. Clean, Shower and Tubscrubber delivers a quicker, easier and deeper clean with the power of the Magic Eraser, a sturdy group handle built-in squeegee and a pivoting head for hard-to-reach areas.

The result, Mr. Clean is winning consumers and driving category growth, delivering 18x its fair share of the bath cleaning category growth since launch. Site is a great example of both core and more.

Tide did their biggest upgrade in over 2 decades on the original Tide liquid detergent, which represents more than 1/4 of Tide detergent users, significantly improving the product for the same price. Since launch, Tide original liquid has gone from declining to high single-digit growth. On this side of the business to get that inflection is simply amazing and gives me tremendous confidence of what can happen if we activate the core much better.

Tide biggest strength is tide. So this is a very powerful example of strengthening the core. A great example of a bigger more is Tide evo. Tide evo represents the biggest innovation in laundry crafted by concentrating active surfactant ingredients into a mixture that is spun into individual fibers. This sophisticated process ensures each functional fiber delivers the part from cleaning performance of Tide while also enabling the creation of the convenient tie Evo unit dose form with no plastic packaging and no extra water.

This new-to-the-world formulation and assembly process is proprietary to P&G and protected by over 50 granted patents, making it a truly unique technology. National expansion of Tide evo is on track with full-scale launch support planned this fiscal year. To further accelerate scale and innovations, campaign ideas and executions like the ones we just shared, we are creating our vision of the CPG company of the future. P&G team are now scaling advanced capabilities in 4 areas that build on our unique strengths.

Platforms developed over many years now being fully activated across the company. First, branding transformation. Our teams are rapidly evolving how we connect with consumers in a more fragmented media landscape and translate those connections to real-time retail actions. We are scaling AI-enabled tools and integrating workflows from creative development to media activation to continuously improve content effectiveness and always on consumer engagement. By bringing together the voice of our brands, trusted experts and consumers themselves we can more effectively reach the right consumers in the right context at the right moment and optimize what works to drive trial, awareness, loyalty and ultimately, growth.

Second, transforming internal work processes, leveraging data capabilities to free up the organization to focus on winning externally. Teams are using integrated data platforms, AI capabilities and programmatic shelf does built on top of our fully stocked data lake to work faster and deliver better outcomes.

Processes that once required multiple touch points and handoffs are now being automated, improving both speed and quality. In many cases, time for discovery to execution is moving from weeks to hours, freeing up more time for higher value work focused on winning with consumers.

Third, taking our existing R&D advantages to a new level by leveraging a unique set of innovation capabilities, substrate technologies, formulaic chemistry, devices and biology, to deliver breakthrough solutions in every part of the business. Technologies like AI-enabled molecular discovery will drive faster acceleration and more powerful integration of innovation capabilities leading to faster growth.

And finally, supply chain capability. Supply Chain 3.0 is driving a more complete system connection from purchase signal to our production planning and material ordering to ensure consumers find the product they want each time they shop. We know how to digitize and automate our operations and more importantly, we have qualified a financial framework to generate strong returns on these investments.

Full activation of these advanced capabilities will enable speed and execution, smaller teams and a stronger connection to the consumer to enable the next S-curve of growth and value creation for P&G. We are confident in the short-term progress we are making and excited about the mid-to-long term as we leverage our strengths and unique capabilities to set us apart from the industry.

Now I'll pass it back to Andre to cover guidance.

Thanks. As we enter fiscal '27, we continue to expect the environment around us to remain volatile and challenging, from costs to currencies to consumer competitor retailer and geopolitical dynamics. We believe our going-in guidance for fiscal '27 prudently reflects these current market realities.

On the top line, we currently expect the markets in which we compete to deliver local currency value growth in the range of 1% to 3% for the year, with the current run rate roughly in the middle of this range. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets. However, recall our guidance includes a 30 to 50 basis point headwind from brand, product form and go-to-market restructuring.

Taken together, our guidance range is for organic growth of 1% to 3% versus prior year. The low end of the range protects for additional softness in underlying market growth rates, the high end would require acceleration in underlying market growth rates and market shares. Our bottom line outlook is broadly consistent with top line with core EPS growth of 0% to 3% versus fiscal '26 core EPS of $6.89, and this guidance equates to a range of $6.89 to $7.11 per share, $7 at the center of the range.

This outlook includes a cost headwind of approximately $1 billion after tax, driven by higher raw materials, energy, transportation costs and other premiums resulting from the conflict in the Middle East. This estimate assumes an effective Brent crude oil price of $90 a barrel. This is a combination of actual prices since March '26 and future contracts through Feb '27, which approximates the average price that will flow through our P&L in fiscal '27.

It's also in the ballpark of current spot prices. You'll likely note that our current estimated cost impact is the same as we projected last quarter, but at a somewhat lower oil price. This is due to a larger impact from the noncommodity elements of the supply chain like ocean freight and trucking surcharges, supplier inflation and force majeure premiums. Most of this impact will be felt in the first half of fiscal '27 as those materials were produced when the underlying oil price was above $100 a barrel.

While we don't typically provide quarterly guidance, we estimate the cost dynamic will cause Q1 EPS to be down 5% or more versus prior year. We expect the foreign exchange headwind of approximately $50 million after tax and approximately $150 million of higher net interest expense after tax. We are also forecasting $150 million after tax of lower nonoperating income. We estimate that our core effective tax rate will be approximately 20%, in line with prior year.

Combined input costs, foreign exchange rate items and items below the operating line will be roughly a $1.4 billion after tax of earnings headwind in fiscal '27 or $0.56 per share, 8% of fiscal '26 core EPS. We expect capital spending will be 4.5% to 5.5% of sales. We are forecasting adjusted free cash flow productivity at 85% to 90% for the year. We expect to pay over $10 billion in dividends and to repurchase approximately $5 billion in common stock combined a plan to return $15 billion of cash to shareowners in fiscal '27.

The guidance range reflects the continued acceleration toward our long-term algorithm. It is a balanced outlook between top line and bottom line despite significant cost pressure early in the year and reflecting current market realities for consumer demand. We will maintain strong investment in the business balanced by a strong productivity program with an intent to improve results semester-by-semester and year-by-year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates.

Significant additional currency weakness, commodity cost increases, geopolitical disruptions, tariffs, major supply chain disruptions or store closures are not anticipated within the guidance ranges. Now I'll hand it back to Shailesh for closing thoughts.

Thanks, Andre. Fiscal year '26 was a year of foundation building. The operating environment was even more challenging than expected, we delivered another year of organic sales and core EPS growth, and we continued our long-term record of returning high levels of cash to share owners.

In fiscal '27, we will solidify progress and continue to build the technical, organizational and operational capabilities to have P&G lead as the CPG company of the future. We continue to believe the best part to sustainable balance growth is to double down on the strategy, stronger integrated execution to delight consumers with superior products at a superior value. We're driving interventions to improve near-term results and we are building the technical and operational capabilities to create the CPG company of the future.

Our investments for growth will be balanced and funded with a strong productivity program. We are pleased with the progress we are making. It will be a straight line as the past few quarters have shown, but we are building momentum with consumers, and we are excited about the long-term opportunities ahead.

With that, we'll be happy to take your questions.

[Operator Instructions]

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

So it's at a little more than a year since you guys announced your restructuring and you put the plans in place to reinvigorate organic sales growth and get P&G back to outperformance versus the category -- you obviously gave some examples of progress today with your interventions, although we're not at outperformance you have with flat share in the quarter.

So just looking forward to fiscal '27 what are the biggest areas or initiatives left to put in place versus what's already been implemented organizationally in your restructuring? And just as you think about fiscal do you think you can consistently return to sales outperformance versus your categories at some point? Any thoughts on timing there? And just the line of sight there as we move through the fiscal year from an org sales standpoint.

Thanks, Dara. Let me start with how we are feeling about the progress we've made so far. And it is consistent with the way we have felt over the last few months. We are happy with the recovery on the consumer front, particularly our performance relative to getting new users in. I think it is best reflected in the fact that our global share has now stabilized and has been flat for 3-month periods. I think that is a big step forward.

More recently, 1 month doesn't tell you much, but the last volume share month inflected and volume share is sometimes a good predictor of the status on user growth. So from that point of view, we feel very pleased that we are getting on track to winning with consumers, which is the most important. Now when I then break it down and we see when we started interventions and whether that progress has happened, we feel that's what gives us confidence.

So if I start with China, where, as you know, coming out of COVID, it was a depressed market, it was a tough competitive environment, and the results were not great. We are now growing share in China for the first time in 15 quarters, driven by fundamental changes we made similar to what we're doing in the company. We changed our market.

We changed our brand building systems and processes and capabilities. We changed the kind of innovation we were doing because we knew we were in a lower growth market that needed us to drive market growth. So we've seen that begin to inflect in China. China closed AMJ, as you know, at 4%, ex exits that happened in China even better. Similarly, if you look at Latin America, where after our decision to change the go-to-market in Argentina and other choices, we've been really happy with the way our business has performed across every single metric, but probably most exciting 3 years back, less than 10% of that business was growing users.

Today, over 55% of that business is growing users. Then even if I go to some of the markets in the Asia, Middle East, Africa region, which was pretty badly hit in the earlier Middle East crisis. Those have come back well. Last quarter, we closed at 3%, ex exits closer to 6%. Even a market like Gulf has had a very tough 4-, 5-month period with disruptions, we are growing share across all time periods. That market had less than 5% of the business growing users last year, they are now at 60% of the business growing users.

So a pretty quick bounce back on some of these markets. Turkey is another good example of that. Europe focus, the market has been depressed, but we have been growing share even in a very difficult situation there. U.S. is the market where we probably started the interventions closer in, in time line. We are beginning to see progress there, as Andre covered in some of the results, and we saw it very clearly in consumers. Even in the U.S., we saw a blip in the volume share in the recent time period.

So we feel good about the progress we are making in the U.S. as well. And as I said, Dara, with you and others at CAGNY, in U.S., we are doing our interventions in a way that will be category growth driven. So they depend on innovation and retail partnerships. So some of the time lines on that will be -- many of those interventions happen in the front half of the next fiscal or in the July, December -- so we expect that momentum in the U.S. to pick up during the semester, behind some of these interventions.

So overall, long-winded answer, but I feel good about the progress we are making I feel confident based on the interventions we made and the time lines we have that we are on track. And which is why even though our cell and sell-out was mismatched, I feel good because as long as the consumption is strong, I'm very confident that we will have strong sales.

Your next question will come from the line of Lauren Lieberman of Barclays.

Great. So you called out that 23 out of 50 country category combinations held or grew share. I think there was a step back sequentially. I know that you guys have talked about the progress won't be linear. But I was curious within that number, what percentage actually grew share within that. And then the global roll up of flat, I understand there's a mathematical dynamic on that, but it has to some of the bigger categories versus the smaller ones within that that 50 grid. So I guess notwithstanding the comments on being pleased with progress, what are maybe some of the bigger category country combinations that still need more attention, more change and sort of time line on the next 6 to 8 months of getting some of those interventions in market.

Laura, let me start and then Shailesh can jump in. I think the most important turn that we see is enterprise markets continuing to progress. If you look at enterprise markets growth, consistently mid-single digits. So Asia, Middle East, Africa, 3% growth. If you exclude the market restructuring, Asia, Middle East, Africa growing 6%. Latin America continuously growing share across categories over time periods.

Europe enterprise market is growing 5%. So enterprise market strength, I think, is sustained, visible and broad-based. From a market dynamic, the most important share growth component we needed was China to return to share growth because it is our #2 market, and we've done that very decisively. We're back to leading share on Baby Care. We're leading -- we're growing share on FemCare growing share on Fabric Care. So it's broad-based.

And honestly, the recipe that the team is executing will result in the same dynamic across categories. But already, the majority of the categories in China is on share growth. The rest will follow. Europe continues to grow modest value share in a very difficult environment, up 20 basis points of value share. And the more the more impacted categories from a headwind standpoint, if you want to go there. Fabric Care, for example, is 1 where competition has increased. And we are reestablishing competitiveness in Europe. So that's a big priority for the European focused market team.

In the U.S., I would really point to the progress we're making at the customer category level. We quoted in the script that we had 10% of the top customer brand combinations growing in the front half. We're now up to 50%. And we expect that to continue to accelerate over the next 6 months, which will solidify the share growth that we're seeing early signs of in the U.S. as well.

The more longer-term recovery trajectory, Baby Care. But for example, on diapers on tape diapers where we adjusted competitiveness from a value perspective, we saw the immediate adjustment in shares. So we're back to volume and value share growth on tape diapers. But we have an opportunity to drive that strength through the entire portfolio. That's where the innovation plan is focused and you see the next wave of innovation coming here over the next couple of months.

The other big one in the U.S. Family Care, that's more of a category dynamic and I feel very good about where family care is going. Again, we won't be talking about the future innovation and launches, but it gives me confidence that we have a very clear view of where we lost users and most importantly, very clear data on how to regain those users over the next 6 months. That's kind of the run about. But what Shailesh is saying, I think, at the essence is core, we're building out that matrix of category, country, customer share growth, and we're increasing the number of greens.

Will it be linear? No. But do we have confidence that we exit next year with strong solidified share growth? Yes.

I would just say, Lauren, to that question in addition to what Andre said is we've made big inflections on some of them. I think Fabric Care, U.S. being one of those and we are building further momentum there. And where we have gaps, we have very clearly identified the category customer combinations that need to inflect and have very clear time bound plans on those being executed over the next 6 months.

Your next question will come from the line of Steve Powers of Deutsche Bank.

Great. As I look through the last several quarters, it strikes me that much of the volatility and surprise that we've seen has come either from the U.S. or from focused markets in Europe. And so I guess my question is, how would you assess the underlying fundamentals of those markets as you think through the puts and takes and as you assess the outlook for fiscal '27.

And is there anything that you've experienced midst all of that volatility and surprise that has altered the way you approach go-to-market plans interfacing with retailers, plans with the consumer. Just anything that you take away from recent experiences that informs any kind of different tactic as you think about fiscal '27?

Steve, let me start and then maybe Andre has a few points to add. But I would start and say, fundamentally, these 2 markets, both North America and folks Europe, the market growth has slowed by 1 to 2 points over the past 12 to 18 months. And I think at the core, where we have large shares and the category growth slows down, the impact is greater. At the same time, we actually think there is a much bigger opportunity in the next 5 years for growth in these 2 markets.

If I just take the U.S. and you we look at where is the maximum value we can add on top and bottom line, it is still the U.S. Whether it is something like Power Oral Care, where even if we get to somewhat reasonable penetration levels compared to our Europe benchmarks, it's like the equivalent of creating a new India business for us.

So we see a good $5 billion to $10 billion growth opportunities over the next 3 to 5 years in both U.S. and Europe, just fundamentally by addressing some of these huge growth opportunities that still exist. A lot of this will require a higher level of innovation, and that's what I was referring to when I was talking about China. When China slowed down, it wasn't about driving in the train anymore. We needed to drive the train. And I think in U.S. and Europe, we are modifying and adjusting our innovation plans to ensure that they are capable of lifting the category growth rates.

Tide evo is an obvious example, but I would take the combination of Tide evo and Tide liquids work because Tide's going to get some of the new growth and get some of that new performance and innovation-driven growth but improving significantly the performance of our existing propositions has a lot of market growth and share growth opportunity for us.

So when something like Tide liquids grows it is still a 50-plus percent premium to the market average. So when Tide liquid starts growing, the market gets lifted and Tide liquids will grow if we can really strengthen the value proposition, which is what we have done. So I think our biggest growth opportunities moving forward are still in U.S. and some of the Europe focused markets. It does require a higher bar on innovation, and that is what we are preparing ourselves for. Andre, anything?

Your next question today will come from Andrea Teixeira of JPMorgan.

I wanted to just go back, and you've said many times, the value proposition that you're applying, particularly in the U.S. And we're seeing the increase in marketing spend, in particular, to investments and price reinvestments, as you called out. I was curious to see there's -- I understand a timing situation. And I wanted to see if you can parse out that timing impact.

And then more importantly, how have you learned in terms of those reinvestments and then the volume that you could get from those initiatives? I mean, I think you called out side, you called out some of the Baby Care -- but if you can explain to us and then perhaps think about how you're embedding those recoveries and market share recoveries into your guide?

Andrea. Look, I level up a second here. But we are very diligent in telling the categories to remain fully invested in the business. And I think that is what is allowing with the right interventions, the turn of business that you see in many parts of the world. And what is driving and fueling the share -- the volume share growth we see now in the U.S. and the increasing number of customer brand combinations that are winning. How that investment is structured really depends on the specifics of the business.

In Baby Care, we needed a short-term intervention on key price points because we are being out-promoted and outpriced Making that intervention while painful, is absolutely necessary so that the innovation that is launching and the brand communication can be effective, and you see the results on tape diapers.

In other categories, it is a channel price point conversation, for example, where we might have expanded our absolute cash outlay premium in club on certain categories too far. That requires correction and is being invested in. In other categories like in type, the example Shailesh mentioned, it's about product performance but not changing the price point, but improving the value that way. All these interventions are very targeted and very carefully constructed and embedded in the guidance range that we've given you.

We also will continue to invest in media. I firmly believe we have a big opportunity to increase the effectiveness of our media spend. Because of what Shailesh is continuing to describe the fragmentation of the media landscape, I don't think we're at 100% effectiveness potential, and that's the investment we're making in media capabilities.

So maybe a bit broader answer, but it's the combination of these interventions that are required to get to sustainable share growth -- and therefore, back to algorithm are embedded in the guidance ranges that we have given you. And if oil and the Middle East situation holds at the assumption, we feel comfortable with the midpoint of the guidance range because we're very certain that the interventions and the execution that we control will deliver. The uncertainty in the guidance range in our mind, entirely results from Middle Eastern oil and underlying consumer strength.

Your next question will come from the line of Chris Carey of Wells Fargo Securities.

I wanted to pick up on this line of thinking actually around investment levels. Andre, I'm getting to a bit of gross margin compression for the full year, which let's just say, if I put it all together, would imply SG&A doesn't grow a whole lot this year, if anything, maybe it can be a bit lower year-on-year, so implied to have good operating leverage this year. And I guess I'm mindful that last year was a kind of significant investment year ended at historically high levels for investment.

Coming into this year, you have a restructuring and overhead initiative, which is going to drive a lot of savings -- number one, is my premise somewhat logical around a bit of gross margin compression and thereby SG&A doesn't grow a whole lot. And if so, can you just give us a sense of how you would view the full investment suite over the last several years, say, fiscal '26 in and kind of the underlying levels that you would foresee once you normalize for some of these overhead savings and some of the automation initiatives that you have, just to give us a sense of that indeed, you will be going into fiscal '27 with full and robust investment levels behind your brands? I know you had kind of expanded on it to Andrea's question, but I'd like to dig just a bit deeper, if I could.

Yes. No, it's good to dig a little deeper here, Chris. I think the -- the setup for the year we just started is good. We have the productivity savings now flowing through. Obviously, half of the headcount reduction has been executed. The major market restructuring has been executed. So the benefits of that from a cost perspective will start to flow through into fiscal '27.

We have remained fully invested in the business. And if you look at our media spend and advertising spend over the last 3 to 5 years, the only way we've gone is up and as I said, I don't think note of Shailesh believes that 100% of that spending has been effective, and we will work to increase the effectiveness. And I think you'll see a combination of effectiveness flowing through to the P&L and effectiveness, increasing the efficiency of the spend. And therefore, we maintain full support to the brands but we can be more selective on the tools, the platforms and therefore, the spend levels that we will apply.

The third component that is part of the plan is very strong productivity on the cost of goods side. We've delivered record cost of goods productivity in the fiscal we just closed, and we will do that again, if not more. And that's our path to get to a reasonable EPS outcome with the cost headwinds we talked about, while maintaining investment in the business and providing the value balance that consumers need to give us the share growth that we want.

I'd just add 1 point to that, Chris, which is that we are looking at investment depending on the brand, the country and the category in a few different buckets. So there's investment in brand building, which shows up as advertising costs -- there's investment in product per often like we did on Tide to significantly improve value. So we are very, very choiceful and disciplined of where we are investing for that brand in that country to get the maximum lift -- so we've gotten much better in our learnings over the past 12 months on what is the right mix of spending across these different investment is to get the biggest lift on the business.

So in some businesses, it may be just fundamentally increasing media because of their brand building plans. In some, it may be strengthening the product investment. And so we have built a much better understanding over the past 12 months of where that balance and mix needs to be.

Your next question will come from the line of Peter Grom with UBS.

Great. I guess I wanted to ask just on the 1% to 3% organic sales outlook. And Andre, you mentioned what the low end versus the high end. But on the high end, you mentioned you assume some acceleration in category growth and partner share performance. But I think historically, category growth alone would already put you towards the higher end of that range. So can you maybe just unpack what's embedded from a category growth standpoint in the outlook? And then I guess just related, there's a big disconnect between consumption and shipments this quarter. Is this dynamic now in the rearview? Or said another way, should organic growth and consumption be more aligned moving forward.

Thanks, Peter. So if I dissect the guidance on the top line range, the base assumption is category growth at the current levels we're seeing in the market, which is that's a global number. So 2% value growth is the center line. To deliver 2% organic sales growth within that would require us to grow about 2.5 points because we have about a 40, 50 basis points headwind from the market restructuring on the top line that is still carrying into this year.

So this would mean if the categories grow at 2%, and we have underlying growth of 2.5% that would require share growth but would leave us at the midpoint of the range from an organic sales growth standpoint.

Our objective, as you can tell from the commentary, both Shailesh and I are making is to remain fully acted in the business. and to drive share growth and drive market growth. So we're building business plans that shift us obviously more significantly above market. But the construct assumes 2 points, which means in the middle, 2.5 points of growth for us, net of 50 basis points of headwind from restructuring would mean share growth at a minimum, okay?

On the shipment versus consumption, listen, it's the dynamic happens in Europe and the dynamic happens in the U.S. And the simple answer is we need to get to stronger growth in both regions. So those dynamics don't impact us as much. That's the macro answer that we would give our teams. We have to deliver stronger growth and that's what they are working on. The dynamics are slightly different in the U.S. It is truly pull forward of inventory quarter-to-quarter, which sometimes happens very late in the quarter like in quarter 3 and then shift of big events like Prime Day, which changes the way we have to recognize the trade investment that's what happened in Q4. I think the combination of the 2 was unusual. Therefore, the effect was bigger than we would typically see.

But I fully expect there's going to be always has been some level of trade inventory volatility quarter-over-quarter. We just need to get back to 3-plus percent growth, so it's less visible.

In Europe, the effect is more linked to trade dynamics and negotiations. There are different negotiation windows with retailers and fewer retail will apply some pressure in the negotiation period, which then shifts inventories. We generally catch up also that dynamic will sustain. So how do we make that go away? We have to accelerate growth in Europe.

Your next question will come from the line of Filippo Falorni of Citi.

I wanted to ask about the price and promotional environment in your categories. It seems like you have 2 opposite forces on 1 hand. You talked about the price intervention to trade to improve market share.

On the other side, you have cost inflation, which typically will result in higher pricing. So can you help us understand how you balance the 2? And one of your European competitors talked about second half of calendar year being a little bit more price driven. So maybe can you help us understand within your organic guidance the contribution from volume, price and mix in '27.

I don't see a fundamental change in our growth algorithm. But you're right, we see promotion increasing back to pre-COVID levels. Europe volume on promotion has increased by about 5 points in the most recent read. There's a little bit of seasonal dynamic in there. There's a little bit of FIFA-related promo activation in there, which you would have heard. So we would expect both the U.S. and Europe to over time return to pre-COVID promotion levels.

We're almost there. So I don't think that's a dramatic shift, but promotion will continue to drive some level of growth. Our plan assumes that we continue to price with innovation. We mainly use promotion to drive trial. We use innovation to drive a regimen from high penetration categories into low penetration categories by co-promoting.

When we talk about the customer plans, in the U.S., there is a very careful construction of the business plan that includes promotion as it comes to those objectives. But we don't believe that promotion in any way, shape or form is a way to build the business or to acquire users on a sustainable basis.

So we'll use it where it makes sense. It's not part of our desired business building strategies. We expect the return to pre-COVID level. We're cognizant of that, and we have built that into our assumptions. But we will continue to drive price/mix in this year like we've done in 20 out of 21 previous years.

I think just to add to what Andre said. Specifically, we think with innovation, there will be -- we believe we will be able to have a consistent price mix and a more balanced volume price and mix growth composition of sales. If costs remain elevated, we typically do see promotion levels go up or down. So if costs tend to be high, we will see promotions ease off a bit.

But as Andre said, it's generally trending towards the pre-COVID levels. But at a fundamental level, we have an innovation plan that will allow us to price but still deliver great value to the consumer.

Your next question will come from the line of Bonnie Herzog of Goldman Sachs.

I just had a high-level question on China. I was hoping for a little more color on your business. in the market and then your expectations for category growth in the region and maybe expected improvements to your share this year?

And then I guess, finally, are there any changes you're making to your innovation and our strategy in light of the consumer and macro?

Yes. I would say given where the consumer is, we are definitely raising the bar on innovation. We are making sure that the performance is very noticeable. That's important not just from where the consumer is today and becoming much more discerning. But also as we see the future of brand building and we see the environment there, real difference in product performance shows up in authenticity and plays positively when you look at path to purchase through social media or e-com or other such tools.

So we continue to raise the bar on what is expected out of innovation because not only is the consumer more discerning on value, and that's been a critical piece of it. But moving forward, we also think it's a multiplier to the brand-building efforts.

Your next question today will come from Peter Galbo of Bank of America.

Maybe if I could actually follow up on Greater China. Andre, I think 4% organic sales for the quarter, 4% for the year. So really a nice improvement or rebound in that business, and that's even with maybe some headwinds in some of the categories that you called out in the press release. So maybe just if you could help us unpack a little bit more on the China side, like Baby Care seems to be driving the bus, but presumably, the interventions if you can make in some of the other categories would help that total China number tick up from where it is?

And just what's being done in those categories outside of maybe Baby Care to help improve going forward?

Sure. China market continues to be challenged. So it's not a tailwind that we're getting. The market in aggregate is still down about 2% in the most recent reading that we have. The share breakthrough, the most encouraging part of the share breakthrough for me is the work the team has done to win across channels. We historically, as you know, were more centered around offline, more centered around brick-and-mortar and the team has been able to win in both. So we're winning in the physical store, and we're winning online, both on pure plays as well as social platforms.

So it's really broad-based from a channel perspective, which I think is the first encouraging sign because that means no matter where the consumer goes, we have a better position we're winning with that consumer.

From a category lens, SKI continues to shine. 8% growth, excluding travel retail in China. We continue to lead from a share perspective and the activation, the team is driving across the core but also the super premium LXP proposition drives continued share growth, continued growth in the SK 2 business.

Making progress in hair care on the core propositions Head & Shoulders and Pantene. There is a lower tier rejoice that we're still working through, but the core of the proposition is growing. Great progress on Fabric Care, progress on Femcare and Baby Care, the shining star with the growth rates you see and now back to #1 position in the market. So we are the #1 Baby Care brand in China, which is an amazing accomplishment by the team.

So broad-based opportunity still in a couple of areas. I mentioned the low tier of Hair Care, work to be done. There is still work to be done on Oral Care. On the paste side. We are actively deciding what we want to do in that space.

And the third component, where we still have work to do with mass skin. Mass skin is a market dynamic more than a brand dynamic. The Olay brand is a very strong brand in China but we have to find a way to grow that category and grow within that the Olay mass brand. So that will be the more detailed view of China.

Your next question will come from the line of Robert Ottenstein of Evercore ISI.

Just a couple of follow-ups. I just want to go back to start with -- go back to the gap between the shipments and consumption. And I was just wondering, this has been going on for a while now, right? And I'm just wondering if there's anything that is more distinct with Procter's business compared to your competitors? Because it does seem to be a little bit more of an issue for you guys. And I'm wondering if that is a function of where either your strategy, your brands or just your retailer concentration. So I would love to understand that a little better.

And then second, going back taking a look at the U.S. consumer, did you -- are you -- did you see a distinct impact from higher gasoline prices, when it went up, when it went down? How much of a driver is that? And then any comments on July would be helpful.

Robert, let me take the first part, Shailesh can jump in on the consumer side. I believe the very simple answer to your question is there something specific about P&G and P&G strategy that creates more volatility on the inventory side. I don't believe so. I think it's a very simple answer. We're bigger than everybody else, and we have higher velocity than everybody else.

So if you need to reduce your inventory quickly, you focus on the biggest brand on the shelf that has the highest velocity because that's how you can get your inventory dollars down. So I think that's the very simple logic of unstocking P&G and restocking P&G is easier. You can do it with a few decisions, plus we have the supply chain capability that we can deal with those swings.

So I think that's the answer. I don't think there's anything that I can think of that would make P&G a specific element of that conversation.

And I would just add to that, Andre, Robert, to your question that we see that even within P&G categories, there's a variation. So it's not like every category would have had a sell and sell out. On our grooming category, we had a reverse dynamic where actually the sell-out was less than the sell-in. So that goes to Andre's point that depending on velocity, depending on other dynamics, even within our categories, we see a mix difference.

And what the other point I would make is that fundamentally, over a large number of years, we are pretty sure that the consumption data in any of these is good over any rolling period of time. So when we take a rolling 6 months basis or a rolling 3-month basis, the disconnect kind of goes away. So what we are focused on and when we work the teams is get focused on growing consumption, that's what Andre was saying earlier, get it high enough that the variations don't make a difference firstly, and grow it high enough because whatever you grow at eventually for the fiscal, it will balance out.

So we know that on a fiscal basis or even on a 6 monthly basis, we get it fairly evened out.

On the consumer, I can't point or we can't point to gas as a specific impact. I think it's a general impact where you see the consumers that are well off, continue to behave as they've behaved before, larger pack sizes to find value the more pressured consumer that will be more impacted by gas prices or incremental $100 of gas cost per week. They continue to look for smaller pack sizes. They continue to be very affected by promotion patterns. So none of that has changed. What I'll tell you, Robert, our consideration also in the guide is longer term, if the Middle East conflict sustains and oil goes up and gas prices stay high and inflation increases. So that impacts consumer sentiment, we believe in the longer term, I don't think we're there yet.

So there's kind of a multiplier effect here. If the Middle East sustains oil prices keep high. We expect somewhat of an impact on the top line as well as the cost impact that you see. That's why we have the range as wide as we have it. Because of that connection between both elements.

I'll just add one point maybe to this, that our portfolio points on the portfolio within that. One is that we do have a good vertical portfolio. So when we look at grooming, which is beginning to, for example, show very strong results, I think a lot of those results are driven by activating vertically and horizontally the portfolio. And we're seeing some of the best results we've seen in grooming in a long time as they've activated that portfolio. So having a portfolio that is vertically strong like ours and also horizontally to the -- one of our best-performing grooming items is the arimolaser headroom device which is one of the hottest selling items and one of the big growth drivers. I believe that's at $300 in most places.

So you see kind of the leverage of the full vertical portfolio from IPL down to the disposable blades. The second part is our portfolio is a little more skewed to the $100,000-plus than it is to the less than $50,000. So our user base is a little skewed that way. So what we see is a little more of discernment by consumers, not an inability to buy.

Your next question will come from the line of Kevin Grundy of BNP Paribas.

I actually wanted to pick up Shailesh on the comment you just made a moment ago. But really with respect to longer-term outlook, in the portfolio. So specifically, I really have two questions. One, is there anything that you see structurally -- so longer term and much more lasting in nature, particularly around the areas of consumer behavior, competition, value orientation, which you touched on. Is it possible this is more lasting than something that's more transitory?

Or even pricing power as we look at the commodity cost inflation embedded in your guidance, is there anything there that kind of leads you to believe that the company can't return sustainably to 3% to 4% organic sales growth kind of coming off a couple of years of kind of more disappointing low single digit, 1% kind of growth.

And then two, related to that, if you indulge me, sort of as part of the strategy, is there anything that gives you pause now about the current portfolio or sort of relative attractiveness of these categories that should potentially be reconsidered by you and by the Board.

It's a great question. I'll try and break it into a couple of different pieces. So we do see some demographic shifts and behavior shifts, which will create certain higher-growth segments than not. And we've always said we do expect probably higher growth rates in segments like beauty and health, and we expect to be accelerating that part of the portfolio even more. So we definitely do see some trends that are driving some parts of our portfolio at much higher category growth rates than others. We see much higher growth rates on e-com growth, for example. We expect to leverage that much more in some cases where we have a share gap, we catch up on the e-com there.

So I think we are seeing certain segments that will grow faster, and we are adjusting and making the required choices on portfolio to address this. There is a second piece, which I think has been the key for growth for all of us, no matter what the situation is. So let me just give -- it's what I would call growth in adjacencies where we have expandable consumption. Probably one of the best examples we have on that is Fabric Care, where you can see growth rates over 5% over a decade and when you look at that and break it down, you will find probably laundry having a decent growth rate but double-digit growth rate on fabric enhancers. That is true almost in every single category we operate.

I mentioned earlier the Power Oral Care example. Fees should have a decent growth in the years to come driven by innovation. But there's a question in my mind in a market like U.S., the power brush, for example, will be a much higher growth rate part of the business. And so on what we are doing on each of the categories is we are getting very disciplined on what is the adjacency with expandable consumption -- it is not something new, but we know when we do it well, we are able to get well past market growth rates that are current. And in fact, they drive much more future growth from a category standpoint because it just lifts the total number.

The final point I would make on this one is that the -- our in the base propositions we have, which are already at premiums to the market, when we get those activated like we're doing with Tide liquid and have those growing mid-to-high single digits, that too lifts the category growth rate. And which is why if I pull it all together, Kevin, I think with a deliberate strategy that we have. We do see sequential improvement, and we are not acting it to be incremental, to be clear. There are a bunch of innovations and initiatives we are working on, which completely step change the out-year growth rates because of the interventions we make.

I'll give you another example on that one is Zevo, which we launched. Zevo been driving a really stagnant category by addressing a totally new needs. So we feel there is plenty of growth opportunity. We don't feel we are constrained by the current consumer environment. We know when we innovate well against the right growth opportunity areas, we can get back to high growth rates. Andre, do you want to add?

No.

Your next question will come from Kaumil Gajrawala of Jefferies.

Very I want to build on some of the earlier questions with so much focus on market share. It can be implied maybe wrongly so that you're a victim of whatever happens to the categories. But I think you mentioned in some of your answers to questions that market share growth will drive category growth. And I want to make sure just sort of mathematically, that is correct. And what will it take to get to that stage? Are we in sort of a first stage where share growth without category growth and category growth comes later?

Or in the past, we've heard so many of the initiatives of Procter & Gamble have made or things that grow the category. But it feels a little bit like with the growth rates you're providing or some of the messages that you're sending related to whether it's macro or consumer or whatever it is, is that the category is going to do what it has to do and then you're taking the appropriate intervention.

So just trying to understand what were you seeing in these categories and the category growth, are those real run rates? Or do you feel like you can pick them up? And what would be the path of what we would observe if that was going to be the case.

Let me start, Kaumil. I think the base assumption here is a relatively stable environment, which is what we've been seeing for the last 3, 6, 9 months. And pending any change to that, which we don't see a driver of at the moment other than major inflation shock to the consumer base. But our job, we view as we need to drive innovation in our categories. We need to drive interest in our categories. We need to drive traffic to the category.

And I think the point we made earlier, when we do that, successfully, that generally grows the category because we are somewhat premium versus the category average, and it drives new users into the category. And with doing that, we drive share.

Now is that going to happen every time in that sequence? No. So for example, on Baby Care, when we react to a value component in the market that we need to address, we grow share because we need to return to value competitiveness. But from there, we will continue to innovate. We will continue to do exactly what I just said. So the playbook hasn't changed.

Our intention to grow and get back to algorithm, and that's why we take longer because we want to take it that way, not via heavy promotion and volume and value share gains that are not sustainable or require continued fueling of promotion. We want to do it with innovation. We want to do it by driving traffic into the category. If we do that well, we grow share.

I would just add, building off your point, Andre, that where we are clear what is the shorter-term interventions, and we are very clear on what the innovation interventions are. And we know that when some of those innovations go in, they will lift the category. So the sequence of some of these could be different, like on Baby Care, if you have a value gap and you fix it immediately, you may not immediately see the market impact.

But in parallel, we are working innovations that will lift the category. And we do that across every single category from Hair care to Skin care. We look at doing it. So it won't always happen in tandem. But generally, if we are growing the category should be growing because of our portfolio.

And second is we do focus on innovations that can step change category growth. I think if you take EVO and beads that are excellent examples of that. I mean, EVO is completely incremental to the category.

And the message to our organization is very consistent with that. So grow the market that will allow you to grow share sustainably will allow you to get to a balanced top line and bottom line construct. So it's all 4 components at the same time.

Your next question today will come from the line of Robert Moskow of TD Cowen.

I kind of wanted to drill down on 1 category in the U.S., and that's like home care, paper towels, paper tissues, doesn't get a lot of talk on these calls, but it's a big percentage of your sales that strikes me that it's kind of like the best example of a category where you really do need that premiumization to justify a gap to private label. And private label has been a problem in this category.

So is it possible to delve a little bit into in light of your talk about premiumizing to justify pricing, is this a category where you can do this successfully? And is it a priority even for fiscal '27?

Yes. Let me start on that one, Robert. On -- I presume you're are seeing fundamentally family care. On Family Care, we -- now the -- I would rate it as the category where we have probably the biggest technological advantage of all the categories we play in. So we have true ability to deliver superiority on that category. We have innovations like when we did software that lifts the category, that lifts us.

We have a program for this fiscal, focused on doing the same -- the one area to COVID that we probably did not have as strong on family care or because of the high demand had to depriorize a bit was the vertical portfolio. And I think that was the reason we had a vertical portfolio on Family Care was to be able to leverage the full scale and also defend against private label.

One of the things that we are doing is reactivating the vertical portfolio on both Charmin and Bounty while we continue to innovate on the base Charmin and Bounty. So what you will see is a better activation of the vertical portfolio there. and strong innovation on both Bounty and Charmin to continue to have that pricing in.

And the only thing I would add is -- this is a category where price points matter a lot versus private label. And with the commodity-based pricing, we have gotten too away from a price point perspective in some channels. So that correction is happening. And one encouraging sign to leave you with is we have grown users for the first time in family care in the most recent period. And that's before some of the intervent that Shailesh was talking about have even been activated. So I look at that category and say, we probably have a very clear path forward. But as you rightfully point out, that needs to be done the right way because this category only grows if Charman and Bounty grow.

Your next question will come from the line of Olivia Tong of Raymond James.

Shailesh and Andre, we've talked a lot on this call and in the past about how important is for P&G to control its own destiny and create your own tailwinds. And as the line between retail and demand generation continue to blur. Can you talk about some of the actions you are taking and investments you're making to specifically improve that? Because your size likely still benefit to you, but perhaps not to the same extent as it does in other areas like promotion and category growth.

So can you talk about what's been done? And looking back at this year, where do you need to enact further change going forward? And what you expect to achieve in fiscal '27 by year-end?

Thanks. I think the biggest one we are trying to do is really change the way we work with our retail partners. Fundamentally driven by the fact that the landscape has changed both in terms of a sharper differentiation in performance amongst the retail set -- but secondly, amongst what it offers beyond the classical merchant partnership. We have tremendous synergies on media and tremendous mutual gains to be made on demand creation and category growth by leveraging that. There's tremendous benefits on supply chain collaboration.

And generally, where we have been focused on is getting a much better demand signal generation to marketing content to closing the loop and having a short path to purchase with each of these big retail partners. I feel very, very happy with the progress we are making and the partnerships we are building. So that is probably the biggest area, and it is one where actually size does help. It kind of helps to be the largest media spender in this environment because for a lot of them, their big market growth opportunity is becoming a media platform. And so naturally, we become a good customer for that -- so we see a lot of opportunity, and we see a lot of progress in partnership on brand building and demand creation with retail partners leveraging our joint assets. and that will continue to be the case moving forward. So I actually think that is a trend that will continue to favor us longer term.

Your next question will come from the line of Edward Lewis of Rothschild & Co Redburn.

Just wanted to return to Tide. Clearly, Shailesh brand you know very well from your long association with it. Obviously, a lot of interest in evo but clearly early days. And I just wondered that was a return to the Tide liquids and the relaunch there. I think you referenced high single-digit growth. Now is that in line or better than you would have expected? And how much is what I would think some with the apparent success of that move, how much will that make you consider such approach in other areas? So does that then -- would it be then logical to assume within the algorithm that we're going to get more volume than price going forward and that would be a market success of the changes you're making?

I would -- let me go back to the tide as the basis and then build from there. So we -- the EBITDA expectations is a simple answer. When you put such a massive investment in product performance on such a large part of the business, it's very difficult to estimate a number like high single-digit growth. What did we do? We said price is the same give a much better performance. Intuitively, you know it's going to work, but you can't really say is it going to grow 3%, 5%, 7%. And so I really commend the team there for having the courage of their conviction to say, no, if I really step change the performance of Tide, the users will reward us. And what we have seen is a reward higher than what we had anticipated. It is absolutely the basis on which we will continue to drive more of this across the company. It is what -- when we refer to it as a stronger core, that's what we mean.

You can take any of our brands, take Head & Shoulders, 85% of our user base is on the base Head & Shoulders. So -- on each of these areas, we are looking to see, are we absolutely delighting the consumers on our base while, of course, innovating and doing new things. So it gives us clear proof of concept, improving our base proposition while having the right value by balancing price and product performance is what we need to do.

So when we say -- we're really focused on user growth. User growth is about value and value is about do we have the right product for the price and the marketing inputs we give it. So I think Tide was a great example for us and it's always good when you get a success on the largest part of your business, they become more believers than that. Andre?

In a broader sense, we've had the post-COVID period, 100% of growth driven by price. We will return, and you see that in the construct to a more balanced model where we see both price and volume being drivers of our time growth. And that needs to be the model to return to algorithm. So as sales that innovation on the core, if we're catching up on value might not come with pricing but innovation in a broader sense will come with pricing to continue to drive trade up and price mix as part of the growth model.

Your final question will come from the line of Michael Lavery of Piper Sandler.

Just obviously, a lot has been covered already. I wanted to come back just to some timing considerations. And I think you were really clear about the cost pressure skewing to the first half. And on some of the interventions, at least once you've already identified, those should seem like they're in place by the end of the first half. But for some things like the scaling the 4 key capability areas and some of the other kind of transformation elements. Is it right to think that the fiscal second half starts to be when -- at least where you sit now, you should be hitting your stride? Or is some of that a longer process?

I guess, maybe how do we think about how different the first and second halves could look? And just in 1 sense, kind of what inning we're in for some of the plans that you've identified already?

Yes. Let me answer part of it, and then Andre, feel free to add. But I would say, for sure, you will see greater momentum in the back half on these capabilities being scaled up. And we will be much more in the implementation and application stage of many of these capabilities. Now there's no big bang date on this. So some of it is already beginning to play out, and that actually continues to give us confidence to move faster on many of these. Some still need some capabilities in place, but it is -- for sure, we are looking at this as something that progressively gets applied. And by the back half, we'll definitely be in a much further along the journey of the application of that -- so that's one part of it.

And second, a lot of our interventions do on the business itself, along some of the points we've talked about going in the front half. And so we do expect to have the cost anniversaried as we go into the back half as well as have continued sequential improvements in our top line as we move forward.

Okay. With that, I would just close it out by saying, listen, we are pleased with the fact that we are growing consumption. We are stabilizing our value share which puts us on a good foundation to get back to better growth. We continue to drive a robust productivity plan so that we can continue to invest in the business and continue to make sequential improvement as we have said.

And as Michael, to your last question as well, we believe that we will continue to see improvement semester to semester. That's something that Andre mentioned in his comments. We generally feel good about the state of where we are and how it puts us for achieving our future growth and getting back to long-term algorithm.

Just one last piece before we sign off, I want to remind you that our Investor Day will be on Thursday, November 19 here in Cincinnati. We'll be sending out invitations tomorrow morning. We're excited to have you all here. Thanks for joining the call today, and have a wonderful day.

That concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.

RECONNECT

Great. Good morning. I'm Robert Ottenstein. I head Evercore ISI's Global Beverage and Household Products Research.

We're super excited to be starting day 2 with Procter & Gamble. I think everybody is well aware that Procter has over 20 billion-dollar brands. In fact, I think they've stopped counting how many at this point. But people may not be quite as aware of the fact, is they also have, supporting that in the back, hands down what is generally acknowledged as the most reliable supply chain. Moreover, and enabling the supply chain and increasingly enabling the brands at the front end and the back end is also an IT capability that is widely regarded as the envy of the industry by anybody that you talk to.

In that regard, we're super excited to have Seth Cohen here with us. Seth runs the information technology office, Chief Information Technology Officer at Procter. He joined Procter in April of 2024, having come from a similar position at PepsiCo and at Reckitt. So I don't think there's anybody on the planet who has run 3 world-class information system programs.

In his capacity, he leads the digital transformation. He oversees technology strategy, data, AI, cybersecurity and really the digital capabilities around the world.

Joining him is Keri Cowan. Keri ran China Hair for Procter & Gamble, I think, for the last 3 years. She's moved over now as Senior VP in the IR department and is taking the helms there, if not already, very shortly. I'm not sure exactly on the timing on that.

So super happy to get started here. So Seth, you're still fairly new to Procter. As you came in the door and you started to kind of get a sense of the levers and the muscles of Procter on its digital capabilities, what was your early assessment of the capabilities? And what are your focus areas over the next 2 years to help deliver the strategic vision of the company? And just to kind of hone in on it, if you could talk about maybe 2 or 3 key goals as CIO.

No, that's a great question. First of all, thank you for having us today. I'm excited to talk about our journey, where we are and the great work that's been accomplished and what's left to be done.

As you commented, I've had the opportunity to work at other big, big brand companies. And coming into P&G, one of the things that I was quite impressed with, and this isn't maybe the limelight of AI, but I think it's the most important part of AI, is P&G's data capabilities. P&G is known in the industry of having some of the most standardized systems of records of any of our peers.

So when you think about like SAP, again, not terribly exciting -- I guess if you're an SAP person, you think it would be. But in general speak, not terribly exciting, but yet we have a single instance of SAP globally that runs all of P&G. And while from an application lens, there are some advantages from my view; from a data lens, it's a superpower. Because if you think about the data that then is structured underneath that, the transactional data, it is 100% common.

And therefore, when we start to then feed the AI -- and I joke around, AI without data is simply A, it's artificial -- it really starts to drive new capabilities. So we've been focusing on harnessing that data into a core data lake, as well as the other piece that we're now able to do because of that foundational capability is our AI factory, which is where all the models sit, all of the digital products can be built upon sit there, we can scale.

In terms of where we want to go and where we're focusing, I would say 4 key, I'll call them, toolboxes. Customer and consumer is first. And there, we're focusing on integrated brand building. So you think about all of the concept to creative to media as well as enablement of the sales force, is a big, big piece there.

Second is supply chain. Supply Chain 3.0 is a big enabler for us from both a productivity, especially, as well as a reliability angle. R&D is number three. And there, focusing on how AI can make us faster at both creating insights as well as generating new products. And lastly, internal efficiencies. And that's a big, big area for us that we're driving towards.

Just for those who are new to some of the lingo, can you just briefly explain what exactly is a data lake? It sounds kind of fun and rural and nice, but what does it actually mean and why is it important?

It's not necessarily a place you go for your sun tan. But what a data lake does for us is, if you think about what can happen when you have individual systems that are out there, the data can become quite siloed. So if you want information related to production, you might go to an SAP system. If you want data related to a sales force, you might go to Salesforce, et cetera.

The problem with the siloed-ness of the data is if we're looking at creating digital products, we want to string the data together to let the AI start to go across functional boundaries to try to solve business problems more from an end-to-end point of view. A data lake is the technical capability of allowing us to bring the information ultimately together.

Got it. Great. Great. So one of the things that investors are very much focused on, right, is we tend to live in the very short term, we get the scanner data that comes out every week, every 2 weeks. And although we're supposed to be looking really long term, people look short term. And what seems to be happening in a lot of industries, including yours, and particularly in areas like beauty, is that the smaller so-called digital natives who don't have any of your R&D, any of your supply chain, any of your muscles, but they do have some savvy, right, in terms of dealing in the digital landscape. In aggregate, they seem to be winning in many ways.

So I was wondering if you could talk about kind of the dynamics of competition on Amazon with the digital natives and how you're using these capabilities to meet these new sorts of challenges. And maybe talk about the difference between competing on Amazon versus Walmart.

That's a great bunch of questions. So let me try to take them one at a time. So I want to lead with we are absolutely also looking to get inspiration to learn from where others are succeeding. We're dealing with spaces that are evolving very rapidly. So please don't treat anything that I say as we got this solved, pencils down, and we're moving on. So we're looking externally all the time to see who's winning, who's doing things that maybe we ought to think about doing it in a more scaled way.

When we talk about beauty specifically, and it's a fascinating category, coming from my last few companies, I would say beauty was probably not as focused as it is here, it is a very unique category in how the consumer ultimately engages into the category. And as you rightfully call out, a lot of small players are in that space. Now the thing that just to be balanced with is I think Nielsen number that, please don't quote me, is somewhere around 95% failure rate for the small players in these spaces.

So as we look at these different providers in these spaces, we don't want to necessarily emulate a 95% failure. But there are learnings that we do want to make sure that we are both embracing and scaling. And I would argue, scaling is the name of the game. If we -- if you're doing just a series of pilots, it's not going to be materially impactful to the company.

So from that, I would say some of the inspirations that we've gotten, and we've already built in now into the beauty categories and now we're scaling to other categories, is this whole consumer journey, meeting the consumer in the generative AI spaces that she's playing in, meeting the consumer in social, leveraging different vehicles for that consumer to engage with us whether it be channels that we are authoring or key opinion leaders, they call them KOLs, which we are using to help enforce the capabilities of the products. And then of course, user-generated content is also a big, big play. So we have a lot of activities going on in scaling the abilities to do that.

Your question around Amazon and others, the thing with the retailers that is great, in my opinion, is that we actually all have a very common objective. And that is we want to meet the needs of the consumer at the end of the day. We have a saying at P&G, and I love it, "Consumer is boss." And it really is the DNA of the company. Everything that we ultimately do is about the consumer.

We define what we call 5 vectors of superiority that we feel if we can meet 5 vectors of superiority with the consumer, we ultimately win with the consumer in meeting his or her needs. And those 5 vectors are around a superior product, in a superior package, with superior communications, like media, as well as superior selling, so the product is available where it's supposed to be, and at a superior value. So we feel similarly to what Amazon would say or what Walmart or whoever we deal with would say, if we can meet those 5 vectors of superiority for the consumers that are shopping in those channels, we ultimately have met the needs that we're trying to. And we're constantly evolving these and trying to improve upon these.

So back to your question around Amazon, how do you win on Amazon? It's no different than if we can meet the 5, we call, 5 vectors of superiority, for the consumers that are shopping on Amazon, we feel that we're in a good place to win. And that's what we focus brand by brand with the different retailers, on making sure we are in fact meeting the needs. Or if we're not meeting the needs, making sure we have the right interventions in place to meet those needs.

Great. So look, if you walk into a Walmart, you're all over the place, right? You can't avoid Procter & Gamble. You go on Amazon, you need to be on the front page, right? That's super important, right? So one of the things that we understand, or have been told at least, is that Amazon has changed the algorithm a little bit and maybe constantly does so in terms of how do you get on the front page, how do you get that visibility. Can you talk a little bit about that? And it's probably a lot of confidential state secrets, but how do you try to game the system, or even in -- not even game it, but just make sure that you have a fair representation and that other people don't kind of do end runs around you to kind of have outsized presence on Amazon?

No, it's a great question. I'll focus more on what we call the organic side of the equation, meaning you're not looking at a paid advertisement from us, but rather you've done a query on Amazon. And I would say this is probably similar to Walmart or any of the dot-coms that we deal with. The algorithms, I can't really speak of, right? I'm not privy. Would I like to know? Sure. But it's not necessarily something that they're open to share with us.

But back to this idea of 5 vectors of superiority, Amazon or Walmart or whoever we're talking, Tesco, you name it, they want to make sure that they're meeting the needs of their consumers. And so what they're leveraging is their data sets to figure that out. And what I mean by their data sets, things like ratings and reviews, things like the product description page, so the information we provide, are highly valuable in correlating -- and sales, of course, in correlating the consumer question and search to ultimately what gets presented.

So what we do focus on with Amazon, Walmart and others is because we have a very large proprietary consumer behavioral database, we're able to now inject our insights and learnings from the consumer, what they're looking for, into our product descriptions. So ultimately, the consumer good companies are feeding the product descriptions of our products in, so that when the consumer asks what is the best, I don't know, razor to use, we're able to take that question and ensure that in a very easy-to-understand language in the product description page, that's included. So that when their algorithms are searching for answers, we're able to come up with the right answer.

Of course, ratings and reviews are huge for everybody. So we want to make sure, if there are great stories to be told, we want to make sure we're telling them. We also want to make sure if there's maybe not so great stories to be told, we're reacting and understanding how to adjust so we can get back to that 5 vectors of superiority.

So I don't have an answer from the algorithm necessarily. But I can tell you, we do a lot of matching of what we call generative engine optimization, which is, in the old days, we used to see SEO search, now it's more generative search, to make sure we have a strong match for what they're asking for, to ultimately what data they can actually pull out of the details to provide to the customer.

Great. Great. So one of the questions that has started coming into myself and Javier, who covers Procter with me, is what is agentic marketing? What is it? Is it good, is it bad for Procter? Is it good for Walmart? How does it change the game? How do you use AI to deal with it? And I think a lot of the questions at the core, I don't think people really understand what it is, and it's, I guess, it's developing, it's become a big buzzword. So maybe you can enlighten us a little bit in terms of what is agentic marketing. How does this change the consumer path to purchase? And what are the new challenges and opportunities that it brings?

It's a great question. And if you have a definition, I would love to hear your definition as well. I think agentic is a -- it's an interesting term. And I suspect if I were to go around the room and ask all of you to define agentic, I might get slightly different answers by individual. And what I'm going to focus on now is more the agentic kind of path to purchase. I think -- I'm hoping later we'll talk about media at some point.

But the realities are, thus far, we're not seeing this idea of I'm going to let my agent just buy for me. And while this is not necessarily settled yet, we're not sure how far this will go, an example I would give from past days that gives me reason to believe that the human will still be involved, is if you think about the subscriptions that we are often asked to subscribe to products, how often in the past have we subscribed? When you think about it, subscriptions are not that different from agentic in terms of it's an automated workflow that just suddenly pumps out products to you on a regular basis. But most humans are not comfortable even in that very specific use case to do it.

I'm still of the belief that we're not sure how far this agentic workflow will take on. I do believe that agentic, it already is and will continue to grow as part of the workflow. And so what we focus on for that point is we want to make sure that from a consumer journey perspective, and more and more of the consumer journeys are starting usually either in the wild -- when I say in the wild, like ChatGPT or Gemini, or within the walled garden of a specific retailer such as, well, Amazon used to call it Rufus, they just renamed it to Alexa, or Sparky at Walmart, we want to make sure that when questions are asked, that we're able to understand that question and make sure that our information is being presented in a very accurate and thoughtful way.

And so we have a lot of activities at scale that we're deploying around all of our categories where we spend time on what we call GEO search, which is this concept of generative engine optimization, understanding where are the engines going to seek out information to then make sure that we are presenting the right information for it to come back. And then from that point, to ensure, back to the earlier discussion, around this idea of making sure though that our product information catalog, our product descriptions in the retailers, in whatever sites that we're selling in, have a clear match to it, so these engines, these LLMs have an easy way to match.

And so that's what we're really focusing a predominant amount of our effort on, to ensure that there is that cleanness and that, I'll call it, accuracy of how that question turns into an insight for the consumer, then turns into, hopefully, a purchase of our product.

Great. Great. So if things weren't challenging enough already, at the same time this is all happening, right, media is proliferating like crazy, and the lines are blurring between what's a retailer, a media, you've got influencers. I mean it's crazy just how complicated things have become in the last 5 years and kind of moving at a very fast rate. So that media proliferation and how that changes the consumer path to purchase is something that Shailesh has called out at conferences.

So big challenge, I'm sure it's a big part of your mandate and working on the marketing side. How is Procter responding to that environment? And how can your capabilities help Procter deal with this rapidly changing media world where lines are really blurring between retailers and media and everything in between?

No. You're right, it's a very fast-moving space. And from a consumer lens, and I'm sure -- we're all consumers. That's the beauty of working in this industry is that we can all relate to the journeys that we're talking about, is a lot of information is often being thrown at us, whether it be in doing searching or whether I'm on TikTok or I'm on Facebook or wherever I'm playing, the number and potential touch points that could be there are exponentially different than the past.

So what we're focusing on in this space, and I'll kind of take a walk down memory lane, before the explosion of social, consumer good companies might be able to get away with maybe 1 to 4 updates on the ads on linear TV for the year and be absolutely fine. Now we're dealing with needing to deal with anywhere up to 10 to 200x that number to be able to engage with the consumer wherever she may be walking or wherever he might be looking for products that are out there.

So there's a couple of elements to this. One, I've mentioned is this whole generative engine optimization element. And that is quite important for us to make sure that we're staying on top of, to make sure that when you ask a question about a product, especially if it's a product in our categories, that we're able to give a thoughtful response through the engines that are out there. And I think that's a big, big unlock.

We now have also layered in, and we're scaling this across every one of our categories, this idea of, well, then how do I generate 10 to 200x that content depending on the category needs? In the old days, you would leverage agencies. Well, the reality is, and we've talked about this, in some categories, the volume that we need to get to and the scale we need to get to, it's not realistic to assume an agency would be able to meet those needs. So we're internalizing some of the agency capabilities, specifically around media concept to creation, leveraging generative AI. And then once I get to creation, adaptation of it.

And this, it might not be well understood, but just having the asset is good, but the problem is, is that every site you go to has very specific requirements of that asset on their site: the size of it, the color palettes, et cetera. So baking that all in into an automated workflow is critically important for us.

Taking that then to the next level of, okay, well, now that I have this asset that's been sized for a specific location, what do I do with it? Well, we have tools, and we've in-housed this over the last few years, where we have media buying tools that are, I would argue, best-in-class. In fact, compared to where we were when we were using external help for this, we are seeing a tremendous higher impact at a lower cost for us to be able to do things. So the same ad is able to be presented and targeted to the right consumer base at the right time of the day, at the right, I'll call it, purchase inflection point to be able to do things.

And then the round trip of it is measurement of performance. And you mentioned earlier that, and you're 100% right, the lines are blurred. Used to be very clean. I have media companies and I have retailers. Well, now retailers are becoming media companies. And arguably, social is becoming retailers. Think about like TikTok Shop as an example. So to be able to see the attribution of that ad that was seen all the way through to a purchase decision, so that we can react -- in the old days, it would take us 4 or 5 days to see that. We now see it in, I'll call it, near real time, not 100% real time, so that we can then quickly react to that, to adjust that workflow as we move forward.

Great. Great. So one of the things that has really proliferated is influencers. And there's -- and it's proliferated so much, there's macro influencers, there's micro influencers. I mean who knows how that's being segmented, right? And we have seen in some cases where that hasn't worked out so well for some companies, in the beer industry, which I don't need to mention. But look, how do you deal with these influencers? And I don't even know how many you have. I mean, I think some companies we talk to, it's in the multiple thousands, like 50,000 in some cases.

So maybe if you could talk a little bit about how you help the marketing team manage influencers, impact on brand equity. And to the extent that it's possible and relevant, maybe contrast how the influencer ecosystem in the U.S. may contrast with what's in China. Because it's been very big in China as well, where they call it KOLs, whatever. And it's a different -- it may be a different type of thing. But would love to get your thoughts on that.

It's a really good question. So KOLs, key opinion leader, is the term that we're using internally for this capability. And let me first try to paint out the different levels that you would have in these spaces.

So at the, I'll call it, the highest level or the most controlled level, we have the content that we're putting out ourselves. The next level below that would be what we call these key opinion leaders. And these would be the few but very influential people, have lots of followerships and lots of influence, that we would contract with to get them to enforce brand messaging for us on behalf of the folks that they represent.

When you mentioned the numbers in the thousands or tens of thousands, that's when we start to get into user-generated content. And that is also part of the equation for us. And there's different mechanisms to get user-generated content. One is just pure organic, someone just absolutely loves Old Spice deodorant and wants to scream from the mountaintops how much they love it. Hopefully, if you guys like it, you'll do that for us.

But others might be us nudging it. So for example, we have loyalty programs that we will occasionally put out messages, hey, if you like this new product and are willing to talk about it, tag us and you might win -- you'd be put in a lottery to win something, et cetera. So we have these different archetypes that we're looking at in terms of who we get to enlist to talk about our brands.

The most important point -- and this is the piece that we've now really ramped up. This is one of the key learnings that we had. You asked earlier about, hey, what happens in beauty when some companies are doing things? One of the early learnings that we had was we were not aggressive enough in the measurement space in this thing. We've deployed this now and we're actually seeing some great success. But we're now able to see in near real time how the KOL performance is.

And we're looking for a few things. First, are they on message? So we're using generative AI to tag and understand if they're on message or not. Second, are they getting a level of followership that's giving us a signal that this thing could become a viral communication vehicle? And so we can then boost that ad or boost that content so that more and more people can ultimately see it.

So we spend a lot of time -- and this is not just the KOL space, we're now focusing this now on the user-generated space as well. And the nice part is it sounds very complicated and tricky, and you mentioned China, we got a lot of -- actually, we got a lot of insights from China. China is probably, I don't want to say they're leading and everyone is going to follow, I think China is probably in a space where I don't know if many countries, including the U.S., will ultimately get to the level that China is at in terms of its dependency in the space. But there's a lot of learnings that we've gotten from China that we're now applying into other parts of the world around how do we start to manage the space in a far more systematic way.

And as I said, it's not -- it sounds complicated, and I guess to some degree it is. We don't have that many platforms that we are looking at. If you think about like the number of apps that you all use on a daily basis, my suspicion is you're using probably 10 or less apps, right, which -- my suspicion, I could be wrong. That's typically going to be the case of most consumers. So are you on TikTok? Are you on Meta? You understand. Are you on these very targeted -- Reddit could be another good example. Are you on these platforms? And then from that, we're able to then interpret everything I just mentioned.

Great. I'm almost getting dizzy thinking about the complexity of everything. And so the next question, on the marketing side, is from an organizational perspective in terms of capabilities, how do you build an organization, and how does that organization interface with the rest of the company so that you can actually execute effectively on everything that you're talking about? I mean do you have marketing people on your team? Or do you have people from your team on the marketing teams and the brand teams? I mean how does this all actually come to be?

Yes. At the end of the day, the success or failure of any of these initiatives is the change management effort, people change management, to get it into the ecosystem. We try to take the approach of being relatively functionless as we go after these capability areas. So I would say we don't have this black box group that does work and it gets thrown over the wall for others to deploy. We actually partner with the category teams, we call it integrated brand building teams, to be able to drive all this.

So far, I would say the reaction from the enterprise is incredibly positive. And the reason for it is, A, as I mentioned previously, we're internalizing a lot of work that used to be done by agencies. So people are very excited about being engaged and being part of the solution. Second, I mentioned GEO. GEO is -- generative engine optimization, is a great tool to figure out how you optimize responses back, but it's also a great tool to understand where the consumer is actually spending their time.

I'll give an example. In the baby category, as moms or parents are asking questions in the wild around different types of products for their baby -- diapers comes to mind, we have Pampers as a premier diaper. I would have assumed, before we did this work, that more than likely these people are probably headed either into the brand sites, pampers.com, or possibly the niche sites like bump.com (sic) [ TheBump.com ] or Good Housekeeping. Do you know what the #1 -- or one of the #1 sites was? Was Forbes. Forbes for diapers. And it was because there was an engagement going on in one of the discussion forums for diapers.

And so the reason why I think that is an interesting insight for this brand, going back to your brand point, is understanding where she's spending her time is, I would argue, almost half the battle of figuring out then how to engage with her. If I'm spending all of my time on pampers.com, optimizing that, yet she's over on Forbes, I have a disconnect. So part of it is that.

And then what we try to then do is we bring together the whole platforms of tools that we have. So we go from understanding insights, and we can talk a little bit about how that comes to life, but then going from that, we then move quickly into the creative process, which is all the generative AI work we're doing too. Same teams are involved in trying to bring this to life. Then we go into the whole adaptation to the different platforms, into then the purchasing of the media, into then the full cycle back. But ultimately, I think that the organization is very excited.

Now the daunting part is what was true yesterday from a technology lens and what's true tomorrow might not be one and the same, so we have to stay fairly agile in how we do it. But because we have this strong foundation, we feel very comfortable and confident that we can make those adjustments as necessary.

Great. Great. So look, Procter has an R&D capability that is probably greater than all your competitors combined and then some. And most recently, you're rolling out one of the most impressive arrays of innovation across categories and across the world. So maybe you could talk a little bit about how your innovation process has changed with AI and maybe tie that into leveraging your incredible R&D capabilities.

Yes. And this is such a fascinating space. R&D starts with -- is probably not going to come as a surprise, with the consumer. So when we talk about the 5 vectors of superiority, what we are trying to figure out is where we have the next unlock to create innovation that will improve upon the 5 vectors of superiority.

One of the things that has been so incredibly impressive as I've joined P&G is P&G spends an exorbitant amount of time with the consumer. So we have over 2 million touch points each and every year with the consumer. When I say a touch point, I'm not talking just a focus group or just a panel. We have thousands of what we call connected homes where the consumer has allowed us to come into their home with IoT sensors to basically "see," with quotes around it, how they're using the product. So things like we have sensors on wrists so we can see how they're washing their hair, as an example. I say see, not visual, but with the motion of the sensors.

This turns into approximately about a 35-petabyte database that we have of consumers. And what we've been able to do, and I don't think any other consumer good company has this capability, is we are able to create digital twins of these consumers. Not synthetic consumers; that's an averaging of consumers. These are digital twins. And we're talking thousands upon thousands of digital twins that we can create.

And why that's good for us is we're able to then test concepts with these digital twins. It's not to suggest we go from this idea of testing a concept idea with the digital twin, we go to -- we just produce it. No. But it takes this funnel down to a manageable number that we then can engage with real consumers to ultimately testing it. So it starts with this whole insight piece where we're able to take all of this information that we have and test it up against what the consumer ultimately is saying.

And then from there, and we've talked about this publicly in the past, we have a very strong capability called Molecular Discovery Suite, where we're able to compress the innovation time line from what used to be years, like 5-plus years of discovery work, down to, with the right master scientists in play, less than 6 months at times, depending on what we're trying to solve for.

And this has turned into many types of innovations, whether it be innovations on the product side. So as an example, in the U.K., one of the insights that we learned was, in the U.K., the consumers at the end of their dinner would take all their dirty dishes and put them in a sink full of water and let it soak overnight. And the rationale was that's the only way you're going to be able to get those clean before you put them in the dishwasher. That was the insight.

What we came up with is something we call the Fairy Powerwash, in the U.S. we call it the Dawn Powerwash, which is a spray solution that sprays out. And what we've been able to do, and it's been tremendously successful, is we've been able to nudge the behavior for that consumer to, instead of soaking overnight, in fact, I think the slogan is "Skip the soak," and be able to take those dishes, put it directly into the dishwasher, spray it with the Powerwash spray, and have an amazing experience of clean dishes and clean everything that comes out of that dishwasher.

Another example is in Brazil. We had an insight of there was this worry of deodorant creating staining underneath the arms. And we were able to innovate a product, very quickly, that I think the slogan is "Stainless freshness," is what they call it, for Old Spice. And that too has been wildly, wildly successful.

So it starts with the insight. And then from that insight, we're able to then quickly iterate through to that final product design.

Great. So to wrap things up, our research department management and Julian Emanuel, our strategist, have really been pushing all the analysts to really look at AI and how that's going to make a difference with the companies. And you've done a great job talking about the changing marketing landscape, how this is really going to help drive growth. But they want numbers, particularly on the cost side.

And I know you're not going to give us any numbers, and it's probably impossible to do, and you wouldn't want to do it anyhow. But maybe if you could talk about the key buckets perhaps of savings. Because everything that you're doing costs money to do. So how are you funding it? Maybe the key buckets of savings. And maybe things that you aren't doing anymore that you used to do, or things in the future, near future, that you won't be doing anymore, where you can get savings and then all us analysts can kind of try to put numbers to it ourselves.

So we were speaking previously before our talk today, I struggle answering the question of how much do I spend on AI. Because it's almost like asking the question, I have a hammer, how much is my hammer? And then I'm going to look for nails. Instead what we try to do is we try to take an approach of, holistically, what is the capability we're trying to bring online? And then with the combination of process, people and technology, we then build this solution.

But your question is a good one because there is, if you think about it, 2 key benefit areas. One is growth, so superior products, et cetera. And one is we should be able to do things more efficiently. We talked about the media example, as an example. Let me talk about a few other areas that we're focusing on that gives you -- hopefully gives you guys a reason to believe that there's some real stuff here. And ultimately, I think our performance will speak for itself at the end of the day. So at the end of the day, I don't think there's going to be such a thing as an AI-native company. I think it's just going to be a company, because everyone is going to have the AI and the companies that have adopted it the best will be the ones that are outperforming in the marketplace.

If we go back to those 4 toolboxes we talked about previously. So we talked about the customer, consumer. We talked about the internal efficiency, supply efficiency and R&D. I think R&D we've talked about already. On that internal efficiency piece, I mentioned previously that we have a great, great, great capability with this data lake, not the sun tanning kind, but the kind we're going to get all this great data in.

What we are finding, and this is where I think, just fact versus fiction, a lot of the generative AI press will talk about this easy button. Get the data, you get our tool or our AI capability, and you're off to the races. It's not necessarily as easy as it sounds. There's this area that we call a semantic layer or an ontology layer, which is the ability to have a description and a relationship of the data that is in this core data lake, that allows the AI to be far, far more productive than it ever would have been in the past. And this will be, I believe, a differentiator for Procter & Gamble.

So in today's world, before AI, you would take data and you create dashboards, right? That's how most people would have operated. The next evolution of that will be, if you are able to understand the relationship of the data, the AI is able to -- be able to understand it, you should be able to talk to your data. So instead of it being a dashboard, why not just ask how is customer X doing in this geography? And through the semantics and through the ontology, the data will be able to talk back.

The next layer of progression is going to be insights that will be generated automatically. Because the AI will start to learn what's going on. And then finally, get back to this word agentic, how do I then automate a response back into the organization?

So we have already been piloting -- not piloting. We've been deploying this in pockets in the organization for use cases that make the most sense. We're doing more and more of this. So as an example, we're using AI right now largely to do financial forecasting without humans touching it, as an example. There will be far more use cases as we move forward. And this is where we're spending a lot of time, whether it be in the selling organization, in the R&D organization, in product supply, et cetera.

In our supply chain, it's another area. We have a big initiative on Supply Chain 3.0. We've talked about unattended operations. It's going incredibly well, where we're able to do parts of the day without people in the plants. As you would suspect, there's both a productivity point of view, but as well as I think there's actually a capability that we're able to do. The trick there was we don't necessarily just take the existing process and just put AI against it. We have to reorganize the process so that a portion of the day we can automate out of the process, where other portions of the day we still need humans in the middle to be able to do things.

We have other capabilities in product supply for quality, for example. So we have tons of IoT devices on the lines where we're able to see quality concerns before they become an issue and we're able to adjust the lines very, very, very quickly.

And then on the sales force side, tons of information going to the selling teams so that they're able to walk into a store and be able to spend their time, not trying to survey the store to see what's out of stock, what's not. Because that data, we have that data. But rather talking to the store manager or store buyer to say, listen, this, we're having a gap here. And I look across the neighborhood that you're in, you're underperforming other places because they have that gap filled. And we're able to see some good benefits there.

Great. Well, we've gone over a few minutes here.

Sorry.

No. No. We could go on for hours. Thank you so much. Really appreciate it. And look forward to your -- the rest of the day.

Thank you, Robert.

Thank you.

P&G would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections.

Additionally, the company has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non-GAAP and other financial measures.

Well, good morning, everybody, and welcome back to day 2 of Deutsche Bank's Annual Global Consumer Conference. Happy to have you all here. Especially happy to have Procter & Gamble back to the conference, Chief Financial Officer, Andre Schulten, and Head of Investor Relations, John Chevalier. For today's session, P&G, led by Andre, will lead us through a presentation for about 25 minutes, and then we should have the balance of time about 15 minutes or so for Q&A that will follow the presentation. .

And with that, I'm going to hand it over to Andre.

Thank you, Steve. Good morning, everyone. All right. So let's start with a review of results through the first 3 quarters of the fiscal and then a few words on strategy. I'll share some examples of the near-term interventions that we are making to accelerate growth before we get into the Q&A that Steve mentioned.

Starting with results. We delivered 2% organic sales growth through the third quarter against the backdrop of softer consumer markets, and a dynamic geopolitical landscape. Focus markets are up 1%. Enterprise markets are up 4%. Growth has been broad-based across categories, 9 out of 10 categories growing or holding organic sales and 7 of 7 regions holding or growing organic sales. Fiscal year-to-date, 24 of our top 50 category country combinations grew or held share. And in the January to March quarter, 26 of our 50 category country combinations grew or held share. Global aggregate value share past 3 and past 6 months is now in line with prior year.

On the bottom line, core EPS was up 2%, following the top line and reflecting our commitment to prioritize full investment in the business while managing the impacts of the volatile external environment. We have averaged roughly $2 billion of productivity savings annually across cost of goods sold and SG&A over the past decade helping to fund consistent reinvestment back into the business, and helping us to mitigate cost challenges. Despite the volatile environment and the more recent external cost pressures from the Middle East conflict, in our third quarter earnings release, we maintained fiscal year 2026 guidance ranges across organic sales, core EPS and adjusted free cash flow productivity.

As a reminder, our outlook included a headwind of approximately $150 million after tax for fiscal year 2026 from a combination of commodity-linked cost inflation, feedstock exposures and logistics disruptions resulting from the conflict in the Middle East. Almost all of these costs will be in our fiscal fourth quarter. As we close the fiscal year, we are monitoring the U.S. consumer trends, which have been softening, as you have seen in publicly available data and incremental short-term cost impacts.

Looking forward, we have provided perspective on the annualized growth impact of sustained elevated Brent crude oil prices at $100 a barrel. This cost impact could be up to $1.3 billion before tax, pre-mitigation. We intend to maintain a disciplined approach to investing in our business. In light of the current macroeconomic backdrop, we continue to focus on sustainable investments in the business to deliver sequential progress and return to algorithm over time.

At this conference 1 year ago, Shailesh and I announced a 2-year noncore restructuring program. In the volatile world we are in, I am glad we already began the hard work to create opportunities for us to invest in growth and manage the uncertainty while paving the way to move our organization forward to embrace a more nimble approach to running our 10 categories enabled by more holistic roles and technologies.

Recall, our goal was to better focus the portfolio and to streamline our operations and the organization. We are on track to deliver against our commitments and continue to estimate the total noncore cost of this program to be in the range of $1 billion to $1.6 billion before tax. The portfolio choices include choices of brands at the country category level and even product form level, which may include some brand divestitures. These include, but are not limited to, go-to-market changes in Bangladesh and Pakistan and streamlining of the portfolio in Laundry, Baby Care, Fem Care, Oral Care and Grooming.

These choices allow us to focus on more profitable segments of our business. The brand and product form discontinuations have been a 30 to 50 basis point headwind to organic sales growth, and this impact will continue throughout next fiscal year. As an example, the Asia, Middle East, Africa region, organic sales growth in the third quarter would have been 3.5% without the portfolio choices versus the 1.5% with those impacts included in the reported numbers. These portfolio moves enable us to make related interventions in the supply chain, rightsizing and right-locating production to drive efficiencies, faster innovation, cost reduction and even more reliable and resilient supply.

For example, we have shifted sourcing of Baby and Fem Care in Saudi and the Philippines to improve operational and logistic efficiency. Automation, including adoption of touchless operations is playing an important added role in delivering cost improvements across the supply chain. Each business unit is implementing organizational design changes to make their operations more effective. We see more opportunities to make world broader and teams smaller, making work more fulfilling, faster and more efficient, leveraging digitization and automation opportunities.

Over the past 2-year period, we have plans -- over the 2-year period, we have plans to reduce our nonmanufacturing workforce by up to 7,000 roles or 15%. The restructuring program provides us the flexibility to continue to invest in excellent execution of our strategy and to, over time, return to our long-term algorithm.

So moving on to strategy. We continue to invest in creating superior propositions for our consumers and retail partners with relevant innovation, powerful brand campaigns across every touch point and continuously improving in market execution across all channels and platforms. We are fully activated, it's working. Therefore, we have high confidence in continued improvement. We remain committed to our integrated growth strategy, a portfolio of daily-use products and categories where performance matters, superiority across product, package, brand communication, retail execution and value, productivity with multiyear visibility to fund superiority and deliver financial results at the level you and we expect, constructive disruptions to stay ahead and an organization fully engaged, enabled and excited to serve consumers. The strategy has enabled us to deliver significant growth and value creation over the better part of the past decade and while we believe the strategy continues to be right, we need to adapt our execution in light of the changes and the external environment.

While the core strategy remains constant, we have consistently outlined 3 major changes in the landscape around us. Media fragmentation and changing consumer media preferences are affecting how consumers collect information about our categories including social media, retail media, AI portals. Inflation across food, energy, health care and many other areas of spending has taken a toll on consumers and how they assess value. Recent geopolitical events have elevated this to a new level.

The retail landscape is changing, more concentration, but also brand proliferation, retailers are becoming media platforms and media platforms are striving to become retailers. In short, the consumer path to purchase is changing every day, and we expect an even more intense pace of change in the next 3 to 5 years. And these changes are as much a short-term reality as they are a long-term opportunity for us. To adjust to these changes in the external landscape, we are adapting business plans with urgency. The changes include putting the consumer first, transforming brand building, creating holistic partnerships with retailers and driving stronger core and bigger more innovation.

We are already seeing strong results in the parts of the business that have made these interventions holistically. Latin America has most broadly and completely implemented many of the adjustments. In each of the 3 quarters of fiscal '26, the business in Latin America has grown mid- to high singles, has grown share and has driven market and profit growth. There are many country category combinations where these interventions are leading to growth. So let's highlight a few more.

Building on the success of Dawn Powerwash in the U.S., Fairy Skip the Soak in the U.K. is a great example of deep consumer insights, driving innovation. Consumer research showed us that more than 70% of U.K. consumers soak dishes before washing, different than the U.S. With this insight in mind, watching how the consumer used the product in the home, we created the Fairy Skip the Soak idea, which instantly and intuitively helps consumers understand what the product is and why they need it.

Integrated superiority across all vectors where the product name inspires the packaging, in-store execution and communication all supported by superior performance that delivers on the promise. So let's watch the ad from the U.K., please.

[Presentation]

The results, Skip The Soak lifted the total Fairy brand household penetration to 61%, up 5 points in the first year. Skip The Soak drove 5% category growth and 7% Fairy value sales growth. This is a great example of following the consumer and addressing local habit differences. .

Next example, authentic, personal conversations and trusted recommendations from experts and social communities are crucial to cutting through the fragmented media landscape, driving awareness and influencing consumer purchase decisions.

Pantene in Germany built their communication to support this insight. The team engaged relevant top German beauty opinion leaders, hair experts and stylists to share their endorsement about Pantene with their communities. At the same time, the brand team activated micro and [ mitty ] influencers through curated Pantene gift boxes sparking organic conversations, reviews and content across social media. And in addition, Pantene elevated its presence at culturally relevant talkable events like the Oktoberfest and Berlin Fashion Week, where great hair styling matters.

We created immersive styling experiences with celebrity stylists, indirectly reaching influencers and celebrities, seamlessly integrating our brand story into high-impact earned content within their relevant communities. The impact earned influencer post grew 4x, and total reach tripled with a 20% reduction in media spend. Pantene grew users reaching 130,000 new households, resulting in sales growth of 17%, value share growth of plus 60 basis points versus a year ago in Germany.

Tide is a great example of a stronger core and bigger more innovation. This past fall, we launched the biggest upgrade to Tide original liquid in over 2 decades. And we have already shared the dramatic performance turnaround, and the growth continues, adding 4 more months of accelerated growth, while we expanded boosted to Tide Free & Gentle. Let's watch a Tide boosted ad that shows the performance and the consumer value.

[Presentation]

A great example of a bigger more is Tide evo. Tide evo represents the biggest innovation in laundry, crafted by concentrating active surfactants ingredients into a mixture that is spun into individual fibers. This new-to-the-world formulation and assembly process is proprietary to P&G, and protected by over 50 granted patents, making it a truly unique technology. Incrementality was strong in the test market and the innovation and communication has an overall boost on Tide cleaning equity across forms. Evo is now available in store nationwide,; and it's building trial and awareness. And here is the latest Evo ad.

[Presentation]

Mr. Clean continues to innovate on its core proposition and solving more cleaning jobs with new additions to the portfolio, core and more. The brand has launched new innovations on the Magic Eraser platform that improves the longevity with a denser foam and a wider micro scrubbing structure that now lasts 2x longer. .

We restaged the packaging to show room and mass-focused names that clearly signal where to use the eraser. At the same time, we launched Mr. Clean shower and tub scrubber to address consumers' #1 most hated cleaning chore, the shower and the tub. Mr. Clean shower and tub scrubber delivers a quicker, easier and deeper clean with the power of the Magic Eraser, a sturdy grip handle, built-in squeegee, and a pivoting head for hard-to-reach areas. So let's watch the ad.

[Presentation]

The result, Mr. Clean is winning consumers and driving category growth, delivering 18x its fair share of the bath and cleaning category growth since launch. In addition, Mr. Clean Erasers are also growing, with sales up 11% in the total market and household users, up 13% since launch. Mr. Clean is solving consumer tensions with innovation that delivers on the core brand promise and the bigger more solving more cleaning jobs.

Our Latin America team is winning across all segments of the cough & cold category with a consumer-first mindset. The team uncovered a deep consumer insight, Latin American consumers perceive products as more efficacious when they deliver a sensorial experience. Consumers need to feel the immediate sensation and relief to believe the product is working. This insight, feel immediate relief was brought to life with upgraded packaging, brand communication and retail execution that visually showed the product bringing fast relief. The sensorial benefit was incorporated across the full Vicks portfolio, ensuring one unified brand while leveraging the deep equity of the core Vicks VapoRub. Let's watch 2 ads.

[Presentation]

The brilliant execution of this consumer insight has led Vicks to be the #1 cough & cold brand in Latin America. Over the past 12 months, Vicks has grown organic sales mid-teens and gained over 1 point of share while growing the category.

So each of these examples enhance the perceived value equation for our consumers by improving product, package, communication, retail execution and in some cases, price, up or down. With the consumer at the center to growing users. If we are not growing users, some element of the consumer value equation needs to be adjusted. Our priority is to address consumer value gaps by working on the numerator of this equation through innovation and improved execution. The simplicity of linking superiority to user growth in this way, increases the urgency to adjust the vectors as needed versus assessing each element individually.

When we get the equation right, we grow users, we lead market growth and grow market share, sales and profit. In addition to the near-term interventions we are making in each brand category and country, we continue to lead constructive disruptions to stay ahead. We are doing this with better innovation, more flexibility, more efficient supply chain, better decision-making and resource allocation with more external focus.

We will leverage P&G's strength and unique capabilities to create the CPG company of the future. These strengths include unique innovation capabilities, advanced data lake and AI platforms, brand building reinvention to create deep consumer connection and an industry-leading supply chain. It took years to build these underlying platforms and capabilities, and we are now in full scaling mode across the company, and we will go into more detail on each of these pillars at Investor Day in November.

Today, I want to highlight how our industry-leading supply chain is benefiting P&G as we work through the current global supply chain challenges related to the Middle East conflict. As an example, surfactants are the most oil-sensitive ingredient in our materials portfolio, the closure of the Strait of Hormuz directly constrained the primary feedstock of this critical cleaning agent and the industry lost around 20% of primary feedstock used to make surfactants across the world when factoring in logistical constraints.

Despite these significant disruptions, we have not gone out of stock or made compromises on product performance. The same is true for nonwovens, polyethylene, polypropylene and perfumes. This outcome was not improvised. It reflects years of deliberate investment and formula flexibility, business continuity planning, proprietary chemical manufacturing capabilities, deep supplier partnerships and intentional digital investment to drive data connectivity across the supply chain. We are confident we have the right strategy and choices to win in the long term, building on our successes in the near term.

And with that, we'll be happy to take your questions.

Okay. Thanks, Andre. .

Appreciate it.

Okay. You covered a lot of ground there. So let -- let me start with, I think, what is top of mind for a lot of investors, and you mentioned watching the U.S. consumer and some of the softening that you've seen most recently, although it looks also to me fluctuating kind of period to period. So maybe we can zero in there and just go a little deeper into what you're observing and how that's impacting both your tactics in the market and your planning for the future.

Let me start maybe with the longer term. I think if you look over 12-week rolling periods, the U.S. consumer has been relatively stable and consuming in the range of 2% to 3% in all categories. We don't believe that's changing in the near term, but we see volatility driven by event timing, holiday timing, short-term shocks to their wallet like a $6 gas price. But if you, again, step back and leave the 1- to 4-week period view and look at a rolling 12-week period, 2% to 3% is what we're seeing.

Most importantly, we believe that over a 12- to 18-month period, so looking 12 months ahead, 18 months ahead, we can help grow the market back to 3% or higher growth. We believe that innovation based pricing, penetration growth and more investment from retailers in our categories as excitement is building, will bring the consumer back to the aisle and will grow the category at the historical rate somewhere between 3% and 4%.

And that's really where all the focus is, where all the interventions are that I've talked about, Steve, is really, a, grounded in the fact that, okay, there's short-term volatility, but the underlying consumer is relatively stable at 2% to 3%. That though is not good enough. We want to have the market growth back to 3% plus so that we can go back to our algorithm on the top line in mid-single digits, and that's where all the interventions are focused. What are the interventions? It's really that simple equation that we put up there, where we know we grow users when we have the combination of product, package, communication, go-to-market execution relative to the price, right.

So we also know that if we don't grow users, something must be done. So the simple equation takes all the time back out of the conversation because we know if you don't grow users, you don't have your superiority equation right, which triggers immediate action in the categories. That's what we've been focusing over the last 9 to 12 months. What is the exact action plan in the top 50 category country combinations. And most of them are in the U.S., to be honest, to get back to user growth. User growth means category growth means us growing share, growing top line and getting back to algorithm.

Great. I'll come back to that in a second. But I guess if you pan out and you think about other key markets around the globe, maybe a little bit more context into what you're seeing around the world. And in the context of the cost dynamic that you mentioned, just visibility is low, but how are -- how is that all factoring into your planning considerations for '27?

I think the balance of markets is actually strengthening and maybe a little less -- a little less volatile than the U.S. right now. We look at enterprise market. We have sustained category growth around 4%. And we have sustained share growth. Our momentum in LA is continuing to strengthen. You've seen high singles growth, and I think that is sustaining share growth consistently across the categories. Asia, Middle East, Africa is growing and accelerating.

We quoted the number of 3.5% growth, if you exclude the restructuring decisions. But that number even is accelerating. So we feel good about Asia, Middle East, Africa momentum. Europe enterprise markets and Europe focused market stable, 1% to 2% growth. So the balance of markets is doing well. China continues to be challenged from a macroeconomic standpoint. However, our categories have also returned to slight growth. Our P&G categories have returned to slight growth in the range of 2% to 5%. So if I look at the balance of the portfolio, relatively stable towards low to mid-singles. The key variable for us is I come back to North America, to the U.S., getting the U.S. back to 3% to 5% top line growth will bring us back to algorithm.

Okay. On those country category combinations where you made interventions to reestablish superiority, what's the scorecard as we sit here today, 9 to 12 months from restructuring announcement? .

So let's maybe pick the U.S. as a good example. Mindy, our President of North America basically is measuring brand customer combination. And the score is, do you have a plan, a firm plan aligned with the customer to grow share within the next 90 days. And that scorecard is now 80% green. So a plan has been aligned, is being executed to grow share. Where that plan is hitting reality, we are seeing the results that we want. Is it a guarantee that all of that 80% is going to turn green? No. But compared to where we were 9 months ago, I think we have a much clearer picture of what needs to be done. The plans are aligned with our retail partners. The execution is aligned, the innovation is ready to go. So that's being executed.

And the same is happening in the rest of the world, not at the customer level, but at the country level, so the brand country level. So slowly, but surely, we're working through the top 50 category country combinations. In our most recent quarter, you've seen 26 of our top 50 are holding or growing share. We need to get that number up closer to high 30s, high 40s to have consistent share growth.

Okay. What about -- if we look at the restructuring from a different -- kind of from a functional perspective, right? So there is elements that we've talked about in the presentation, portfolio simplification, organizational simplification. If you were to just assess progress against those original objectives today, how are we tracking and where are the biggest unlocks to come as you think about the next 12 months?

From an organizational standpoint, we are right on track. So if you look at the 7,000 role reduction that we targeted, 15% of nonmanufacturing headcount, we are right on track after year 1 to have slightly more than half of those reductions executed. The balance of the organization is clear, has been notified. So we're working through the rest. The teams are doing a fabulous job doing this in a very respectful way. You see we're taking longer. We're taking 2 years to execute that reduction. You see some of them being executed in other industries ad hoc. That's not the way we do them. We take time. We talk to the individuals. The benefit for us is no disruption on the business, absolutely no disruption on the business, which is important to us, important to the organization.

The teams then are reorganizing. They are building smaller business teams. So instead of having every function represented in every brand team and every customer team, you see more and more choices to combine roles, to make teams smaller, make roles bigger. And that is enabled to a large degree, by technology. I've talked before about 4 technology toolboxes we're developing. The first one is really focused on that. How to extract data, how to use technology and AI to analyze data at scale and how to replace internal reporting requirements and automate them fully. That frees up an enormous amount of time for the teams to really focus externally on the consumer. Those 2 boxes are ready and they are being scaled across the organization.

Brand building is the second toolbox. How do we reinvent brand building and come to a more integrated AI-based content creation, content amplification across platforms, measurement and then close the loop again. Again, that toolbox is being developed and scaled as we speak. Innovation, how do we create innovation from consumer insights, concept ideas at the same time, develop the product, qualify via digital twin so we can bring it on the line faster and get it to market quicker. Toolbox #3 already being scaled in R&D. And number 4 is essentially Supply Chain 3.0, which, to a large degree, is automation, running unattended operations, unattended warehouse operations. So that's our lever to efficiency in the cost of goods space.

All 4, Steve, are well qualified. We now need to make sure that we can, again, scale them, push them out to the organization. And I think our biggest opportunity then is adoption, which will enable, I think, further opportunities. And our conviction today is that we can grow this company post the 15% reduction in nonmanufacturing headcount that we can grow this company without adding headcount, which is really hopefully then preserving the simplification and the agility that we're trying to drive with a 2-year intervention plan.

Okay. Very good. The category that we haven't talked about today, but we've talked about it for a while, and we'll talk about now, Baby -- Baby and Family, mostly Baby. I'm assuming that on that scorecard of those 50 top country category combinations, that's an area where there's still a lot of progress to be made or at least progress to be made. Where are -- where do you see the Baby business today relative to competitive conditions? And what's your -- I guess, your forecast for progress? .

Baby is a tale of two cities, not to stretch a story here. But outside of the U.S., baby Care is growing, growing sales, growing share, leading innovation, leading market growth. We've talked about China many times, but in a market where birth rates are declining 15%, Baby Care is growing 20% and growing share. In Europe, Baby Care is growing share, where the only other competitor really is private label, which is priced less than half of Pampers. We're growing, growing share.

Enterprise markets in general, we're growing and growing share, biggest challenge in U.S.

And I think the U.S. is a dynamic of heavy price competition in the short term that we saw, and we don't like. Baby Care isn't an expandable category. So just because you cut prices, you're not going to sell more diapers. So if you start cut prices or driving heavy promotion, all you do is contract the market. So we don't like that playbook. We are adapting to the reality that we're seeing in the market. By adapting to that reality, we've returned diapers to share growth. You've seen it in the last 4-, 6- and 8-week period.

So it's not rocket science, but it's just not the way that we like to drive the category. So we're complementing that with very strong innovation. You also see strong brand launches based on Chinese imports. You see Rascal & Friends. You see some of the Zuru brands having taken a foothold in some of the retailers. That's the reality we need to acknowledge. So we are developing products that are able to compete and win against those competitors. And that's really the journey we're on. So short-term value competitiveness is critical. That already brings us back to the share growth area.

Now it's about truly developing the most superior proposition across every value tier, and that's what the team is on. We are not limited here. I think we have both the consumer understanding, the technology understanding, the ability to invest. But Baby Care, as we talked, Steve, Baby Care is a longer innovation cycle category, simply because of the complexity of the manufacturing process. But I have no doubt we will get there. .

Great. Okay. You talked in the presentation about concept of media companies becoming retailers and retailers becoming media companies, retailers consolidating, I guess -- and the partnerships that you're forging to succeed in that new environment. Can you go a little deeper and talk about exactly the nature of the partnerships and why they're advantaged versus other companies?

I don't know if I'm going to address the second element of your question. But the first one, look, if you look at the categories we're in and the brands we have, they are foundational to driving traffic. Winning with Pampers is foundational to getting young families onto your platform or into your store, winning with Tide which has above 60% share of the laundry category is foundational to drive traffic to your site and to your store. Growing these categories, which are huge and profitable for retailers is a critical element of their business model. So there is a joint interest in driving growth in these brands if the fundamentals are right. .

So the conversation starts with what is keeping us from growing with you, which is finding if there's profitability issues, finding synergies in the combined supply chain, finding synergies on how to create value is a very easy path to unlocking that issue, which we've done successfully with multiple retailers in the U.S. The next question is how do you drive traffic. So how do you capitalize on the strength of the brands on your platform? What is needed and getting the teams together and sharing in their own language, what is keeping consumers from transacting is a critical element. And we found that putting teams together in a room and working through it is an enormous unlock to what might be an intervention we want to make, either in terms of search, in terms of offers.

So for example, on some online platforms, we had the common belief that bigger transaction size was the right way to go. And we found that many of our retail partners were actually struggling with that because they weren't able to get new users onto the platform. So trial driving -- pack sizes, trial driving activity was key. Working through those elements unlocks exactly what they are after and what we are after, new users to the platform, new users to the brands at a profitability that is attractive to them, building on combined capabilities from supply chain to media activation. Every time we have that conversation, there's an enormous amount of value to be unlocked.

Great. We have a couple of minutes left. I guess maybe to close, there's an accelerated amount of activity inside P&G amidst lots of external challenge. I guess what is the level of focus inside the company on these priorities as you've outlined them and the energy that exists around accomplishing the goals you have set?

I would describe the energy as an enormous amount of impatience. And the impatience is only rising as you get clearer and clearer on the interventions that need to be made. And I think with a new leadership team with Shailesh coming in, we have new leaders across many parts of the business, which are building on great experience in the business, that in patience is only growing. So I feel a great amount of energy.

Many of you will hopefully come to Investor Day in November. So you see many of our new leaders. It's actually a pleasure to work with the team and to see the urgency with which they are acting. Again, what our job is to balance urgency with diligence to make sure we get this right. But I feel good about where we're headed, and I feel good about the capability of the team to get us back to algorithm soon.

Great. With that, we're out of time. But I want to thank Andre and John and Procter & Gamble, and thank all of you for joining us today. Thank you.

Thank you.

Good morning, and welcome to Procter & 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&G's most recent 10-K, 10-Q and 8-K 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 & 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 & 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 Schulten.

Good morning, everyone. Joining me on the call today are John Chevalier and Keri Cohen, our Senior Vice President of Investor Relations. I will start with an overview of results for the third quarter of fiscal '26 and then discuss our progress on near-term business interventions and longer-term transformation efforts. I'll close with guidance for fiscal '26 and then we'll take your questions.

As we expected, we saw a solid acceleration in top line results in our fiscal third quarter. Bottom line results reflect the strength of the top line progress with partial offsets from incremental investments in the business and energy cost impacts from the conflict in the Middle East. Taken together, we remain on track to deliver within our guidance ranges for the fiscal year.

Organic sales increased more than 3% versus the prior year. Volume increased 2 points, pricing was up 1 point and mix was flat for the quarter. We delivered broad-based growth across the business with each of our 10 product categories growing organic sales. Skin and Personal Care grew organic sales high single digits. Hair Care, Family Care and Home Care grew mid-single, Personal Health Care, Oral Care, Fabric Care, Baby Care, Feminine Care and Grooming, each grew low single digits.

Growth was also broad-based geographically with each of our 7 regions growing organic sales. Focus markets were up 3%. Organic sales in North America grew 4%. Volume was up 3 points, driven by improved consumption and trade inventory dynamics. We saw a benefit from base period trade inventory destocking and a modest help from a current period trade inventory increase late in the quarter, driven by Easter timing. Price/mix added a point of growth.

The Europe region was up 2%, led by enterprise markets being up 6% and modest growth in focus markets, led by the U.K., Italy and Spain. Greater China organic sales grew 3%, continued growth in what remains a challenging consumer environment, Pampers and SK-II led the growth, each up double digits. Enterprise markets in aggregate grew 5% for the quarter. Latin America organic sales were up 5%, with Mexico and Brazil each up high single digits.

Organic sales in Asia Pacific, Middle East, Africa enterprise region was up 4%. Global aggregate market share improved to in line with prior year with positive trends through the quarter. 26 of our 50 -- top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share came in at $1.59, up 3% versus prior year on a currency-neutral basis, core EPS was in line with prior year. Core gross margin was down 100 basis points, and core operating margin was down 80 basis points versus prior year, strong productivity improvement of 330 basis points was offset by healthy reinvestment in innovation and demand creation.

Currency-neutral core operating margin was down 70 basis points. Adjusted free cash flow productivity was 82% and we returned $3.2 billion of cash to shareowners this quarter, $2.5 billion in dividends and over $600 million in share repurchases. Earlier this month, we announced a 3% increase in our dividend, continuing our commitment to return cash to shareowners, and this marks the seventh consecutive annual dividend increase and the 136 consecutive year P&G has paid a dividend.

In summary, this was a solid quarter of progress. Positive sales and share trends and earnings growth in a difficult environment. Geopolitical dynamics have thrown new challenges in front of us, but we will continue to fully support the business to maintain the momentum that we are creating.

As we move forward, we remain committed to the integrated growth strategy, a portfolio of daily use products and categories where performance matters. In these performance-driven categories, we must deliver irresistibly superior products across the product itself, the package, the brand communication, retail execution and value. We continue to drive productivity with multiyear visibility to fund innovation and demand creation and to mitigate cost headwinds.

Constructive disruption is key to staying ahead of and to creating emerging trends and opportunities in our fast-changing industry. Finally, an organization that is fully engaged, enabled and excited to serve consumers and to win in the marketplace.

Now P&G's point of difference. Our competitive advantage comes from outstanding integrated execution of these strategies across all activity systems in the company and from anticipating what capabilities are needed next. While the core strategy remains constant on last quarter's call and at the CAGNY conference, we outlined 3 major changes in the landscape around us. media fragmentation and changing consumer media preferences are affecting how consumers are collecting information about our categories, including platforms like social media, retail, media and AI portals.

The retail landscape is changing, more concentration, but also brand proliferation. Retailers are becoming media platforms and media platforms are becoming retailers. Third is inflation across food, energy, health care and many other areas of spending has taken a toll on consumers and how they assess value. Recent geopolitical events have elevated this to a new level of concern. In short, the consumer path to purchase is changing every day, and we expect an even more intense pace of change in the next 3 to 5 years.

The interventions and investments we're making in P&G capabilities to adapt to these changes are beginning to bear fruit, strong innovation supported by sharper consumer communication and retail execution. A few examples. Building on the success of Dawn Powerwash in the U.S., Fairy Skip the Soak in the U.K. is a great example of deep consumer insight that's driving innovation.

Consumer research showed us that more than 70% of U.K. consumers soak dishes before washing. With this insight in mind, we created the Fairy Skip the Soak idea, which instantly and intuitively helps consumers understand what the product is and what it's for. Integrated superiority across all vectors, where the product name inspires the packaging, in-store execution and communication, all supported by superior performance that delivers on the promise. Skip the Soak drove Fairy brand household penetration to 61%, up 5 points in its first year.

Mr. Clean continues to innovate on its core proposition and solving more cleaning jobs with new additions to the portfolio, core and more. The brand has launched new innovations on the Magic Eraser platform that improves the longevity with a dense form and a wider micro scrubbing structure that now last 2x longer.

We restaged the packaging to use room and mass-focused names that clearly signal where to use the Eraser. At the same time, we launched Mr. Clean shower and top scrubber to address consumers' #1 most hated cleaning chore, shower and tub. Mr. Clean Shower & Tub scrubber delivers a quicker, easier and deeper clean with the power of the Magic Eraser, a sturdy grip handle, built in squeegee and a pivoting head for hard-to-reach areas. The results, Mr. Clean is winning consumers and driving category growth, delivering 18x its fair share of the bath cleaning category growth since launch.

Germany Pantene identified an opportunity to improve brand and product superiority awareness by capitalizing on media landscape shifts. The increased investments in social media and influencer partnerships including top German beauty opinion leaders, hair experts and brand events, including talk-worthy local events like the Oktoberfest and Berlin Fashion Week. The impact earned consumer earned influencer posts grew 4x and total reach tripled despite a 20% reduction in media spend. Pantene value share in Germany is up 60 basis points versus a year ago and accelerating.

The other examples we've discussed recently also continued to deliver strong results, including Greater China Baby Care, Mexico Fabric enhancers, Brazil Hair Care and U.S. Personal Care. Finally, site boosted liquid detergent in the U.S. continues to deliver strong results, initial weeks in the tight EVO launch are on track with our high expectations. While we work to improve our near-term results, we're also making progress on the longer-term reinvention of P&G capabilities, the next phase of constructive disruption that will create and extend our competitive advantages in each element of our strategy.

The way to break through consistently is to build the strongest brands in the industry. P&G has the unique strength and capabilities to redefine brand building to deliver consumer-relevant superiority. First, we are leveraging our large iconic brands with huge consumer bases and all the data we gather. We are now scaling the integrated data platforms and the technologies that will enhance our team's ability to mine this data for insights that lead to new product innovations, brand ideas, performance claims and marketing campaigns across all relevant consumer platforms.

Next, we are driving our unique set of innovation capabilities, substrate technology, formulaic chemistry, devices and biology to deliver breakthrough solutions in every part of the business. Third, we have tremendous supply chain capability. Supply Chain 3.0 is driving a more complete system connection from purchase signal to our production planning and material ordering to ensure consumers find the product they want each time they shop.

We know how to automate, digitize and autonomize our operations. And more importantly, we have qualified a financial framework to generate strong returns on these investments. Our innovation and supply capabilities are key enablers to win in the volatile market we operate in today. Connecting R&D, supply chain and procurement allows us to adjust sourcing optimized formulations and qualify alternative supply faster and more effectively than ever done before. It took years to build these underlying platforms and capabilities, and we are now in full scaling mode across the company.

The next step is to connect the dots to integrate the pieces. We will close the loop, and we believe this will create a new S-curve for growth and value creation centered around our consumers. We are confident in the short-term progress we're making, and we're excited about the mid- to long term as we leverage our strength at unique capabilities to set us apart from the industry.

Moving on to guidance. As we saw in our press release this morning, we are maintaining our fiscal '26 guidance ranges across organic sales growth, core EPS and adjusted free cash flow productivity. However, where we will land within those ranges has become more uncertain given the geopolitical dynamics in the Middle East. We continue to expect organic sales growth of in line to 4%. We're seeing progress in most categories and regions, as you can see in this quarter's results.

Underlying global market growth for our portfolio footprint is around 2% on a value basis, with a positive trend over the last 2 months. However, it's unclear how much higher gasoline and energy costs will impact near-term consumer spending in our categories. Also, as I mentioned earlier, the trade inventory increase we saw in March was driven by Easter timing and likely some protection against potential price increases or supply chain disruptions resulting from the conflict in the Middle East. We expect this to result in fourth quarter organic sales somewhat lower than third quarter.

As a reminder, our top line guidance includes a roughly 30 to 50 basis point headwind from product and market exits as part of our restructuring work. Our bottom line guidance is for core EPS growth in line to 4% versus prior year. This equates to a range of $6.83 to $7.09 per share. This guidance includes a foreign exchange tailwind of approximately $200 million after tax, unchanged from our prior outlook. We now expect a headwind of approximately $150 million after tax for the fiscal from a combination of commodity-linked cost inflation, feedstock exposures and logistics disruptions resulting from the conflict in the Middle East. Almost all of these increased costs will be in the fourth -- fiscal fourth quarter.

Our teams are doing a tremendous job to protect supply continuity and to minimize cost impacts much of this work, such as rapid product reformulation and supply diversification is enabled by the advanced data tools and capabilities we discussed earlier. With the timing of these cost impacts, there is little opportunity to create short-term offsets within cost of goods sold. Likewise, we will protect our demand creation investments in the business to support our new innovation and maintain positive momentum. In fact, we've approved incremental investments in several businesses in the last month. Given all the above, we now expect full year EPS results to be towards the lower end of the guidance range.

Our fiscal '26 outlook continues to call for approximately $500 million before tax and higher costs from tariffs. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20% to 21% for fiscal '26 combined a $250 million after-tax headwind to earnings growth. We continue to forecast adjusted free cash flow productivity in the range of 85% to 90% for the year. This includes an increase in capital spending as we add capacity in several categories and as we incur the cash costs from the restructuring work.

We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion of common stock, combined a plan to return roughly $15 billion of cash to shareowners at fiscal '26. This outlook is based on current market growth rates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity or other cost increases, further geopolitical disruptions, major supply chain disruptions or store closures are not anticipated within the guidance range.

We won't provide guidance for fiscal '27 until our next call in July. However, we understand investor concern about potential cost and supply impacts from the Middle East conflict. For perspective, the annual cost impact of Brent crude at around $100 per barrel is roughly $1.3 billion before tax or $1 billion after tax versus a pre-conflict oil price in the mid-60s. Again, this goes beyond direct commodity cost to include other upstream and downstream cost impacts that would hit our P&L.

Regarding supply impact, we are hopeful the full flow of materials where we resume in the coming weeks. We continue to work closely with our suppliers and contract manufacturers to identify potential short-term risks. So far, our business continuity plans continue to perform well despite some force majeure declarations by our direct suppliers or by their upstream suppliers. No company will be immune to these effects. But this is an example of where our capabilities help us buffer the impact on our business.

Our business teams have been developing multiple contingency plans to mitigate potential cost and supply disruptions. Underpinning each of these options is a commitment to maintain support for our brands and superior value for our consumers. We remain willing to manage some short-term pressure on the bottom line to come out of this period with stronger brands and business momentum. On the other side, this has proven to be the right path in the past, and we are confident that it is now.

In summary, we continue to believe the best path to sustainable balance growth is to double down on the strategy, stronger integrated execution to delight consumers with superior products at superior value. Challenging markets like the ones we compete in today are an opportunity for P&G to step out from the pack and to lead. We have the brands, the tools, the capabilities, and most importantly, the people required to win. We're confident in the short-term progress we're making. It won't be a straight line, but we are moving in the right direction. We are building momentum, and we are excited about the long-term opportunities ahead.

And with that, we are happy to take your questions.

[Operator Instructions] Your first question comes from the line of Steve Powers of Deutsche Bank.

Andre, you covered a lot of ground in your prepared remarks. But I guess as you look through the puts and takes and timing nuances, in the third quarter, how do you assess underlying progress on organic growth? And to what extent are you confident it could be further progressed into the fourth quarter and into '27?

And I guess I asked that in the context of the $1 billion in after-tax cost headwinds that you mentioned have now built for the year ahead as well as the accelerated investments you've set in motion that I presume are also likely to carry forward. And so as you approach fiscal '27 planning with all that in mind, do you think productivity alone will be necessarily relied upon as offense to those factors? Or do you feel the building advantages and momentum you're building will allow for potential use pockets of incremental pricing should the need arise.

Steve, thanks for the question. I have a great amount of confidence in the progress we're making on the growth side. The breadth of the progress is visible across regions and across categories. And if you drill a level deeper and you look at the individual plans that we are executing across the brands that are responding the fastest and the best, they show that our hypothesis underlying our business model is working.

When we innovate, when we deliver a better solution for our consumers and our categories, they respond. The prime example for me is the tight liquid intervention we made again, a huge business in the U.S. and the formula upgrade we delivered was the biggest upgrade we made in 25 years and just showing that performance improvement to the consumer at the same price, leading to mid-teens growth on a business like that is impressive. We're seeing the same on the beauty category. SK-II growing 18%, just continuing to invest in the brand proposition, the innovation on the super premium side with different forms is gaining momentum and just great execution.

The examples we gave -- the other examples we gave are just solidifying that same model. So I feel very strong about the progress because I also see the amount of brand country combinations that is still to come will only increase the momentum. So I feel very good about the diligence the team is applying really understanding what is the intervention we need to make across product, package, communication, go-to-market and/or price to give the consumer the value that they will respond to. And I feel very good about our ability to create excitement with the consumer when we innovate into new areas.

The confidence in that model comes with conviction that we want to continue to invest behind it. The noise, I would call it, from the commodity exposure is significant. As you know, $1 billion after tax is nothing to sneeze at from a headwind standpoint. And we have a lot of work to do to work through the supply chain side and the cost side. I think you've seen us excel in that space. The last time when we had to do this coming out of COVID, with the supply chain crisis.

I think the team even further sharpened their skills and reformulation. We further diversified our supply base. We further diversified our flexibility on our formulations and we further sharpened our understanding of what our short-term productivity levers that we can pull. And honestly, there's a lot of room in our P&L to drive short-term productivity and that will be the first place to go.

Will it be sufficient to offset the full $1 billion after tax, likely not. With that, we continue to innovate. And pricing -- selective pricing with innovation where the consumer tells us their interest is high, their willingness to pay for better performance is there will be the other part of the offset that we're driving. So we're building those plans, and I'm confident it will leave us in a reasonable place from an earnings growth standpoint, while not jeopardizing the investment in sustained organic sales growth and share growth, which honestly, we're just delighted to see the ship turning this quarter.

Your next question will come from the line of Dara Mohsenian of Morgan Stanley.

Just 2 follow-ups on Steve's question. Just a -- can you discuss if you can see any advantage on relative sales performance versus competitors here as you look at the post Iron conflict situation from a supply chain or sourcing standpoint, is that something you think can be significant? Or is it more modest in nature? Obviously, it's a fluid situation, but any thoughts there would be helpful.

And just be, you mentioned progress in a lot of areas on the growth side, whether it's certain brands, et cetera, with the innovations you put in place, your spending behind the business in Q4. The first part of the question, you've got some potential competitive advantage here post the Iran conflict. Are you comfortable that you're back to organic sales growth outperformance versus your categories going forward as we look out beyond fiscal Q4? Do you have visibility around that? Just your thoughts around the potential timing of sort of broader outperformance across the portfolio versus some of the areas where you're seeing progress already would be helpful.

The supply chain side is too early to assess. But if history is any indicator for what's to come. Our supply chains are generally resilient. We have flexibility. We have ability, as I said, to reformulate and our retail partners tend to lean on us to be their reliable partner in these times, and we've managed not to let them down. We've seen other players struggle, especially if it's long supply chains, especially if it's heavily contract manufactured supply chains.

So again, if history is any indication of what's to come, I feel relatively good about our position. And if anything, I have more -- even more confidence if that's possible in our supply chain team, procurement team, our R&D teams who are just on top of every single element of this every day.

Outperformance versus the market is absolutely what we want to deliver. We've done it in quarter 3. We want to do it in more quarters. Will it be in every quarter, I don't know. There are many drivers to this, but I feel that we are getting to a point where there's enough mass in the interventions we've made we've hit enough critical components of the portfolio with the right innovation, with the right interventions across the vectors that we will see continuous progress every quarter.

Again, can I promise that every quarter will outperform the market? No. But I'm more confident than I've been in a long time that we will go exactly in that direction.

Your next question comes from the line of Lauren Lieberman of Barclays.

I wanted to check in on China. So China of 3% this quarter. Just if you could give us a sense for how the market performed in your categories? And then you called out the tremendous acceleration in SK-II. So I just wanted to talk a little bit about what you're seeing in the beauty market in China, in particular.

China delivered 3%, as you've seen in the quarter. So last 3 quarters, 5%, 3%, 3%, very good progress. And again, I think the fundamental reinvention of the China model all the way from go-to-market portfolio communication model, innovation model, I think, is starting and is continuing to pay dividends. The market is still difficult. Consumer confidence is still low and down versus the normal equilibrium.

The market growth is still negative across most channels. And the only growth you see is in online and into in yen. So the market content -- context is really still the same. The positive side of China is the consumer is very discerning and the consumer is very engaged in our categories. And when we deliver true superiority, they are willing to go there. And that's what you see in SK-II. SK-II was up 18% in total. I think China was up 13% in the quarter. China travel retail was up significantly. And you see exactly that when the consumer sees excitement, value something that they enjoy, they will go there and pay the premium.

The same is true in Baby Care, I think 19% growth in Baby in the quarter. And for the exact same reason, best-in-class consumer understanding product performance and innovation that is in line with that with the great communication model gives us growth in one of the most difficult categories. Great visibility, I think, to driving that model across more categories, more mature thinking around the channel approach that we take between online to yen and our brick-and-mortar channels.

So I see a lot of upside in the China market because of that maturing thinking in strategy and execution. But again, our closes are always closed. China is China. So a lot of volatility to be expected, but I feel very good about where the team is headed.

Your next question will come from the line of Peter Grom with UBS.

Andre, I know we're not getting guidance for '27 today. But in your response to Steve's question, you touched on productivity and pricing with innovation as offset to inflation and that it would put you I think you said in a reasonable place from an earnings growth standpoint. And so I don't know if I'm reading too much into this, but I just wanted to clarify that despite these headwinds and a commitment to invest in the business but you still see a path to earnings growth next year based on where things stand today.

Thanks, Peter. I'm -- look, I'm very happy that I don't have to give guidance today because what do we know, what the world looks like 3 months from now. With what we know today with $1 billion headwind and with the assumption that we can manage through the supply side of things well, we will do everything, everything that we can to do exactly what you're describing. But it's a work in progress. It's a work in progress on the macro side. It's a work in progress on pushing the productivity lever as hard as we can, and it's work in progress on honestly, a lot of tough choices that we can make within our P&L.

The one thing we will not compromise on is the investment in the parts of the business that are showing momentum. So I won't give you any more detail than that, but be reassured the team and the work that is happening right now has the sole objective to deliver exactly what you're describing. Earnings growth even in light of these challenges, without sacrificing reinvestment on the business without sacrificing or jeopardizing the momentum we're building.

Your next question will come from the line of Peter Galbo with Bank of America.

I just maybe wanted to click in a bit more. I think you were very deliberate in your comments about increased investments across several kind of country products combinations. I believe you said over the last month. And we've heard a little bit about [indiscernible] in the U.S., SK-II obviously in China. But maybe you can give us a few more just where the incremental investments are really going in from a country product combination standpoint as we start to contemplate Q4 and into '27?

Peter, look, you will understand, I won't give away where we're going in terms of the innovation investment and the strengthening. But it's the areas you would point out have opportunities. So if you look at Baby Care in the U.S., we're growing share at a global level on Baby Care. But the U.S. is not performing where we want it and that requires intervention. The plan is extremely strong. The conviction of the team and our conviction is very high. And as we said, we'll continue to drive interventions and innovation in that space.

The momentum that the team is building in Beauty Care is fantastic to see. And talking to the team and the number of ideas they have to further build that momentum. I have high confidence to give them the flexibility to continue to invest with the innovation and the commercial ideas that they have. Fabric Care, we just launched Tide Evo, very strong execution in market, retail support is outstanding. So again, an area of significant upside and a significant reason to believe that we can accelerate.

And I could keep going, Peter, but it's basically what I said is we have a bigger and bigger share of the portfolio where we either have interventions that are already working or we have a very clear plan in place with conviction that investment will pay out and deliver, and that's what we'll execute over time.

Your next question will come from the line of Chris Carey with Wells Fargo Securities.

Andre, I wanted to ask about the concept of pricing power and whether you think that this is different for perhaps the consumer staples industry, but more specifically for P&G. You did mention that there was potentially some front-loading of inventory levels in the quarter as retailers potentially prepared for do pricing for inflation. I don't know if I heard that wrong, but nevertheless, it does imply that retailers are aware that incremental pricing is a possibility for this new round of inflation.

The reason I bring that up is because I feel a lot of questions around consumer staples companies, including P&G, potentially losing the concept of pricing power into new inflationary cycles with so much inflation over the past 5 to 6 years. I wonder if you could just give some thoughts on pricing and whether you think pricing as a concept is different for the sector or for P&G than what it has been more historically.

And then just as a follow-up, just from a competition, you have mentioned in recent earnings calls that competitive activity has heated up now that inflation is moving higher, are you seeing competitive activity start to ease as competition needs to become a bit more rational given cost structures?

Thanks, Chris. Look, there's a natural tension in these situations. You have broad macro cost headwinds which are hitting everyone in the industry, which generally is demanding pricing. So typically, when you see these headwinds, the entire industry will move up in terms of pricing. And then on the other side, you have the reality that the consumer has been hit with cumulative inflation beyond anything that they've seen in recent history.

I think the opposite ends here, the way to square that in our mind is innovation. Consumers do respond well if we give them a truly better proposition in the categories that we're in because they see there is upside. There is still upside in many of our products to make them better deliver a better experience and delight the consumer. And if we do that and we take a little bit of pricing with it, consumers respond.

The other reason why that works is it generally comes with a choice for the consumer because we won't price across the entire portfolio just a straight line. But we give the consumer choice. We give the consumer choice to either pick the innovation with a bit of pricing and the promise of better performance or stick with what they know. We have a very well-developed vertical portfolio, as you know, both from a brand tiering standpoint and from a price point standpoint.

So I don't think we've lost pricing power I think pricing power has to be earned and the way to earn pricing power is to combine pricing with truly a delightful experience for the consumer. And if we do that, and we're honest with ourselves, instead of just assuming we can take a straight 5% price increase across everything, I think it will work. So that's the job at hand for the team. And luckily, again, we're in categories where that generally works because these products are products where you see as a consumer, you use them on a daily basis and you know whether they are delighted or not. And you know whether the product you just bought is better than the one you had before, and therefore, it's worth the price.

On the competitive side, too early to say, to be honest. I think this is just a few weeks. And I think everybody is still -- at least we are grappling with what reality are we looking at. You would expect some pull back, hopefully, in terms of promotion activity but it's too early to observe. What I can tell you, the data we have is still relatively stable, but promotion activity in Europe and the U.S. as the 2 indicators with the closest read are slightly increasing back to pre-COVID levels. So with the data read that we have, nothing has changed yet. We'll see where this goes.

Your next question will come from the line of Robert Ottenstein of Evercore.

First, just a follow-up. Can you disaggregate the volume number in the quarter for the Easter impact the inventory drawdown last year and SKU rationalization that you were planning. So we kind of have a better sense globally exactly where volumes are.

And then perhaps building on that, maybe give us an update on the restructuring program that you announced in June of last year in terms of head count reorganization and kind of rebalancing some of the functions and the people and responsibilities.

I'll keep it simple because into every effect on the base period versus base period of that base period, we get confused. The simple answer I give you, I think the pull forward from Q4 into Q3 is about 1 point. So we would have rounded to 3% organic sales growth instead of having a strong 3%. That's my easy answer and the IR team can give you all the gory details behind it. But think about it, the underlying growth, in my mind, would have been about 3%, but rounding up. With the pull forward, we had a strong 3%, the net impact about 1 point of volume forward from Q4 into Q3.

The restructuring program is very well on track. Multiple components. We have the portfolio part of the restructuring with the go-to-market changes in Bangladesh, Pakistan, the portfolio choices across Asia Pacific, all of that is being executed and actually slightly ahead of the program objectives. The head count reduction is being executed in line with trajectory. So we're on track to deliver 15% nonmanufacturing head count reduction over 2 years with a significant portion of that being delivered this fiscal year, by the end of this fiscal year.

The organization programs, look, our objective really is, as we said, to enable our organization to be closer to the consumer and be more empowered than they are even today. as the next phase of organization design. We want smaller teams that are empowered to make decisions that have the data to make those decisions without a lot of leg work and that are freed of internal work processes and leg work that they otherwise would have to do. That technology bundle is being rolled out right now. So data access, data analytics, reporting capability, I would call that toolbox, number one, rolling out.

Second toolbox, how do we enable those teams to be better at consumer-facing work. So think about concept ideation, content creation, pushing that content out across all platforms, measuring it, reworking it. That's toolbox #2, that is being scaled as we speak. Number three, the whole innovation part that's already being used. So think about molecular discovery suite think about perfume discovery, digital twins to qualify innovation, that's already well in place.

And then the fourth component of the intervention is automation. So we talked about unattended shifts. We now have those programs rolled out across 9 categories. And again, the feedback from the plant organization to skip the night shift is great. We are upskilling those people to deliver a higher order task in the factory that is working, and we have multiple automation programs qualified that we are rolling out. So I think consistent progress on the organization design side and consistent progress on the technology data site that is underpinning that progress on the organization.

Your next question comes from the line of Kevin Grundy with BNP Paribas.

Congrats on the progress in the quarter. Andre, I want to come back to gross margin, not to beat a dead horse here, but kind of pull together some of the threads that we've talked about, this is around ability to price input cost, productivity, kind of controlling what you can control for the organization. The $1.3 billion pretax headwind, thanks for sharing that. That's helpful. Understanding the volatility of the environment and a lot to sort of digest here around pricing decisions and consumer demand, et cetera.

But just to play this back, it sounds like your base case is the gross margins will likely be down, I would say, looking out to next year, given that cost headwind and May using sort of reasonable assumptions implied kind of a lower pricing contribution.

I think getting back to Chris' question, like is it different, this may imply like typically the CPG companies are kind of able to price through this. Is that a fair take? The base cases today would be that gross margins are down and maybe there is understandably a little bit more trepidation around pricing given the K-shaped economy, et cetera, et cetera. So I just want to play that back to you and get your take.

Thanks for the question, Kevin. Look, the honest answer I'll give you is I don't know. The second part of the answer is I don't really care. Not because I don't care about the financial impact. But what is more important is what are we doing within the activity system that drives top line growth and bottom line growth. that's what ultimately we want to drive and then the gross margin and the margin are outcomes of that. So if we continue to drive great productivity, which we will check, if we continue to drive innovation that's winning even though it's gross margin dilutive, check. If we continue to drive investment in the right trial driving activities on the sales deduct side, check.

So if all of those things happen and the gross margin is down, I feel great about it because it will drive top line growth and it will drive earnings growth. We will not let gross margin dilute because we're not delivering productivity or we're investing in things that don't drive top line and underlying earnings growth. But where exactly that balance comes out for me is very hard to predict and honestly not that relevant as long as the underlying activity system does what we need it to do.

Your next question comes from the line of Filippo Falorni of Citi.

Andre, I wanted to ask about your enterprise market business. I think you mentioned 5% growth in the quarter and 4% in Asia, Middle East and Africa. So any impact that you saw within the 4% from -- in terms of demand from the conflict in the Middle East. It seems pretty minimal based on the reported results, but are you expecting some further impact in Q4?

And then also related to this, in terms of like some of the Southeast Asia countries and India, countries that rely more on oil from the Middle East. Are you seeing any demand impact in those regions? And how do you think that evolves going forward?

Yes, Filippo. Look, every enterprise market cluster has been performing very well. As we said, Asia, Middle East, Africa, up 4%, Latin America up 5%, Europe enterprise markets up 6%. So it's encouraging to see the breadth and the consistency of the growth. I -- as you already pointed out, the Middle East in it of itself is a relatively small part of our global sales, about 2%. And I can only thank the team in the Middle East. Our Dubai-based teams and Middle East-based teams are doing an amazing job showing resiliency and professional commitment to keep the business running while dealing with the situation. So big thank you and shoot to those teams.

So the direct impact on sales, no. Actually, the business is doing well still. And for the rest of the effects, the only thing I can tell you is the upstream supply chain is more exposed in the Southeast Asia region. So that's where we have to do more work to ensure that we can continue to supply have all the feedstock available, et cetera. So that's a heavy workload there that our supply chain team is mastering. It's too early, I think, to expect any consumer demand impact from the conflict. So we're not seeing that. All markets are growing strongly. India is growing. So I think that's the question where we have more visibility next quarter and again, part of why I'm happy not to give guidance today.

Your next question comes from the line of Bonnie Herzog with Goldman Sachs.

I have a quick question on Baby Care, which appears to be turning following declines over the past year. You did highlight unit volume growth in certain markets. So curious to hear how much of that is end market led growth versus market share gains? Also, can you talk about the interventions you've made to drive a turnaround in that business? And I guess, how should we think about the momentum going forward?

Thanks for the question, Bonnie. Baby Care at a global level is growing share. 5 of 7 regions are growing share. And the biggest region, not growing share is the U.S. So that's where the focus is. The regions that are growing are further ahead in truly driving superior propositions. It's coming back to the same playbook. We've talked about China earth rates down, market volume down, hundreds of competitors were growing 19% in the quarter. Why? Because we understand the consumer drive the innovation, have the execution.

Same is true in the other 4 regions that are growing. That's the opportunity in the U.S. So that's where you see investment in the product. You see investment in how we communicate that benefit in a more relevant way to our consumers in the U.S. and trial building activity to ensure that we get that product into moms and dads hands and on baby's parts as fast as we can.

The playbook is the playbook, and we know how it works. What we're in right now is the execution, which takes some time in baby care. It's a complicated manufacturing lineup, et cetera. But I'm very confident the team has the plan, and I'm very confident to put the money where that plan goes.

Your next question comes from the line of Kaumil Gajrawala of Jefferies.

As we're all working through the various puts and takes from the geopolitical issues, I think you mentioned very specifically in your prepared remarks, it's not just commodity costs, but all the other sort of things that come with it as part of that $1 billion. Can you maybe just talk a little bit more about what those items are just so it's something that we can watch and track a little more closely?

And then on tariffs, we're starting to see some public companies, especially in their filings, talk about potential tariff refunds. Curious where you stand on that.

[ Nick ], the cost impact is broader than just commodity. Obviously, a lot of feedstock. Basically, the majority of our feedstock is petro-based. So it's input NAFTA, you name it input costs into our suppliers' production system, part number one. Part number 2 is sourcing changes that we are making, either because of cost or availability generally mean less effective sourcing lanes which means higher transportation costs, longer lead times, higher inventory levels, including outside warehouse.

The third component is reformulation. When materials are not available, we reformulate into others, which might come with upcharges. In many cases, they do. because we don't want to dilute the performance of the product. So we have to go to an alternative formulation that generally comes with higher cost. The last component is just finished product logistics again, diesel costs going up. That's the most immediate impact you see in quarter 4, that immediately passes through to the P&L in terms of higher logistics and transportation costs.

Force majeure, again, we see some suppliers just not being able to supply at all. We see some manufacturing facilities that have been compromised by the war. And so it's not just the oil price, it's also the availability of product and input costs that is then driving the exact same comments that I just gave you.

Tariff refund, look, we are following the process. The U.S. administration is beginning to lay out. Once that process is clear, defined and accessible, we will follow it. We have about $150 million after tax in refunds available from the IEEPA tariff. How much of that is recoverable or not, we'll find out.

Your next question comes from the line of Andrea Teixeira with JPMorgan.

Andre, you mentioned the recovery in volumes with innovation. Obviously, that has been remarkable. But I understand that you're also improving affordability in some areas. Have you been able to recover volume share in the most price-sensitive categories I believe you had some interventions in tissue in the U.S. And like you mentioned in Baby Care in some of the kind of price cohorts that you may be able to assist the low-income consumer. Can you talk to that, in particular in the context of the U.S. and also focus Europe.

Andrea, I think the volume share gains in the U.S. are broad-based. It's a combination of the innovation launches we are driving. I was talking about tight liquid. That's a big component of volume share gain. Family Care is a combination of interventions made by the business, but most importantly, also period-over-period effect. Remember, we -- family care was the business that was heavily impacted by the port strikes in Q2. So you see that reverse effect coming through now, that's playing out in share and the growth rates.

But we are very careful. Look, we always look at every component of what we know drives consumers purchase decision. Is it better for them to have a better product, better presented with packaging, with clear communication and execution in store. And if we think that will address the value outage that a consumer might see and not pick our products, we will go there. And that works in most cases, where it is truly an affordability aspect and we are, in relative terms, just too expensive, we will address it that way.

And it is not a general theme. I can give you one way or the other. That is the difficult and very careful calibration we're making brand by brand and honestly SKU by SKU because in some cases, it might just be price point versus price per unit or price per dose. So -- but you see a combination of all 3 drivers, base period here in terms of share, value interventions we're making on the product and performance side and yes, selective interventions in either price point or just value per use.

Your next question comes from the line of Olivia Tong with Raymond James.

You've quickly obviously taken a number of actions to improve trial affordability. I mean it's early days, of course, but what's your read on the staying power of the volume lift it has had and could have going forward? And the 100 basis points of reinvestment in gross margin, was it fairly similar by division? Or did it vary materially across the divisions? And is that the amount that we should expect for the foreseeable future?

Olivia, I think the staying power of the of the trial of the growth is strong because it's grounded in consumer insight, and it's again done at that very detailed level, with the right level of diligence to say, what is the outage. Will we get it right in 100% of the cases? No, but I think our hit rate is improving significantly, and that's why you see the pickup. And that's what we are tracking diligently.

So Shailesh and I are sitting down with every business to track whether that is actually delivering against the expectations? And if not, what are the learnings we're taking, but we've done this now for 6, 8 months. And you can see as we cycle through these iterations, we get better and better at diagnosis, triage and then making sure we get the right interventions executed. The reinvestment type and level is really different, therefore, by business, by brand, by country.

So I can't give you a standard recipe of this is what it looks like. It is different, not only by category. It is different by country, it is different by retail, it is different by SKU. The level of reinvestment give us until July. We are working through those plans right now. I don't want to give you a blanket answer. I think it really depends on the plans as we review them over the next 90 days and what we decide to go forward with and we'll give you more visibility as we get into guidance conversations.

Your next question comes from the line of Robert Moskow of TD Cowen.

A couple of kind of near-term questions and a clarification. Andre, when you talked about fourth quarter being lower than third, I just want to confirm that's in absolute dollars. And then I think in your prepared remarks, you talked about consumers pulling forward purchases as an inflation hedge. I thought that's what I heard. Maybe the trade is doing it. Can you speak a little bit more about that? Do you have any evidence right now that consumers are doing this to prepare for more inflation ahead?

Let me start with the second part of the question. I think the pull forward, if anything, if you're a retailer and you're tuned to what's going on, you might have pulled in a little bit of inventory. But it's hard for us to really quantify that. On the consumer side, no, nothing. I don't think the consumer is loading pantries at this point in time, nothing visible to us. So I think the consumption side is actually stable. I think the inventory side, which we -- and again, I think I will give you all the glory details between base periods and loading effects. But I wouldn't say the price-driven loading is the biggest part of it. I think it's just base period, is a significant component of that.

When I say Q4 might be lower than Q2, I think it's growth rate we're talking about here. So there's a point -- of shift, a point will come out of the growth rate that you all had anticipated for Q4. And that's the -- as I said, we would have rounded to 3% in Q3 instead of having a solid 3%. So that's the logic of the point to look forward I was talking about.

Your next question comes from the line of Edward Lewis of Rothschild & Co Redburn.

Andre, just wanted to look at sort of supply chain 3.0, which you've talked about. I mean I guess I sort of think of this as a kind of way you're deploying AI across the organization. And when I think about sort of your initial assessment of what costs might be on the cost headwinds heading into fiscal '27, how much of an advantage do you see already from what you're doing on AI in sort of rating that into a certain extent, if that's the right way to think about it? Or is it still too early to really see sort of significant benefits from the moves you're making around AI and supply chain 3.0.

Look, I wouldn't call Supply Chain 3.0 AI. I think it's really applying technology that is available to us in our manufacturing and supply chain processes. Some of it is AI, but a lot of it is a lot more basic automation that we're driving. We are scaling the technologies across all categories. Again, we talked about unattended shift models that is rolling out throughout more and more categories and more and more plants.

Unattended warehousing, including loading and unloading of finished product, pack and raw materials rolling out globally, real-time touchless quality rolling out across the corporation. All of that is embedded in the productivity commitments we've made, so the $2 billion to $2.2 billion, $1.5 billion of that in cost of goods. This gives us confidence that we can continue that level of productivity. And what we'll be pushing now is how much can we accelerate? How much can we accelerate that 2030 vision that carries the supply chain 3.0 endpoint in our mind. How much of that can we carry forward to help the situation. And I think that will be the conversation over the next 90 days and will inform part of our guidance.

But we know -- we know it works, and we know what to do. We have the technologies available. It's about how fast do we roll them out. And I think that's where we'll push the envelope.

Your final question will come from the line of Michael Lavery of Piper Sandler.

I just wanted to come back to inflation mitigation and maybe a couple of parts to it. I guess just if the pressure is primarily oil price driven, and given the stretched consumer, how do you balance thinking about pricing responses versus just the volatility in something like oil prices? And then just on how to kind of think about the spending piece. This could be nitpicking your words. I want just clarify it. You said you wouldn't sacrifice spending on businesses that have momentum. Does that suggest potentially for businesses without as much momentum that maybe you would postpone interventions? Or is your thinking that should we hear you as any of those growth-focused investments would continue regardless of the inflation environment.

Thanks for the question. Look, I think the volatility component of where is oil going to be is a reality that we understand. But that's why we are -- what we're trying to do is control our destiny. We control productivity. We control the choices that we can make in sourcing. We control innovation. So that's where we want to drive the majority of the recovery because if we price with innovation, no matter where oil is, it will be the right thing for the consumer because the innovation is worth the pricing that we're taking.

So we're trying to address exactly what you're describing, which is decoupled as much as we can, the interventions we're making from the volatility we're seeing in the market. So it's the right answer no matter where this goes. Would it be perfect? No, but I think that should be the North Star that we're going after.

Look, the very simple answer to your second part of the question is momentum versus investment. Every business leader's job is to create momentum. And so we need to create a business plan that gives us confidence that where we don't have momentum yet. We will deliver momentum within a very short period of time. And honestly, I have confidence that every 1 of our business leaders is doing that, and I see only increasing conviction that they are able to do it.

So I don't think we're going to have an issue of -- we don't have enough opportunities to invest. We will have the right plans and then it's a matter of wise and sound resource allocation within that.

All right. I think that was our last question. Thank you so much for your time. Again, I want to close out where we started, strong quarter. Thank you to the P&G team. We're building momentum. Will it be a straight line? Absolutely not. We're working through the headwinds that we have identified. We feel very good about our relative positioning to deal with those headwinds and we'll talk more, and I know you're looking forward to that about next year in the July call. Please don't hesitate to reach out with questions. Our IR team is available to you. So am I, and thank you very much. Have a great day.

That concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

Good morning, everyone. Before I introduce our next speakers, I'd like to take a moment to recognize some of the individuals behind this conference and behind the CAGNY organization these past many years. One of the unique qualities of CAGNY is that it's an all-volunteer organization. And this conference has grown, thanks in large part to the efforts of the people who have given their time to keep it going.

In that vein, I'd like to have the past presidents of the organization, please stand. And then please join me in thanking them. I also want to make special recognition of our current president, Steve Strycula. Steve will you please join me on stage. Steve has gone above and beyond to make this year's conference one of our best ever. Many of you know Steve, and he is one of the nicest and smartest people in our industry and the CAGNY organization has been better for having him steer us over the past year. So on behalf of the entire CAGNY community, we just wanted to say thank you. And Steve, I'd like to present you with the President's plan. So thank you, Steve.

Thank you.

All right. With that, it is my pleasure to welcome Procter & Gamble...

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P&G would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. Additionally, the company has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non-GAAP and other financial measures.

I forgot the voice of god. So hopefully, you all got to hear that. So with that, it is my pleasure to welcome Procter & Gamble back to CAGNY this year. We have with us Shailesh Jejurikar, who is joining us for the first time as Procter's President and CEO; along with CFO, Andre Schulten, and CIO, Seth Cohen.

So with this focus on irresistible superiority, Procter remains one of the most resilient HPC companies delivering over 4% organic sales and 7% EPS growth on average over the past decade with periods of significant outperformance, a testament to its strong execution and a likely core holding for many of you in this room. Having said that, Procter hasn't been immune with the broader end market challenges faced by HPC companies over the past year or so with growth slowing. However, Procter has been making interventions, such as rolling out strong innovation, which should really ultimately drive an acceleration in growth going forward.

With that, I'll hand it over to Shailesh and team to hear more about Procter's strategy and how it's evolved to create the CPG company of the future. Andre, the floor is yours.

Thank you so much, Bonnie. Good morning, everyone. I will start with a review of our results before turning it over to Shailesh to discuss P&G's strategy, near-term interventions to accelerate growth and long-term transformation to invent the CPG company of the future. Test will then share progress on the digital assets and AI capabilities critical for category leadership and growth and value creation in the next decade.

So starting with results, the front half of fiscal '26 was impacted by base period dynamics, including trade and consumer pantry loading, driven by port strikes and hurricanes in the second quarter of fiscal '25. These headwinds were concentrated in the U.S. market. The balance of the company grew front half organic sales over 2% with almost all regions outside the U.S. growing or accelerating through the front half of the fiscal year. Organic sales in focused markets were flat and enterprise markets grew 3% fiscal year-to-date.

Following several years of consistent mid- to high single-digit top line growth, recent periods heavily reflect underlying trends with softer consumer markets, aggressive competition and a dynamic geopolitical landscape. Global market growth was around 2%. Growth in the first half of fiscal '26 has been broad-based across categories, with 8 of 10 categories growing or holding organic sales. 25 of our top 50 category country combinations held or grew share in the first half with global aggregate value share, down 20 basis points but sequentially improving.

In the front half of fiscal '26, core EPS was plus 2%, following the top line and reflecting our commitment to prioritize full investment in the business. Although a challenging start to the fiscal year, we expect sequential improvement in the second half, which enables us to maintain fiscal year 2026 guidance ranges across organic sales for EPS and adjusted free cash flow productivity. The growth rate embedded in our near-term guidance should return us to the low half or long-term growth algorithm as we exit fiscal year '26 and head in fiscal '27.

We continue to invest in creating superior propositions for our consumers and retail partners with relevant innovation, powerful brand campaigns across every touch point and continuously improving in-market execution across all channels and platforms where fully activated, it's working. So we have more confidence in the sequential improvement over half 2.

Now I will hand it over to Shailesh to talk more about both our short and longer-term plans.

Good morning. It's a pleasure to be here for my first CAGNY conference. As Andre said, I will share some perspective on our near-term interventions to accelerate growth and the longer-term reinvention of P&G we have underway. Before we do that, I want to start with strategy. We remain committed to our integrated growth strategy, a portfolio of daily use products where performance matters, superiority across product, package, brand communication, retail execution and value; productivity with multiyear visibility to fund superiority and deliver financial results at the levels you and we expect. Constructive disruption to stay ahead and an organization fully engaged, enabled and excited to serve consumers.

This strategy has enabled us to deliver significant growth and value creation over the better part of the past decade. While we believe the strategy continues to be right, we need to adapt our execution in light of the changes in the external landscape. There are 3 important changes in our operating context I want to highlight.

The first is media fragmentation. It is much more challenging to get consumers' attention and educate them on the benefits of our brands in today's fragmented media landscape. Consumers have more sources of information, more sources of influence and more ways to engage or disengage. A decade ago, when I was in North America home care, we could get about 30% awareness on an initiative within 6 to 12 months. Today, it's probably high single digits. A significant change and challenge for every marketer in every industry.

The second change is inflation across food, energy, health care and many other areas of spending. This has taken a toll on the consumer. Even the consumers who have money are much more disciplined and thoughtful about how they spend it. How consumers assess affordability and value will continue to evolve. The third change is the retail landscape. Consumers are shopping differently. Think about Agentic AI, Quick Commerce and Douyin.

In the U.S., some channels like e-commerce and club are growing exponentially, while traditional formats are consolidating. In addition, retailers are becoming media platforms and media platforms are becoming retailers. In summary, the consumer path to purchase is changing every day, is nonlinear and littered with millions of possible distractions. To adjust for these changes in the external landscape, we are making interventions with urgency. We are already seeing strong results in the parts of the business that have made these interventions.

The first intervention we are making is to have a deeper, more complete connection with consumers. Nothing matters more than putting the consumer first in everything we do. Consumer is boss isn't a slogan, it's a belief that has shaped P&G for generations. Our opportunity now is to apply this belief with greater consistency and precision end-to-end. Each decision we make must be based on how it will be received by the consumer so we deliver a superior consumer experience at every touch point.

Let me share 2 examples that demonstrate the power of deep consumer connection. Greater China Baby Care was one of the first categories to make a step change and lead the growth of the premium and super-premium segments of the market behind consumer insight innovation -- insight-driven innovation and brand communication. Chinese parents want only the best for their baby, softness, comfort and dryness. The China team created a diaper that delivers on this insight from first seeing and touching the package to feeling the diaper on their baby. They leveraged the long Chinese history with silk. The shiny, soft yet strong, luxurious material has been a status symbol for more than 2,000 years.

Pampers Prestige is the only leading diaper brand that has silk materials in the product, delivering the ultimate experience of skin comfort and protection. The shiny soft feel package conveys superiority at first touch. Let's see the ad.

[Presentation]

Reframing our super premium line has driven Greater China Baby Care to double-digit organic sales growth over the past 18 months and increased share by nearly 3 points. Mexico fabric enhancers is another great example. The team has disrupted a sleepy category through deep consumer understanding. Mexican consumers describe the gold standard smell of clean as rich, tasty, fruity and floral, like the scents from shampoos. They then developed a product against this powerful insight.

Downy Intense leverages our internal perfume innovation expertise to create a new high-intensity perfume. The packaging highlights the intensity of fragrance blooming on the bottle. Brand communication drives awareness of the 24/7 smelling like freshly washed hair experience and in-store execution with stopping power is increasing trial. Let's watch the ad.

[Presentation]

Deeper consumer insights, driving innovation amplified with sharper brand communication, retail execution and value has spurred Mexico fabric enhancers category growth and led Downy to double-digit organic sales growth and over 4 points of value share growth since launch. Next, we need to transform brand building. How we build awareness of our advertising messages, how we drive consumer engagement and how we reduce the time and steps from awareness to purchase.

A great example comes from Brazil Hair Care. Brazil is the third largest hair care market in the world. 90% of Brazilian consumers suffer from hair damage due to heat, styling and coloring. Pantene was growing sales, but the market was growing faster and we were losing share. The team framed Pantene back to its heritage as a treatment-centric brand that offers complete hair solutions, not just shampoo. They then developed a plan which heavily shifted brand communication to user-generated content and passionate influencers. Let's watch a reel of user-generated content.

[Presentation]

Within months of the intervention, the business turned to share growth, now growing value share 1.4% with sales growth of 30% versus a year ago in the October through December time period. U.S. Personal Care is another great example. They are one of our more successful businesses over the past 3 to 5 years with double-digit sales growth, which has driven market and share growth. An important reason is they adjusted early to the changing media landscape. They significantly increased their volume of influencer, user-generated and ratings and review content.

They leveraged in-house creatives plus AI to rapidly generate traffic-driving assets, and they pivoted to campaigns with direct links to enable consumers to buy. U.S. Personal Care is growing 6% fiscal year-to-date. The opportunity ahead is improving and scaling these brand-building techniques across all country and category combinations. The next intervention is to build holistic partnerships with retailers across the entire value chain, not just in their traditional role as merchants. This is critical as we see the convergence of retail and media, including digital commerce and how shopping agents and AI-based search will affect how consumers shop.

Just take a look at the most recent Walmart, who knew campaign that features Old Spice as one example of the holistic partnerships we are building.

[Presentation]

This is a great example of how our brands are leveraging holistic partnerships in a meaningful shopper-led way to grow the business together. This campaign followed our successful NFL partnership with Walmart. It included exclusive product lineups activated in-store in the Walmart app and more broadly in social and other media. These are clear examples of bringing a holistic integrated brand and retail strategy to life in markets. This complements the integrated value and supply chain work we are doing with our retail partners to make the end-to-end value chain more efficient and deliver the highest service to their shoppers and our consumers.

Finally, we need a stronger core and a bigger more. One of P&G's biggest strengths is our portfolio of established brands, the core of our business. We need to make sure the core is healthy and growing through truly impactful innovations that elevate superiority and represent a good holistic value for consumers. By bigger more, we mean that when we create something new to address new consumer needs, it needs to be big enough to justify the investment needed to build awareness and distribution.

A stronger core and bigger more is critical with how media fragmentation has affected awareness. It is also important in channels like club that are limited assortment or e-commerce where the first 2 pages of results are all the consumer sees. Tide is a great example of both core and more. Tide did their biggest upgrade in over 2 decades on the original Tide liquid detergent, which represents about 1/4 of all Tide detergent users, significantly improving the product for the same price. Let's watch.

[Presentation]

Since launch, Tide original liquid has gone from declining to double-digit growth in the past 3 months. On this size of business to get that inflection is simply amazing and gives me tremendous confidence of what can happen if we activate the core much better. Tide's biggest strength is Tide. So this is a very powerful example of strengthening the core. A great example of a bigger more is Tide evo. Tide evo represents the biggest innovation in laundry, crafted by concentrating active surfactant ingredients into a mixture that is spun into individual fibers.

This sophisticated process ensures each functional fiber delivers the powerful cleaning performance of Tide while also enabling the creation of the convenient Tide evo unit dose form, which is more sustainable given no plastic bottles and no extra water. This new-to-the-world formulation and assembly process is proprietary to P&G and protected by over 50 granted patents, making it a truly unique technology. Here's the ad airing now.

[Presentation]

The national expansion of Tide evo is on track with presale currently available through selected retailers and product expected in stores in the coming weeks. These interventions are making a difference. The business is inflecting where we have put these in place. A number of examples I shared are from Latin America as they have more broadly and completely implemented many of these interventions. The business is growing high single digits, growing share in nearly every market and driving market and profit growth.

There are many other markets where these interventions are leading to growth and more where we are just starting to make these interventions, including the U.S. That is why we have confidence in sequential improvement of the business. Ultimately, these interventions are aimed at improving the vectors of superiority to win the consumer value equation. One simple check, are we growing users of our brands? If not growing users, some element of the consumer value equation needs to be adjusted. The simplicity of linking superiority to user growth in this way increases the urgency to adjust the vectors as needed versus assessing each element individually.

When we get the value equation right, we grow users, lead market growth and grow market share, sales and profit. I talked the external changes we are dealing with across media fragmentation, inflation and retail landscape. These changes are as much a short-term issue as they are a long-term opportunity. While the pace of change has been significant so far, we expect an even more intense pace of change in the next 3 to 5 years. We will adjust to and leap ahead of these disruptions to invent the CPG company of the future.

The way to break through consistently is to build the strongest brands in the industry. P&G has the unique strengths and capabilities to redefine brand building to deliver consumer relevant superiority every day, every week, every month, putting the consumer first in everything we do. Let me highlight P&G's unique strengths. We have some of the most well-known and iconic brands in the world, brands with large consumer bases.

The equity of these brands is unmatched. We know how to build brands rooted in deep connections with consumers. We have an enormous wealth of consumer data and understanding. We connect with consumers across more touch points than anyone in our industry, product research, shopper research, connected homes, ratings and reviews, social media posts, brand fan clubs and many more. We transparently mine for insights that lead to new product innovations, brand ideas, performance claims and marketing campaigns.

Now we are building the consumer connectivity, the integrated data platforms and the technologies that will enhance our team's ability to do this work better, faster and even more consumer-centric than ever before. Next, we have a unique set of innovation capabilities in our industry. Substrate technologies formulate chemistry, devices and biology. We already have years of experience integrating these capabilities to launch new platform technologies and innovations. And we see many more ways to bring combinations of these technologies to life in new consumer products. Tide evo is just one current example.

Technologies like AI-enabled molecular discovery will enable faster and more powerful integration of innovation capabilities for faster growth. In addition, we have tremendous supply chain capability. Supply Chain 3.0 is driving a more complete system connection from purchase signal back through inventory solutions and systems to our production planning and material ordering to ensure consumers find the product they want each time they shop. We know how to automate, digitize and autonomize our operations. And more importantly, we have qualified a financial framework to pay out these investments.

Finally, we have built a structured data lake stocked with petabytes of relevant data. We have built data platforms, AI capabilities, programmatic shelf tools and media creation and evaluation systems. We have supply chain platforms that can run autonomously reacting to retail demand signals, consumer innovation needs or productivity opportunities faster than ever before. The next step is to connect the dots to integrate the pieces from identifying the consumer friction point to product idea to product design, to supply, to creative concept, to purchase transaction, to usage in home, to post-use evaluation. We will close the loop. We believe this will create a different S-curve for our future growth and value creation centered around our consumer.

Let me hand over to Seth, who will share more about the work we're doing to constructively disrupt P&G.

Thanks, Shailesh. As we continue to navigate this evolving landscape, it's evident that a dramatic transformation is occurring across our entire value stream, from consumer to retailers, to work processes, to suppliers. This shift demands scale capabilities to lead construction -- constructive disruption and accelerate both growth and profitability. The results of our efforts are becoming increasingly evident. To mitigate risk, one might consider exploring AI via extensive pilots. However, the biggest opportunity lies in our ability to scale.

With our investment in data and platform structures, we are now actively and successfully scaling, enabling both top line and bottom line growth across our entire value chain. We are improving and further increasing the payout of these technologies across all areas. While everyone is talking about artificial intelligence, let's be clear. AI without data is just A, artificial. P&G stands in a very unique position, and it starts with our exceptional mastery of our data. You may recall, we highlighted our core data lake at P&G Investor Day back in 2022, which serves as a foundational asset for the company.

Imagine millions upon millions of data points that come from different sources in different formats, different time stamps and different levels of quality. This involved an incredible effort over a decade to structure and organize the data in a way that proved to be useful, actionable and valuable to the organization. We have been leveraging this data in a very broad capacity, including consumer research data that helps us better understand and identify consumer needs. Material formulation data used by both R&D and purchasing that enables performance optimization and better cost.

Manufacturing data that continuously streams from sensors, devices and high-speed vision cameras to ensure quality at every unit that we produce. Consumption data that enables demand planning and forecasting, allowing the orchestration and adjustment of material flow in real time to meet retailer and consumer and financial data for better resource allocation and to close our books faster and more efficiently with less human intervention. In short, our core data lake is a critical platform to enable breakthrough business results.

In addition, our operational data is unparalleled. P&G is one of the most standardized systems compared to any of our peers. The most significant benefit [indiscernible] common data definition across the majority of our value chain. The data collected and standardized are AI factory that embodies a platform approach to our digital products. It empowers the teams to build tailored capabilities on common work benches versus developing independent solutions. This agility allows us to connect data to these platforms quickly, ensuring our digital products can scale across the entire organization.

Whether it's a central solution like our automated media buying tool or a customized solution addressing specific customer or consumer needs, we have a versatile framework in place to support innovation and efficiency. Encouragingly, nearly all of our employees who are reliant on data use these platform capabilities, highlighting the significance of these large-scale tools in our work. Each year, our teams manage over 2 million consumer research touch points transparently collected via in-home visits, consumer surveys, social engagement, connected homes and more. This equates to many petabytes of data that we can model and use effectively.

We have the capacity to create thousands of digital representations, enabling us to model consumer preferences and rapidly generate concepts that we can refine with actual consumers. Further, we are forging new partnerships with agency providers, leveraging the latest technologies to further enrich our consumer understanding and overall consumer journey. With our robust data assets and capabilities as a foundation, we are strengthening our integrated strategy. Utilizing a data plus human plus technology approach, we have transformed and accelerated our entire process for unlocking consumer insights and delighting them with superior products.

Here's a concrete example from hair care. Starting with the consumer insight obtained from interviews that the #1 growth driver for skin care during the summer months was sun protection, we saw that there was no offering in hair care. Our Pantene Europe team sought to solve this need quickly so that they would not miss another season. To move forward, the team leveraged AI to create and validate on 3 vectors.

First, superior product. We needed a UV protect and spray for hair that protected from sun, beach and chlorine. Second, superior packaging. We needed a design, [indiscernible] benefit. And third, superior communications. We needed an exceptional advertising and retail execution to drive awareness across every touch point. Starting with product and concept, the team leveraged our vast database to create twins of our targeted consumers and brainstorm concepts in real time. Nothing can replace engaging with consumers directly. However, these proprietary tools allow us to test and iterate concepts quickly before engaging and validating with real consumers.

Our AI-driven tools enable the team to focus on a benefit that was consistent with Pantene brand positioning. Pantene Sunkiss Glow spray for hair stronger than the sun. We accomplished this in a few days instead of weeks and rounds of revisions. Within a day, the package mockup was created. We then combined digitally created package designs with existing visuals to create advertising prototypes. From there, we had a production shoot and used generative AI to create a wide variety of assets for use in social and in the store.

The entire process costed less, was 5x faster than traditional initiative time lines and was executed with greater quality and consistency across formats. Importantly, we were the first to market with this unique UV protection treatment, a superior product in a superior package with superior brand communication and retail execution. And we're scaling these tools quickly. To highlight a few examples, in Latin America, Secret leveraged the tools at every stage to accelerate their scent lab collection. In the U.S., customer teams like Kroger created the Homegating idea for Super Bowl using AI in about 20 minutes during actual meetings with the customer. And the Metamucil team utilizes AI to create their current TV advertising.

Moving to our unique innovation capabilities. In research and development area, we continuously look for new ways to accelerate innovation, embracing cutting-edge digital solutions like modeling and new predictive testing tools. Discovery of new molecules is at the heart of innovating irresistible superior products. Traditionally, molecular discovery has been a very costly and time-consuming process due to the needs to meet numerous technical, safety and regulatory requirements. Typically, this process can span 6 to 8 years of development.

Our AI-powered molecular discovery suite has revolutionized this process. This groundbreaking tool in the hands of our master scientists allow us to identify new molecules in as little as 6 months. Downy Unstopable #26 is a hit. It is currently our second highest selling product in our Unstopable portfolio and our top driver of fabric enhancer sales growth in the United States. We also applied this very same technology to the Tide evo and Downy Intense innovations that Shailesh had referenced earlier.

Another area that we are disrupting with advanced capability is in supply chain. Supply chain has historically been a competitive advantage for P&G. In 2025, we were recognized for the 11th year by Gartner as 1 of only 4 supply chains globally in the elite masters category. Supply Chain 3.0 places a strong emphasis on automating and digitizing manufacturing processes to improve security, long-term efficiency, service quality, reliability, safety and environmental responsibility.

We shared previously the Berlin and Gillette unattended night shift example. Touchless operations are now being scaled to 9 different sites, including plants, warehouses, planning command centers across multiple regions and operating units. For instance, our Huangpu, China site has launched 4 unattended pilot lines covering different business units, demonstrating that this approach extends well beyond grooming.

Let's take a look at one of the lines in hair care.

[Presentation]

Similarly, our Oral-B plant in Germany recently completed a record-breaking 13.5-hour unattended injection molding ship in our power toothbrush line. Supply chain automation projects like these deliver very strong returns on investment in addition to improved quality, safety, supply resiliency and overall better work environment for our manufacturing employees. So let me recap. Better innovation, more flexibility, more efficient supply chain, better decision-making and resource allocation and a more external focus.

Expanding on the diversity of our data will enable even better insights and automations across the value chain going forward. With our robust history of process transformation, we have a systems in place to make the work even more effective and efficient while maintaining the standards our consumers know and trust. And we're just -- and we're leading constructive destruction to stay ahead. Based on third-party benchmarks, we are considered digital leaders in our industry, and we're just beginning to scratch the surface as to what's possible. Our focus is on linking various elements across our unique capabilities and as we do, drive a new trajectory for our future growth.

I'll now turn it back over to Shailesh.

Thank you, Seth. Let me take a minute to step back and recap what you heard today. First, we have the right strategy, portfolio, superiority, productivity, constructive disruption, the organization. Second, we are making the interventions to restore growth, putting the consumer first, transforming brand building, building more holistic partnerships with retailers and stronger core and bigger and more innovation. Where we are making these interventions, we are seeing strong results.

Third, we are constructively disrupting P&G to create the company of the future. We have a once-in-a-generation opportunity to leverage the landscape and our strengths and unique capabilities to set P&G apart as a company to lead the growth of our industry. We are confident we have what it takes to win in the short, mid and long term.

With that, we're happy to open up for questions.

Okay. We'll start. Lauren, do you want to start?

So I thought it's really interesting that where you've highlighted examples of intervention really working in Latin America, Latin America enterprise market. So I was just curious if we can step back a little bit, and I know Shailesh enterprise markets reported to you when you were a COO. Thinking about org structure and what it is, is there something about the enterprise market approach, structure accountability that is different and is a learning for the focus market as you think about how you're going to change the game a little bit?

Yes. Yes, I think that's a great question, Lauren. I would say what we learned when we moved from -- to focus and enterprise was having clear accountability. So as we have -- in organizations where that is more clearly established, we are seeing that. On focus markets, we are taking it to another stage of accountability. Particularly what we are finding is more of the horizontal aspect of it, changing the way we work so that there is less horizontal movement and people have roles that can expand across more. So I would say we're applying that, but in a different way in focused markets where we are cleaning up a lot more of the horizontal interactions that happen.

Shailesh, it was helpful to hear about all the interventions to drive growth and the examples. Just could you put a bit of context for us, the restructuring internally and how that's positioning you as an organization to reaccelerate growth and related to the interventions?

Yes. Sure. I think first, let me just say the organizational interventions we had planned to make are on track. So those are underway and happening and have gone off very smoothly so far, and we expect that to continue. If I combine your question with a bit of Lauren what you were asking, fundamentally, what we are doing is as we see the landscape emerge, we have to change the way we work.

And that is really where we are putting a lot of the effort, where there needs to be fewer internal transactions, much more external focus. That's where putting consumer first becomes important. Some of the tools that Seth was talking about, there is no need for multiple people doing the same thing. So what we are trying to do from an organization standpoint, the productivity plan is on track. Where we are putting a lot of energy is how we change the way we work to get more outcome focused, to get more consumer focused. That's where the effort is right now.

Kevin Grundy, BNP Paribas. Shailesh, just sticking with the intervention because it's topical and great interest to investors. Can you maybe talk about the scope of what you think needs to be addressed within the portfolio within the focus markets? Is it an additional 30%? Is it 40% within the portfolio, the timing that you think you're trying to set the organization to achieve it? And then was there any discussion about accelerating the pace of investment to get there, maybe outside the bounds of current guidance, but sort of stepping up to accelerate the top line?

The interventions are underway in pretty much all places. I think there's a difference in when who got started depending on when they ran into slowdowns. So I think that probably explains the big part of the variation. The second part, which explains the difference is, particularly when we take U.S., which is our largest market, where the interventions are only getting started. Do I wish we had started earlier? Yes. But an important part of the interventions in U.S., we have to design them so that they are market accretive.

Given our share position, given our desire to grow the total market, which results in the sales growth, it is important we design those interventions in ways that grow the market size. That then has an impact on timing because very often, it then needs to come with innovation. I gave you the example of Tide liquid. We needed that innovation to significantly improve the value while keeping the price the same.

So it just takes -- we could not -- the quick way to fix value would have been change price. But now if you want to grow the category, then we have to do it with an innovation that is significantly better than what we had before. So that is now underway in each of the categories. There are some which are having programs going in, in Jan, March. There are some in April, May, June. On the question of investment, these are -- these interventions are factored into our sequential improvement plan, both on the top and bottom line. I don't know if you want to add?

No, I think you said it. I think the only clarification or emphasis is, we will continue to invest in the business, but we believe that's in a range that we have identified and as Shailesh said both of the sequential improvement, both on top line and bottom line, we want to see in the back half of this year and then returning to the algorithm in that direction the following year. We do not hold back. So we have active conversations with every sector, with every market to ensure that they understand there is no limit to the investment if the plans are right.

Okay. With that, we're going to move to end of the breakout session.

Thank you.

Good morning, and welcome to Procter & 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&G's most recent 10-K, 10-Q and 8-K 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 & 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 & 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 Schulten.

Good morning, everyone. Joining me on the call today is Shailesh Jejurikar, Chief Executive Officer; and Andre Schulten, Senior Vice President, Investor Relations. I will start with an overview of results for the second quarter of fiscal '26, and Shailesh will discuss strategy, innovation and focus areas as we start calendar year 2026. I'll close with guidance for fiscal '26, and then we'll take your questions.

As we expected, second quarter top line results heavily reflect underlying market trends and impacts from base period dynamics. As a reminder, the base period included trade and consumer pantry loading, driven by port strikes and hurricanes in early October and the fear of additional port strikes in late December. The biggest impacts were on the Baby, Feminine and Family Care sector and the Fabric and Home Care sector.

These base period impacts were concentrated in the U.S. market. The balance of the company grew organic sales nearly 3% with almost all regions outside the U.S. growing or accelerating in the quarter. Bottom line results follow the top line as we continue to prioritize full investment in the business. We anticipated this would be the softest quarter of the fiscal year and we remain confident in stronger growth in the back half.

So moving to the details. Organic sales were in line with prior year. Volume was down 1 point; pricing, upper point; and mix was flat for the quarter. 7 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 each in line with a year ago. Baby Care and Feminine Care were each down low singles, and Family Care was down approximately 10%, primarily due to the base period dynamics we described.

As a side note, organic sales, excluding Family Care were up 1% for the quarter. 7 of 10 regions grew organic sales. Focus Markets were down 1%. Organic sales in North America were down 2%. Volume was down 3 points, including a roughly 2-point headwind from the base period trade inventory impact I mentioned. Price/mix added 1 point of growth. European Focus Markets organic sales were up 1%, a strong growth in France, Spain and Italy, largely offset by a softer period in Germany. Greater China organic sales grew 3%, another quarter of growth in what remains a challenging consumer environment, Pampers and SK-II led the growth, each up mid-teens or more.

Enterprise Markets grew mid-single digits for the quarter. Latin America organic sales were up 8%, with solid growth across Mexico, Brazil and the balance of smaller markets in the region. Organic sales in the Europe Enterprise Markets region were up 6% versus prior year, and the Asia Pacific, Middle East, Africa enterprise region grew 2%. Global Enterprise Markets share was down 20 basis points. 25 of our top 50 category country combinations held or grew share for the quarter.

On the bottom line, core earnings per share were $1.88, in line with prior year. On a currency-neutral basis, core EPS was $1.85. Our gross margin was down 50 basis points and core operating margin was down 70 basis points versus prior year, strong productivity improvement of 270 basis points with healthy reinvestment in innovation and demand creation. Currency-neutral core operating margin was down 80 basis points. Adjusted free cash flow productivity was 88% and we returned $4.8 billion of cash to shareowners this quarter: $2.5 billion in dividends and $2.3 billion in share repurchases.

In summary, we've now completed what we fully expected will be the softest quarter of the fiscal year. We have strong innovation and productivity plans for the back half of the year. We continue to invest in creating superior propositions for our consumers and retail partners with relevant innovation, powerful brand campaigns across every touch point and continuously improving in-market execution across all channels and platforms. We are fully activated. It's working. So we move with confidence into half 2 of the fiscal year.

And with that, I'll turn it over to Shailesh.

Thanks, Andre. Good morning, everyone. I want to start by underscoring the point Andre just made. We are confident the interventions and investments we are making now will improve our near-term performance, strong innovation supported by sharper consumer communication and retail execution. We are already seeing strong results in parts of the business that have made these near-term interventions.

Greater China Baby Care was one of the first categories to make a step change and continues to lead growth of the premium and super premium segments of the market behind consumer insight-driven innovation and brand communication. Chinese parents want only the best for their baby, softness and comfort in addition to dryness. The China team created a product that delivers on this insight from first seeing and touching the packaging to feeling the diaper on their baby.

They leveraged the Chinese history with silk. The shiny soft yet strong luxurious material has been a status symbol for more than 2,000 years. Pampers Prestige is the only leading diaper brand that has real silk ingredients in the product, delivering the ultimate experience of skin comfort and protection. The shiny, soft feel package conveys superiority at first touch. Reframing our superior premium line has driven greater China Baby Care to double-digit organic sales growth over the past 18 months and increased share nearly 3 points.

More recently, our Mexico fabric enhancer team has disrupted a sleepy category through deep consumer understanding. Mexican consumers describe the gold standard smell of clean as rich, tasty, fruity and floral, like the scents from shampoos. Downy Intense leverages our internal perfume innovation expertise to create the new high-intensity perfume. The packaging highlights the intensity of fragrance blooming on the bottle like a flower. Brand communication drives awareness of an experience of 24/7 smelling like freshly washed hair.

In-store execution of impactful displays with stopping power is increasing trial. These deep consumer insights driving innovation and executed with shopper brand communication and retail execution has spurred Mexico fabric enhancer category growth and led Downy to double-digit organic sales growth and over 2 points of value share growth.

Other examples where we've accelerated results include the Brazil Hair Care business, U.S. Old Spice and U.S. liquid laundry detergents businesses. Most of these interventions are starting now in the U.S., the biggest, most impactful part of the business. We'll go deeper on these at the CAGNY Conference next month.

While we work to improve our near-term results, we've also begun a longer-term reinvention of P&G. Think of this as the next important phase of constructive disruption that will create and extend our competitive advantages in each element of our strategy. We remain fully committed to the integrated growth strategy that has enabled us to deliver significant growth and value creation over the better part of the past decade and it will in the future, a portfolio of daily use products in categories where performance drives brand choice.

In these categories, P&G is uniquely positioned to deliver irresistible superiority across product, package, communication, retail execution and value. We will do this to drive market growth and create value for P&G and our retail partners. We will double down on productivity with multiyear visibility to fund capabilities, innovation and demand creation and to mitigate cost headwinds while delivering financial results at the levels you and we expect. Constructive disruption to stay ahead of and to create emerging trends and opportunities in our fast-changing industry. We will disrupt ourselves.

At the core of it all is our organization, fully engaged, enabled and excited to serve consumers and win in the marketplace. These strategies taken alone are just words that any company could say. The words alone have become a point of parody. P&G's point of difference, our competitive advantage comes from outstanding, integrated execution of these strategies across all activity systems in the company and from anticipating what is needed next.

We've executed the strategy well for many years. Now we see the landscape around us changing faster than it's ever been in recent memory. Neither we nor our industry in aggregate have adapted as fast as needed. This shows in the growth trends of our categories. Consumer media preferences and information collection are increasingly fragmented with new media platforms, including social media and retail media.

Inflation across food, energy, health care and many other areas of spending has taken a toll on consumers and how they assess value. This will continue to evolve. The retail landscape is changing more concentration but also brand proliferation. Retailers are becoming media platforms and media platforms are becoming retailers. In summary, the consumer path to purchase is changing every day, is nonlinear and littered with millions of possible distractions. We expect an even more intense pace of change in the next 3 to 5 years.

We will adjust to and leap ahead of these disruptions to invent the CPG company of the future. The way to break through consistently is to build the strongest brands in the industry. P&G has the capabilities and unique opportunity to redefine the brand-building framework to deliver consumer-relevant superiority every day, every week, every month, putting the consumer at the center of everything we do.

Leading the consumer-relevant brand building and superiority at this space can and will only be delivered by leveraging superior data, superior technology and superior capabilities to create and extend competitive advantage with consumers and with retail partners. We define our strengths and opportunity here across three areas.

First, we know how to build brands rooted in deep connections with consumers and our industry-leading innovation capability. We have an enormous wealth of consumer data and understanding and we receive a continuous flow of new data every day. Our teams connect with consumers across more touch points than anyone in our industry: product research, shopper research, connected homes, ratings and reviews, social media posts, brand fan websites and many more.

We mine for insights that lead to new product innovation, brand ideas, performance claims, marketing campaigns. Now we are building the consumer connectivity, the integrated data platforms and the technologies that will enhance our team's ability to do this work better, faster and even more consumer-centric than ever before.

We have a unique set of innovation capabilities in our industry, substrate technologies, formulaic chemistry, devices and now biology. We have years of experience integrating these capabilities to launch new platform technologies and innovations, and we see many more ways to bring combinations of these technologies to life in new consumer products. Tide evo is just one current example. Technologies like AI-enabled molecular discovery will enable faster and more powerful integration of innovation capabilities for faster growth.

The second and related opportunity is to create a deeper, holistic connection with consumers to build brand relationships with them in the new media reality. Media fragmentation and the emergence of new platforms creates an opportunity for brand builders who can best integrate across touch points. AI and Gen AI capability help our teams to discover consumer-relevant insights at every step of the consumer path to purchase, grounded in a unifying brand idea.

We are creating the individual touch point experiences for each consumer at a time. These ideas are activated in claims, demonstrations and visuals that communicate the performance and value of the brand across connected and broadcast TV, online video, social media, e-commerce sites and in stores, deep insights translated into a compelling brand idea repeated wherever consumers engage, making the brand easier to remember, reinforcing superior performance that is worth it for the price paid.

The third opportunity is integration with retail partners across the full supply chain and merchandising activity system. Again, the consumer understanding and brand-building capabilities we have from initial brand impulse to purchase transaction and in-home consumption or valuable assets. Integrating these with each retailer's category strategy and business model will enable our brands to create value across all retail formats. This includes activation of our brands in retail media to convey our superiority and value messages close to point of consumer purchase decision.

Our supply chain capability is already a leader in the industry. Supply Chain 3.0 has driven a more complete system connection from purchase signal back through inventory systems to our production planning and material ordering to ensure consumers find the product they want each time they shop. We are well on our way in this journey across capabilities, data and technology. We are freeing up capacity and capabilities with the organization redesign we announced as part of the restructuring in June.

We have built a structured data lake stocked with petabytes of relevant data. We have built data platforms, AI capabilities, programmatic shelf tools and media creation and evaluation systems. We have supply chain platforms that can run autonomously, reacting to retail demand signals, consumer innovation needs or productivity opportunities faster than ever before.

The next step is to connect the box to integrate the pieces from identifying consumer friction point to product idea to product design to supply the creative concept to purchase transaction to usage in home to post-use evaluation. We will close the loop and we believe this will create a different S-curve for our future growth and value creation centered around our consumer.

We are doing many things right in how we are innovating, operating and building brand, and I'm confident in the near-term progress we are seeing. We know the opportunities ahead of us are even bigger, and we will capture them with conviction and discipline. It took years to build the underlying platforms and capabilities and it will take some time to fully integrate and activate these assets across the company. We know what we need to do and we are excited by the opportunities ahead.

In summary, we are confident in the short-term delivery and excited about the mid- to long term as we leverage our strengths and unique capabilities to set us apart from the industry. We are inventing the CPG company of the future. We'll expand on these thoughts with some examples at CAGNY and even more as we get to Investor Day later this year.

With that, I'll hand it over to Andre to cover the guidance update.

Thank you, Shailesh. It's been a challenging start to the fiscal year with softer consumer markets, aggressive competition and a dynamic geopolitical landscape. We expect stronger results in the second half, which enables us to maintain fiscal year 2026 guidance ranges across organic sales, core EPS and adjusted free cash flow productivity. The growth rates embedded in our near-term guidance should return us to lower half of our long-term growth algorithm as we exit fiscal '26 and head in fiscal '27.

For fiscal '26, we continue to expect organic sales growth of in line to plus 4%. Global market growth for our portfolio footprint is around 2% on a value basis at the center of our guidance range. We're seeing progress in most regions and we expect stronger growth in the U.S. as interventions take hold. As a reminder, this guidance includes 30 to 50 basis points of headwind from product and market exits that are part of our restructuring work.

Our bottom line outlook is for core EPS growth of in line to plus 4% versus prior year. This equates to a range of $6.83 to $7.09 per share. This guidance includes commodity costs roughly in line with prior year and a foreign exchange tailwind of approximately $200 million after tax, taken together, no change versus prior guidance.

Our fiscal '26 outlook continues to expect approximately $500 million before tax and higher costs from tariffs. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20% to 21% for fiscal '26, combined, a $250 million after-tax headwind to earnings growth.

We continue to forecast adjusted free cash flow productivity in the range of 85% to 90% for the year, and this includes an increase in capital spending as we add capacity in several categories that we incur the cash costs from the restructuring work. We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock, combined, a plan to return roughly $15 billion of cash to shareowners in fiscal '26.

This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity or other cost increases, geopolitical disruption, major supply chain disruptions or store closures are not anticipated within the guidance ranges.

With that, I'll hand it back to Shailesh for a few closing thoughts.

We continue to believe the best path to sustainable balance growth is to double down on the strategy: stronger integrated execution to delight consumers with superior products at a superior value. Challenging markets like the ones we compete in today are an opportunity for P&G to step out from the back end lead. We're focused on leveraging the industry's best insights, assets, capabilities and people to return to the levels of growth and market leadership that we and you expect.

With that, we'll be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Lauren Lieberman of Barclays.

So two kind of clear themes in the remarks that I wanted to ask about. So Andre, first, kind of what gives you confidence in the near-term acceleration that you mentioned a couple of times? And to what degree is that about kind of comparisons and base period dynamics versus like real fundamental improvement in acceleration?

And then Shailesh, I know we'll get a lot more from you at CAGNY, but what gets you excited about this longer-term reinvention of P&G.? It was a notable choice of words in the press release and then also in the prepared remarks.

Lauren, thanks for the questions. So let me start with half 2 acceleration. I think the first positive element of quarter 2 results is the strength of the business outside of the U.S. If you look at Latin America, 8% growth, Europe in aggregate growing 3%, China growing 3% on top of 5% growth last quarter. Asia, Middle East, Africa is up 2%. And if you exclude the restructuring exits, it will be up 4%.

So there's real underlying acceleration in the business outside of the U.S., and that is grounded in interventions that we've made in terms of innovation, in terms of commercial strategies and in terms of doubling down on the precision and quality of execution in those markets with Latin America really being ahead of the game here. And that's proof for us that the core strategies we're implementing, I think, are showing the results that we want to see.

The U.S. underlying results, we believe, will improve because we don't have the base period headwinds that we saw in quarter 2. As you point out, I think that's part of the acceleration we expect in half 2 versus quarter 2, not having inventory headwinds to the degree that we saw in quarter 2. But the main element here, I think, is the fundamental execution of the same interventions we made outside of the U.S. earlier.

If you recall, the U.S. slowdown was really a little bit delayed versus the balance of the markets. So we started in the rest of the world earlier with the innovation, commercial interventions and execution. But that same playbook is being executed in the U.S. Early indications where we have done this, for example, the Tide Boost launch, that is now in full distribution as of December. We're seeing results that are giving us confidence.

The innovation we're launching on Olay just now on the jars with a new campaign and the launch of treatment at the same time with a new architecture gives us confidence. The innovation we have on Baby Care, first wave executed now, second wave coming later, Tide evo coming in the back half of the year. So there is a wealth of innovation we're launching. We've clearly identified with our North America leadership the opportunity in sharper execution across all retail channels. And the team is committed and is turning that into execution changes and then the simple opportunity to leverage the strength of our brands by staying fully invested across the second half in media with even better execution.

So all of those elements that we executed outside the U.S. that are showing progress we feel we'll work in the U.S. And if we don't see any onetimers anymore in terms of base period headwinds, that will translate into stronger growth. And our objective clearly is to leave the year with share growth in the U.S. Shailesh, you take the second part?

Yes. Thanks, Lauren. So first, what excites me is plenty of growth opportunities. We see that everywhere. But it's not going to happen on its own. It will require us to create our own tailwinds, be it playing in a growth segment and driving it like Personal Care or playing in a segment which wasn't growing like best with Zevo and then having that category grow high singles. So we see growth -- or you take China Baby Care another example where you take and put the odds of growth with the lowest birth rates and all of that and we'll find a way to grow there.

So that's one thing that excites me. The second one is a unique once-in-a-generation opportunity to leverage the shifts in the landscape and our unique strengths and capabilities to set ourselves apart. The media landscape is changing. The retailer landscape is changing. There's a tremendous amount of technology, both from a point of what is applicable using AI, enabling a lot of other things, but even fundamentally our own product and packaging technologies and then consumer preference and demographics, which are evolving.

When you take those and take our strengths and capabilities, brands with large consumer base, if you have a large user base and you're really delivering amazing products, you probably have the biggest fan club already right off the bat. Consumer understanding and consumer data, we have so much data that we have put in. We can get an answer even before getting started. And that flow just continues and we are further strengthening that. Take the media spend leverage and take the different places we could be using it, that is another huge opportunity.

Our R&D spending and capability across multiple areas of technology from formulary chemistry, substrates, devices, biology, that just enables us to innovate much more broadly. You take the China Baby Care, it's one thing to get the insight, another thing to find a way to put silk in the product, another thing to be able to communicate it to consumers, bring it into packaging, bring it to life with user-generated content. So it's the ability to bring all of that together and the technology platforms and applications we've been building, and Andre talked a bit about this. We are -- I would say we have been building a lot, and I would say the future is here. It's just a little uneven. So our job is to integrate and bring it all together.

Your next question will come from the line of Steve Powers with Deutsche Bank.

I'm going to ask a question that kind of follows the same structure as Lauren's question. So the first one, on the second half improvements. If we think about things by category segment versus by geography, I guess, maybe a little bit more detail on where you expect progress on sequential acceleration to manifest most clearly. It sounds like laundry, Baby and perhaps Skin Care from what you said, Andre. But maybe just if you could elaborate a bit more from that perspective.

And then, Shailesh, as you think about all those different pieces of operational enhancement and reinvention initiatives, how do you think about the path and timeline from here for the company to put all of them together and create those own tailwinds and win in the marketplace across the portfolio with consistency? How long does that take in your mind?

Steve, if I look across the businesses, the innovation interventions, the commercial interventions, the execution focus is consistently applied across every part of the portfolio. I would tell you the base period effects are probably a strong help when you look at Family Care, Baby Care and even Fem Care. They were most heavily impacted in the first half of the year.

So Family Care, for example, we see strong growth in January, even turning into share growth now. And we expect similar dynamics to happen across Baby and Fem. Baby at a global level is actually growing share, so has returned to share growth in the most recent reading. So the momentum is there. We continue to work on the mid-tier proposition. You recall, we had innovated on the top tier. That continues to work well. Swaddlers, Cruisers 360, we've made the innovation intervention from a year ago. That's working. On Baby Dry, we have a two-phased approach. Phase 1 is executed, phase 2 is coming later. So that's still work to be done.

On laundry and fabric enhancers, we have very strong innovation, Tide Boost that I mentioned before, the biggest laundry liquid upgrade in 20 years for consumers, and that is taking hold and working. And we're preparing for the Tide evo launch. We have strong innovation across fabric enhancers as well. And as you know, that's still a huge opportunity in terms of household penetration. So communication effectiveness and copy quality is improving.

In aggregate, Beauty is growing 4%, and we have an opportunity to strengthen growth in Skin Care in the U.S. making strong progress on SK-II outside of the U.S., on Olay outside of the U.S. And I think the new launch of Olay that is just coming out with strong retailer support, I think, will accelerate that business. Personal Care has momentum and will continue momentum in the U.S. and globally.

So I can continue to go down the list, but I think I've given you enough depth to say this is really across the portfolio. It's the same idea, double down on the consumer, double down on the execution, a double down on the quality of the brand campaign.

And I think that's where Shailesh is putting his focus, if I can speak for him. He's really doubling down in every review on the quality of the execution, the quality of the brand campaign, the quality of the architecture thinking. And it's stimulating thought, it's stimulating quality of execution. And I think that gives us confidence from a geographic standpoint, as we talked earlier to Lauren's question, but also from a category standpoint.

No, thanks, Andre. And I'll just bridge, Steve, from what Andre said to what I'm going to say. But some of it will be sequential just simply because in U.S. also when we make the interventions, we are extremely deliberate about making sure those interventions also drive category growth. So that's also why some of this has to happen with big innovations.

But switching to your question, so I think a lot of the way to think about the future is we have, in many cases, already built platforms. Take the core data lake that I talked about earlier. I mean, that did not happen overnight, cannot happen overnight, requires data capabilities, requires partnerships but, also importantly, requires internal cultural change. For people to work the data and systems in a certain way is not a change that you can just do overnight. Even if you have the technology solution, very often, the culture change needs to go along with it.

And so a lot of that work has happened or is happening. The timeline, if you asked, as you specifically did ask, is I think by the time we really get the future evenly distributed, I think we're talking 12 to 18 months. But it is not one which is a line of demarcation. So you will see parts of the business and certain businesses better equipped to take on all aspects of the transformation. So some businesses may be ahead of others, some regions may get ahead of others. But the simple answer to your question is really, I think, to get the future evenly distributed will be 12 to 18 months.

The next question will come from the line of Chris Carey with Wells Fargo.

I wanted to ask about investment levels. P&G has recently announced a restructuring program and you're going through some initiatives today to media platforms and supply chain integration with an evolving retail landscape. Obviously, there's an expectation for improvement and sales growth, rebalancing of this, I guess, top line and move toward algorithm over time.

Can you give us a sense of the sort of cost of this progress, I suppose, and kind of the balance between the restructuring and some of the savings that, that's going to allow for you relative to what you feel like is going to be needed potentially, especially if you don't see that acceleration that you're going to be looking for in the coming months if you really want to stimulate the top line for this business over the next 12 to 18 months?

Chris, let me take a crack at this. The first part of the answer is many of the investments have been made over the last decade. If you think about the amount of money it takes to build a consistent global ERP platform, the data lake, the data governance structure, data engineering, all of that has been done. So that was part of the results that we delivered over the past, I would say, 5 to 10 years.

The investment to activate the technology, specifically around the innovation capabilities, the media capabilities won't be significant. It's an investment in scaling. But the underlying technology, the underlying data, that heavy investment is already done. So in that sense, I don't expect major capital or expense investments.

On the supply chain side, you see us build capacity. And as we build capacity, that capacity is built in a way that it leverages automation, digitization, both on the manufacturing side and on the warehouse side. So the elevated investment level in terms of capital is really related to building capacity, building capacity in a different way but not fundamentally more expensive. So I don't expect again on the capital side a significant shift.

The restructuring we have announced in June, the 2-year program, I think, will take us through the majority of the org changes and portfolio changes that we need to make. From there on out, if this works the way we want to, it will basically allow us to grow without incremental investments in organization or people. So if you think about it, the objective is to grow productivity sales per head disproportionately once these capabilities are implemented. But we don't think it requires another wave of significant restructuring beyond what we typically have as part of our core earnings. So I wouldn't look at a cliff of investment that comes with this.

The second part of your question on return to algorithm, I would say let us get through the next 2 quarters and focus on acceleration, and then we'll talk about where we see the next year and how close to algorithm we come once we have that reality under our belt.

The next question will come from Dara Mohsenian of Morgan Stanley.

So Shailesh, just wanted to dial down a bit more into the U.S. market. There's always an opportunity under a new CEO to refocus the organization and tweak areas of emphasis. Obviously, there's broad changes in the retail environment as you mentioned, AI technology, consumer landscape, et cetera, et cetera. And also we're coming off a very difficult category growth environment in the U.S. in calendar '25.

So just as you look going forward, what are the most important priorities for the organization in terms of driving better execution, reaccelerating that organic sales growth, and specifically, P&G is part of driving category growth. And part of the question is I'd like to better understand what's changing in terms of the areas of emphasis or the strategy plans versus more where you're doubling down on execution in existing plans.

Sure. Thanks, Dara. A few areas. So I think the -- as Andre said, I think if we get the elements of our plan right, I think there is opportunity to grow the market. So I think that is doable. What are some of the changes, as Andre talked about, the interventions short to midterm that we are looking at and which also bleed into the long term. So it isn't just one separate short and long-term intervention.

One is the media landscape has changed very dramatically over the last few years. I think probably driven somewhat by COVID habits, a bunch of other things, the way people consume media and content has changed dramatically. Adjusting our brand-building plans to fully reflect that change and leverage it is the first big intervention we are focused on as we review plans, including in the U.S.

The second one linked to the retail landscape, there are a couple. But the first one is linked to when you see what channels are growing, where the growth is coming. We need to adjust the kind of innovation we do. The way we are calling it is stronger core, bigger more. Because by definition, what we are finding is just, given how challenging it is to get awareness, how important it is for the big items to be there, for instance, even on e-commerce where you can list everything, it's really the first screen or two that matters. And so having the item which has the velocity is extremely important.

And so the way to think about it is a stronger core, for example, is the Tide liquid relaunch. You have an amazing user base. You give them a delightful product. They continue using it, use more of it and attract other people to come use it as well. The bigger more, a good example is launch of something like Tide evo, which is transformational. So you are going to get consumer attention and engagement. So we're changing the innovation to reflect that both from a point of view of how the media is being consumed but also how the retail landscape is playing out.

The third area of change is, of course, very deliberate on consumer value. And particularly in a market like U.S., a lot of it is about strengthening our proposition. Again, Tide is a great example of it, but we are going to have that pretty much across every category where we significantly improve the value by significantly improving the product performance so that the consumer notices it and feels the value. So one of the areas that we're looking at across categories is significant strengthening of the propositions. And in many of these cases, that do not come with the change in price. So we will be significantly strengthening value.

So if I were to just summarize what I just said, it would be adjust to the new media landscape with how we do our brand campaigns, adjust how we innovate with much more emphasis on a strong core and a bigger more and then ensure we are delivering really good consumer value.

The next question will come from Robert Ottenstein of Evercore ISI.

And I think you've kind of hinted at this, but let's just talk about the U.S. and Amazon. Our data is showing that it's driving a disproportionate amount of the growth in your categories, depending on the category, anywhere from 60% to 80% or so. How specifically is that impacting your media efficiency and competitive dynamics against smaller brands? What do you need to do differently? And perhaps, do you have any particular learnings from China that are relevant here?

Andre, do you want...

Yes. I can start here, Robert. A couple of points that I think Shailesh hinted towards. I think having the core brand as strong as possible by improving the performance, improving the claims, the e-content, all of that, I think, is the best and most urgent thing to do across the entire portfolio so when it shows up on the landing page, it shows up as strong as possible. I think that's number one.

I think there's an opportunity specifically if you look at online businesses. The willingness of consumers to actually go into higher-priced items is still very, very strongly developed. If you think about categories like Hair Care, if you think about categories like Skin Care, where small brands tend to play is in the upper end of the spectrum from a price per usage component. I think that's an opportunity for us to innovate, which is stronger core and a bigger more. And the more, especially on online, I think, can be premium priced. So that's where you see innovation happening.

And in general, the last thing I'll leave you with is taking smaller brands and looking at some of the ideas that these creators are bringing, I think, is good inspiration. So we're looking at some of these brands and saying, that could be an interesting idea maybe on some of our core business or it could be an interesting idea to replicate as a line extension. There's nothing unique if you think about the ability that the ecosystem of small brands can bring, not technology-wise, certainly not from a marketing scale perspective, certainly not from a supply chain perspective. But the creative stage is something interesting for us to look at.

I'd just add a couple of points, Andre, on this to what you said, which is, firstly, at a broad strategic priority level, we are very, very deliberate about ensuring we win in the fast-growing segments, which may be channels or segments of a market. What is exciting to the point you made, Robert, about the e-commerce growth at a variety of retailers and a variety of countries is very often, if we can channel that right, it can dramatically grow the market size and category.

And if you want to take a stark example and move away from the U.S. for a second, we go to India where our portfolio is slightly different and has been evolving differently, e-commerce is growing probably at 10x the pace almost of off-line and our share is about 1.8x of our off-line business. So we are very deliberate about that, whether it's the U.S. or India or any other market, to make sure that happens.

The drivers, as Andrew pointed out, of winning there needs certain things, which we are making sure we have across the board, which includes content, which includes the item specificity and making sure those are strong and growing and playing with the right portfolio. So those all become very critical elements, whether it's Amazon in U.S. or any other e-comm player in the U.S. or outside.

The next question will come from the line of Peter Galbo with Bank of America.

I'm now happy to be contributing very much to the Baby Care comps in the Galbo household. So I wanted to ask just regarding, Andre, your comments around returning to kind of the lower half of algorithm in the back half on the near term. Maybe a bit of clarification there. I think at one point in the prepared remarks, you talked about your categories growing at maybe 2. Then there was another comment about if we took out the lap, you would have actually seen organic sales at 3%. So Just maybe you can help clarify a bit on what you were trying to say with that comment as I've gotten some inbound from folks on that.

Peter, glad to welcome you to the diapering household community. So if you look at our global categories, we see growth around 2% in terms of value. Enterprise Markets are growing at about mid-single digits. China is still negative by about 1 point. Europe, flat in volume, about 1% in value.

And the most recent reading in the U.S., all outlet read, so our data, would indicate about 1% to 2% of value growth. If you look specifically at the O&D quarter, there is a point of inventory within those numbers. So if you want to be optimistic, you could say the U.S. structurally could be growing at 2 to 3 points. But we have to see where that goes.

From our point of view is the actual results, we've delivered 3% growth outside of the U.S. So that's roughly in line with market growth outside of the U.S. And we have delivered minus 2% in the U.S., which is below the market. And a good part of that is the inventory effect, but there is a component of reduced share. So I don't want to loss over the fact that we have work to do to recover share.

Partially, that's already in progress. I talked about Family Care. We're making progress on laundry. But the recovery in the second half will include both the base period effect moving out of the market and us recovering share. So our objective is really to leave the fiscal year with share momentum out in the U.S. and at a global level.

The next question will come from Kevin Grundy of BNP Paribas.

Shailesh, I wanted to take a step back and ask for your assessment overall on the portfolio from a strategy perspective. So it's been over a decade since P&G completed its portfolio review. Success, as you know, didn't come right away but ultimately did and set the company on a very strong path for growth. But now as we talked about on this call, the company finds itself in more of a transitional sort of phase of a reinvention, if you will, as growth has slowed.

So with that as context, I'd like your view here on whether you are generally pleased with the current portfolio. Is Procter still in the right segments within big total addressable markets, attractive returns on capital and stronger growth? Or do you see it possible that certain business may make less sense today in P&G's portfolio than they may have in years past? So your thoughts there would be appreciated.

Thanks, Kevin. I'd split it into a few parts. So first is I think we are clear that we play in daily use categories where performance matters. So I think we feel very good about that choice. We feel very good about that choice because it's extremely well integrated with the total strategy. That's where superiority becomes critical. The whole model works well when we are in categories where -- daily use categories where performance matters. So I think that is one part of it.

Second part of it is what we call the day 1 look. If we were starting our company today, we would look at our portfolio and say, okay, are we in the right places? That has been really the genesis or driver of the restructuring that we talked about 6 months back where we said we need to get out of certain parts of the business because simply them being a drag or we're not where we saw future growth. So there's another part of it, which is just disciplined look, a continuous review of which are the right segments and are we playing adequately in higher-growth segments or not.

There's a third element of it, which is when we look at categories, are we playing in the right segments? And something Andre just talked about, which is if you look at e-comm, you see which category, what segments are growing and are we present enough in some of those. If you look at social commerce in some categories in [ CRB ], well represented in all segments. And we actually find a lot of opportunity at some of the higher price points in some of the categories and things like social commerce. So that's another aspect of the portfolio that we continue to strengthen.

And the final point I would make is we continue to look at where we can build greater strength. And we've always talked about the fact that health and beauty are two areas where we find we have still opportunity to build a stronger presence, and we continue to look at opportunities which come our way there.

The next question will come from the line of Peter Grom with UBS.

So I guess I just wanted to follow up on the U.S. And I guess you sound confident in your ability to see performance improve. But I guess I was trying to just pin down what you're expecting in terms of category growth for the back half of the year.

And I wasn't sure, in your response to Peter's question around 1% to 2% growth, whether that's kind of the right run rate we should expect moving forward or whether the guidance expects to get back to that 2% to 3%. So maybe if you could just elaborate on that, that would be helpful.

And then I guess, just related, at CAGNY last year, there's a lot of discussion around inventory destocking. So just any thoughts or comments on what investors should expect as we anniversary those impacts.

Peter, yes, thanks for the push on clarifying U.S. category growth. Our base expectation is 2% category growth in the back half. That's what we know and that's what we're planning on. From an inventory standpoint, hard to predict. The only thing I'll leave you with is I would not expect any significant inventory built in the second half. That's not part of our plan.

We expect some level of inventory efficiency to be driven across retailers, like they always do. Some of our retail partners are finishing up supply chain interventions and that will probably lead to some efficiency in terms of inventory levels. So I would tell you a slight headwind from inventory is probably adequate to assume on a market base that has about 2% of value growth.

The next question will come from Filippo Falorni of Citi.

I wanted to shift maybe to margins. For the second half of the year, is the right expectation to think that we should see an improving margin trajectory as well? considering the assumed improvement that you're embedded in the U.S. market, which is your highest margin business, and given the commodity outlook looks a little bit more favorable in your guidance?

And then below the gross margin line, Shailesh, you mentioned a lot about the interventions that you're planning, including the U.S. business. Can you help us quantify where the sizing of this intervention, where would they show up, whether it's with more advertising, with more R&D, more promotional investment. Any help, like sizing and quantifying these impacts will be helpful.

Filippo, let me start. At the risk of disappointing you, I will not give you margin guidance for the back half. I think the margin will be an outcome, and we will have to tactically maneuver to see where we want to invest for the strongest possible growth. We focus on top line and we focus on EPS.

And as you will have noticed, our guidance ranges on both are relatively wide. And they are wide because the outcomes will vary. There's still a lot of variability. And the most important variability to the margin line will be our conviction and need to invest. And so it's hard for me to give you a good indication of where that's going to land because it's going to be entirely driven by our ability and conviction to continue to invest in the brands.

Where that investment comes, I can start, Shailesh, and you jump in, I think it's mostly in the range of again the innovation we're launching. And Shailesh talked about improving value by driving significant performance improvements on the core propositions. That will be an investment we are making. That's baked into our assumptions. And the second component is to communicate those investments effectively and consistently across the balance of the year. So the media side is an important part. I wouldn't expect a significant increase year-over-year but consistent media spend across the second half.

And the third one is trade-related spending to drive trial, create display, visibility, secondary placement in store. Again, our path chosen is not heavy investment in promotion depth and price. We don't believe that's market constructive. But it will be to drive trial of those superior propositions. So that's the third bucket. So product, media and communication and in-store visibility and trial.

No, I think you covered it. The only thing I would say is the ratios of that vary based on the category. So the mix of which one needs a little more on product, which one needs a little more on advertising or visibility will vary. So that's the only point I would add to what you said, Andre.

Our next question today will come from Bonnie Herzog of Goldman Sachs.

I guess I had a question on your Grooming segment. Organic sales were flat in the quarter, which was a pretty big deceleration versus last quarter with volumes inflecting negative and then margins contracting nearly 300 bps. So could you provide a little more color, I guess, on what drove the weakness on volumes and if there are any other factors behind the margin contraction outside of volume deleverage? And then maybe lastly, how should we think about the segment for the second half in terms of whether it's innovation and whether the business can accelerate?

Bonnie, I think you answered the first part of the question. I think the margin component and the bottom line component is an outcome of the top line. It's obviously a high-margin business. And so it's the volume slowing that translates into the bottom line slowing specifically since we don't curtail the investment in the business. Superiority investment across Grooming is very important.

The timing of the Grooming business is heavily related to initiative timing. So year-over-year, the phasing of brand initiatives, female grooming and male grooming initiatives is a driver in the quarterly profile that you see. On the second half, like other businesses, we expect modest acceleration in Grooming related mostly to the U.S. And I think the biggest opportunity for our Grooming business is continued activation of the portfolio in the U.S. and quality of execution in U.S. stores, and that's what the team is entirely focused on.

I'd just add maybe a couple of points, Bonnie, to that. One is we see within Grooming a huge opportunity in continuing to drive Venus. That has upside in pretty much every region. In many regions, that's growing in the 10s and 20s percent growth. So we see a lot of upside on the female grooming side. We see a lot more on appliances as well. And then we are working on innovation, which comes in calendar '26, which should further drive category growth.

And probably the last point I would make is in the U.S., we are also looking at changing the way our shelves are in many of the retailers and significantly improving how grooming comes across as a shopping experience.

Our next question will come from the line of Kaumil Gajrawala of Jefferies.

If we could talk a bit about usage and volumes because there's many puts and takes on your quarter. But to the extent that you're able to calculate what actual usage is in the households, has that sort of trended off as we got into the front half of this fiscal year? Is it about the same and the rest sort of within it is just noise?

I think, Kaumil, that is still a huge opportunity in our categories. Usage volume growth is slow, too honestly flat if you look at the front half of the year and even in the last quarter both in the U.S. and in Europe. So reaccelerating household penetration, reaccelerating user growth is a big part of what we're focusing on.

And if you think about it, a lot of the growth in the past few years has been price driven as we came through the inflationary cycle, the supply chain crisis in all of our categories. And so I think the opportunity for us now is exactly what Shailesh described. It is to improve the value proposition for consumers by diligently constructing propositions that have a perfectly matching performance profile, well communicated and executed without raising the price so we can make the proposition attractive to more households, more consumers more consistently.

So the volume component will have to be a part of how we grow markets. As we talked about the second half, we believe this will take time. So we don't think this is an easy fix nor will it come quickly. So our growth trajectory that I just highlighted, the 2% value growth in the U.S., which is the assumption for half 2, largely assumes that the volume component remains slow.

Just to add one point, reinforcing, Andre, what you said. As we get on the journey of growth, I think user growth will be one which we place a lot of emphasis on. As Andre said, between user usage and price/mix, I think the last 5 years probably had, due to inflation, a bigger component of price/mix. We think the future is going to be a lot more about user growth as the foundation. And then that typically, when we get that, we also get the usage growth.

The next question will come from the line of Andrea Teixeira with JPMorgan.

So was hoping if you -- I have a clarification on one question. On the interventions you just mentioned, Shailesh and Andre, like you're assuming that your category growth. But are you thinking you can stabilize or even perhaps have share gains with the interventions you were making? And within that, are you still seeing some trade down within your brands from, let's say, pods to liquid or if that has stabilized.

And my real question is on the productivity reinvestment as you had a very strong productivity in the quarter. So are you thinking of like as you go in terms of reinvestments and all the media initiatives, innovation you've made and perhaps by spec architecture for affordability, should we expect that to be canceled out? Or perhaps as you see this environment and the opportunity to lean into more of value proposition, how are you thinking of like the balance between top line and bottom line?

Thanks, Andrea. From a share perspective, it certainly is our objective to leave the year with share growth both in the U.S. and in the rest of the world. But we also acknowledge that, that is an outcome of how well we execute, the competitive environment, other factors in terms of geopolitical dimensions, consumer health.

So that's why we still maintain the range. And within the range, if we end up in the mid- to higher section, that will probably have an element of share growth. If we end up in the lower section, it won't. But be assured, our team's energy is exactly that. We need to grow share by growing more users, growing more households, and that's where all the innovation and the investment is focused.

On the balance between productivity flow through top line and bottom line, I'll go back to what I said earlier. It depends on what we see happening. We will certainly err on the side of more investment to drive more user growth, drive household penetration in the short term if we are convinced that we have the right innovation, if we are convinced that we have the right marketing program, the right commercial program. We will double down but we would be diligent in that assessment. So if we feel we've got the right program, we absolutely will continue to reinvest productivity.

The next question will come from Olivia Tong of Raymond James.

I want to talk a little bit about the margin. With productivity savings, about 270 basis points this quarter, you reinvested 220 of that, which I think highlights your pricing productivity and reinvestment even as demand remains slower. So could you drill into that a little bit more in terms of what limitations there could be over the balance of the year on the price and productivity levers, particularly on price? Your implied second half guidance assumes some fairly strong margin leverage. But I want to understand those moving parts.

And then in terms of the guidance range, you mentioned to an answer to another question that you can grow even without additional headcount, leveraging sales per employee. What's the risk that you might need to adjust those investment levels as you think about delivering on EPS.

I'll give it a shot, Olivia, but you can certainly follow up with the IR team to get you more detail. I think the margin productivity side, I feel very good about. We will continue to deliver in the range that we've delivered on. We have visibility to the productivity components for the next 2 to 3 years and we have the effect of the restructuring program kicking in. So I feel good about our ability to continue to drive productivity at the level we need to deliver investment and a reasonable EPS outcome.

Again, I won't get into guidance for next year, but it's certainly our objective to make progress towards algorithm over the next few quarters. The extent of that progress will not depend on our ability to deliver productivity. I feel very confident about that. But it will entirely deliver -- depend on our ability to stimulate top line growth in the market conditions we're facing and the level of confidence and conviction we have to invest behind that growth in the market. So I'll leave it there.

For the longer term, I'll tell you I am fairly convinced, and Shailesh will jump in here, that with the restructuring program, the way we're approaching the organization design, the way we're integrating technology into the way we work and the way we want to decrease functional barriers, we think that's a powerful path forward to continue to drive organizational effectiveness and, honestly, free up a ton of capacity of our teams from internal work to focus on what really matters, which is the consumer innovation and execution.

I agree with everything, Andre. I would just add a couple of points to frame what we are trying to do, which is productivity as fuel for growth, growth as a fuel for EPS. So we really think productivity enables us to do what we need to get the growth, which gives us balanced and strong bottom line growth. So that is really the effort.

So as you think of that, and that's really what Andre was also saying is, we're doing the productivity -- we're very confident, by the way, in the productivity. The success from that is getting us growing top and bottom line.

The next question will come from the line of Robert Moskow of TD Cowen.

Procter & Gamble probably does more than any CPG company to grow categories through innovation and improving performance. That's always been your mantra. But when you look at the data in terms of like the past 12 weeks or even the past year, the percent of products sold on promotion at Procter is substantially higher by about 200, 300 basis points. So I'm wondering, do you think this data like accurately represents what your approach is in market because it would indicate that there is more need to move volume? Or Is it inaccurately depicting what you're trying to do to improve the volume?

Robert, I'll give you a two-part answer here. Good question. I think I've repeatedly said that I don't see a reason why the categories will not move back to pre-COVID levels of promotion, which are around 30%. That will happen. It's just a competitive dynamic, a retailer dynamic, consumer dynamic. And it's happening sequentially over time. The promotion read you're getting is not wrong, but it only captures part of what the market reality is. It doesn't capture forward gift cards. It doesn't capture layered couponing, which is a significant part of competitive promotion that we're seeing.

You're right. Our promotion volume is increasing and probably will increase in the second half. As we execute the innovation, part of creating trial for those innovations is to deliver promotion visibility. Not all of those promotions come with deep price discounting. In many cases, they don't. But they show up in the promotion line. So what I'll tell you is our objective is to grow categories. Have we done this consistently over the past 12 months? No. When Shailesh talks about, we need to grow users and we need to grow usage, that is the part of category growth that we're striving to drive. And part of that has to be to generate trial because if you don't have new users try superior propositions, you don't get repeat and you don't get the growth.

Thanks. I'll just add one thing to this, which is that as we strengthen our propositions, it should strengthen our promotion elasticities as well, so which means we will be less impacted as our propositions get stronger. So that is always something we look for. So there's a balance between ensuring we are building a future business which is less dependent on promotions, but making sure we are not completely losing the plot on competitiveness.

The next question will come from the line of Edward Lewis of Rothschild & Redburn.

Yes. I just should I just wanted to touch on the regional mix of the business. Clearly, your elevated presence in the U.S. has served you well of late. But as the U.S. growth slows back to sort of, I guess, more normalized levels and we see continued growth in emerging markets, for example, what you're seeing in Latin America, how do you think about the regional mix of the business? And the advantages that you see the business is having, are those regionally agnostic? Or can they be applied globally?

Great question. Let me take a crack at it. So I would say our task always, given our business size and other things is, first and foremost, to get U.S. growing faster. And I believe it is doable and we have plans to try and do it. That is really part of what we talk about when we say we want to create the future. But similarly, we think there are tremendous opportunities outside the U.S., which we are very focused on. And what we have tried to do is get very deliberate about which markets have that potential and then really double down and making sure we are playing to the future there.

So a lot of the portfolio choices we have made over the past 6 to 9 months have really been to put us in a position that we are playing in winning segments. Even if I take Latin America, we made the choice to change our business model in Argentina. A large part of that enabled us to much better focus on Mexico and Brazil. And we changed the organization structure in the rest of Latin America, which then enabled us to be much more consumer focused and now we are seeing, as Andre mentioned earlier, 9% growth in Brazil. That's not the pace the market is growing. Double digit in Mexico, that's definitely not the pace the market is growing at.

So I talked about India a bit earlier in a different context. But again, playing to the future growth there, which is heavily e-comm, I mean, having spent a lot of my life there, it's staggering to see the pace of change over the last 5 years in that space. So we're very deliberate on the big markets outside the U.S. on how we're going to get the growth. Of course, China still remains a big one, has a slightly different profile of where it's coming from, but still a lot of future opportunities. So we do believe many of these large markets, we are well positioned to play to where the future is going.

And I would just say it's an end. We need to get the U.S. growing and we need to grow outside. And I think the good news is, maybe only one point to add, is the margin structure that Jon and then Shailesh have built in Enterprise Markets allows consistent investment because we can cover the cost of capacity, the cost of capital. So it's not dilutive. It funds itself. And that's the core idea behind expansion and growth in Enterprise Markets.

Your final question will come from the line of Michael Lavery of Piper Sandler.

Just wanted to come back to some of the share opportunities and how to think about it relative to value for the consumer. You've talked about the importance of that, but also it sounds like no real price changes are under consideration. You've pointed out some of the premiumization some smaller brands are doing effectively and maybe delivering better benefits and value in that way, but you've also had, of course, some private label strength and share pressure.

I guess how do we reconcile all of it? And maybe is it as simple as just a waiting game for the consumer health to improve? Or is there more to do to move the needle on how the consumer sees value other than just sort of trading them up?

Yes. No, great question. I would say it's not one thing because a very critical part of our strategy of delivering value is also having a portfolio. So [ that ] plays an important role in Baby Care in that sense. Similarly, on laundry, we have a portfolio with Gain and Tide Simply. So across markets, we do build that portfolio to ensure we are playing at a variety of price points and making our products accessible.

But if I were to look at the largest opportunities to address growth through value, I would say a bulk of them are really in strengthening propositions. And if I look at probably one of our largest core items, which will be Tide liquid, which is a huge, huge business, we are seeing real momentum as we've just significantly improved the product performance. So it's a combination to answer your question.

Okay. With that, it looks like we have no further questions. So just thank you for joining us this morning, and look forward to seeing you at CAGNY next month. Have a great day.

Thanks, everyone.

That concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.

Good morning, everyone. I'm Dara Mohsenian, Morgan Stanley's household products and beverage analyst. I'm very pleased to welcome Procter & Gamble back to Morgan Stanley's Global Consumer and Retail Conference. And just before we get started, I have to give a quick disclosure. Please see the Morgan Stanley research website at www.morganstanley.com for important research disclosures, and feel free to reach out to your Morgan Stanley representative with any questions.

So joining us today from Procter & Gamble, we have Procter's CFO, Andre Schulten; and Head of Investor Relations, John Chevalier. Great to have you guys here again. Thanks so much for joining us.

So I thought maybe first, we could start off on the short-term consumer landscape here, Andre, since there's been so much volatility, the backdrop is muted category growth. And maybe we can just start with the U.S. both from a consumer standpoint, where there's been some volatility around the government shutdown, et cetera, and also from a competitive standpoint, what you're seeing in the market.

And let's talk about sort of the pace of the U.S. over the next few quarters here. You have a tough comparison coming up this quarter. Things ease in the back half of the year. Your guidance implies a ramp-up at the corporate level. Obviously, that extends to the U.S. given the size of the market. So just your thoughts around near-term trends in the U.S. and sort of pace of potential recovery as you look out over the next few quarters.

Yes. Good morning, everyone. Great to be here with you. Let me start on a more positive note. We have pockets of real strength. We've talked about Latin America. We've talked about China, Western Europe has returned to share growth. But as you say, there are I think the context in the U.S. is more volatile, probably the most volatile we've seen in a long time.

There were a few elements that we knew coming into quarter 2 out of the last earnings call. We knew the consumer was more nervous and cautious. We knew that there was a stronger competitive environment. And we also knew that we had a stronger base period with consumer loading due to two port strikes in the base, where consumers stocked up in fear of product rationing.

So all of those things were known. What we didn't know was obviously the incremental context that was provided with the government shutdown, SNAP benefits, et cetera. And you can see that in the macro growth in our categories in quarter 2. Our most recent reading has the category down both in volume and in value, significantly in October. I don't expect November to be materially different. So as you say, that sets a tougher context for the U.S. business.

Now that said, that's all within the guidance range we provided. So we have provided within our guidance range for some of that variability, which we expected throughout the year. But nevertheless, it will play out in quarter 2, probably more so than on the year.

For the year, we feel very comfortable with the guidance range we've provided. What that means for the U.S., and if you say the U.S. is a big part of the business, so U.S. recovery will play a big part in where within that guidance range we end. The current best view we have is that our consumption run rates in the U.S. will hold at the current level.

So our base plan would suggest that what we see in terms of consumption and shipment in half 1 will exactly be what we see in half 2. And given an easier base period, that will then lead to organic sales growth in the low single digits in the U.S. Incrementally to just the assumption that we'll keep shipping what we're shipping, the upside we see versus that scenario or the protection against further volatility in the macro environment is the strong innovation plan that we're executing across half 2.

We've already implemented a few launches which are promising results. We've done the upgrade on Tide Liquid, the biggest formula upgrade in 20 years, Tide Boost. That's in the market, and the business is responding. We've returned to share growth on Tide laundry, which is great to see. And we have innovation across every part of the portfolio. And it's not about the number of innovations that I'm excited about. It's the quality of the innovation that we see in coming.

Every part of the business we've reviewed, Shailesh and I reviewed every part of the U.S. business with every General Manager, literally going through what is the consumer insight and friction point that we're trying to address. Do we have discovered with the product innovation that you're about to launch? How do you bring it to life with the right claim across all the right media channels and does it hold from a value creation standpoint for the consumer. And if I look at Skin Care, Fabric Care, Family Care, Baby Care, they all have very strong plans in the back half. So base plan, I would tell you, yes, volatile, hold the run rates will lead to better indices, protection or upside, strong innovation plan.

Great. That's helpful. And just as you think about innovation, can you put in perspective versus a typical year, maybe how of innovation process has changed in the last couple of years. We'll talk about AI a bit later, but I'd be curious for sort of what's driving that innovation ramp-up and how sustainable it is?

I think what drove the innovation ramp up was an insight about 2 years ago that the industry at large had driven growth via a lot of price/mix and exclusively, via price/mix for a period of time. And it was becoming clear that, that growth trajectory was not going to hold. So we started thinking through how do we make sure we have enough arrows in the coffer when that hill climb needs to happen, i.e., when we need to restimulate volume growth and category growth with innovation. So the plan that the innovation itself was started to develop 2, 2.5 years ago.

I think the difference in how we approach the innovation design with Shailesh coming in is -- Shailesh is a brand builder by heart. So he really insists on going deep on the consumer insight, first and foremost, deeper than I've seen any member of the team do so. And that, I think, leads to more consistency that we view in the innovation from -- all the way from consumer friction to consumer idea that can be activated consistently across all touch points, media, claims, packaging, retail execution. And when we get that right, we really see step change in performance. So that review of consistency is key in my mind for the success in half 2, and I feel good about where we are.

Okay. Maybe we can turn to China. You've picked up momentum there pretty significantly recently, 5% growth in the last fiscal quarter. You made some changes in your go-to-market model. You've accelerated innovation, more success targeting e-com on top of the Beauty recovery from a category standpoint. So just are we back to sustained growth here as you look going forward, do you think you can accelerate growth as you look out over the next couple of years, given some of those tailwinds behind you? And also any short-term impact on SK-II just from Japan, China relations in the near-term here?

The China team has probably done the most significant restructure of a market that I've seen in my career. About 1.5, 2 years ago, they really turned every element of the business model upside down. Starting with how we go to market, realizing that the traditional brick-and-mortar was still important but less important than online, realizing that distributor network and the way we incented distributors was not up to par with where the consumer and the retail environment was going, realizing that wholesale had to play a different role in the market than it did traditionally, streamlining the brand portfolio, changing the way we innovate across all of our categories and changing the media model. And all of that has worked.

So when we look at quarter 1, 5% growth is probably not structurally where we are yet, but I have confidence and so does the team that the trajectory is upward. China is China, so it will be like this. But I do believe that we have all the right elements in place. And you can see about 60% of our net sales, we deem now superior in China, only 60%. So that leaves 40% to be brought to clear superiority and the innovation plans and the marketing plans and go-to-market plans are in place. So I expect as we make progress along those five vectors on the remaining 40%, we will see continued acceleration.

The market is still difficult. Consumer confidence is still significantly below where it used to be. The retail environment, as I mentioned before, is structurally shifting, which means a lot of the traditional customers that made companies like ours big in China, are struggling. They need to reinvent their model, which puts friction in the system. But when I put it all together, I feel very positive about where the China team is headed.

Great. And any thoughts around any near-term brand volatility in China given some of the political issues?

We're obviously monitoring social media noise on the comments that were made. There has been no specific brand attribution to any of our brands, including SK-II. And again, I think the tone is hopefully easing a little bit between the parties involved.

Okay. Great. Any learnings from China. It's obviously a very unique market and different than a lot of the other markets around the world, but any learnings from the success you've had there that you're taking to other markets or you think can be applied?

Yes. I think the learning is -- I would say there's two markets that I think are -- two regions that I think are ahead in terms of the execution of the strategy and adapting to the new environment, one in Latin America and the other one is China. And I think the learning I would have is both organizations have reoriented their teams to entirely look externally. So both regions have reduced internal processes, internal work and completely focused on very simple things. Can I delight the consumer? How do I know I can delight the consumer? Do I understand the retail environment in which I operate and do I have the right assortment in the portfolio for that retail environment? And how can I partner with my retail environment in order to create competitive advantage for them and for me.

And they've done that consistently. I think that's the playbook that we are applying now in the U.S., in Europe. Those two are probably ahead.

I think the evidence for that point is the breadth of growth across the brand portfolio and in Latin America across various sets of markets, either distributor markets, Mexico or Brazil, if it was just a single innovation that was driving the train that would be very different. This is more broad growth across the market.

Yes, you're right. It's broad share growth, Brazil, Mexico, distributor markets, exactly right.

Great. Perhaps we can turn to Western Europe, macros have been a bit weaker there. Pricing discussions have probably become more difficult off a period of excess pricing versus long-term trend over the last few years. So just how is your business holding up there? Maybe some context for volume growth versus pricing growth? Is it realistic to realize any pricing in Western Europe anymore? Or is it difficult in this environment?

Europe, I like in Europe, Western Europe to the U.S. in terms of consumer sentiment at this point, but less volatile because some of the macro context is just not as volatile as in the U.S. right now. You look at our markets, they used to grow over the past 3, past 6 months between 1% and 2%. They are now at about 1%. So a slight slowdown, but not a dramatic decline. What's encouraging is the price/mix is actually holding to slightly positive by 10 basis points, 20 basis points, not material. But that is good to see because Western Europe can slide into a deflationary cycle between retailer competition and manufacture competition. That is not happening. We see constructive behavior on both ends, which is helpful in the categories.

Europe is a part of our portfolio where we've also started to implement some of the structural changes we're talking about in L.A. and China earlier than in the U.S., simply because the market was more challenging at that point in time. And we've just returned to share growth in Western Europe, which is actually great to see.

And that is in the context of competition ramping up. Henkel is clearly back in the game, Unilever is back in the game. And despite all of that market price mix is holding. So competition is constructive, and we're able to grow share. We also have a very strong innovation plan in the second half like we have in the U.S. So I feel good about where we are headed.

You're right. When the environment is tougher in Europe, retail conversations tend to get more difficult. We are entering the annual negotiation cycle in most of the markets in Europe. So as always, I expect some level of conversation discussion and maybe disruption but nothing unusual and nothing that we haven't included, I think, at the right level within our guidance range.

Okay. And given the consumer weakness we talked about in the U.S. and to some extent, Western Europe, what are you seeing in terms of private label share. And also, what are you seeing from a competitive standpoint in terms of promotion in the industry and with the ramp up there, is that something that's significant? Is it something that you expected? How would you characterize competitive levels also?

Yes, it's interesting. Private label shares are not moving in Europe. If anything, the volume and value shares are slightly down in private label. And I think it speaks to the strength of branded manufacturers entering the market and building constructive innovation and go-to-market plans with their retail partners. And retail partners had to invest a lot in their private labels with a cost basis increasing. So it's less attractive for them to drive private label. It's more attractive for them to drive branded business growth at the moment. So we'll keep it that way.

In terms of private label innovation, there's not much going on there. So I think that the most important part is a constructive promotion environment, which we continue to see relatively stable. So we'll see increases in frequency, we're about back to pre-COVID levels but not increases in promotion depth. And promotion frequency, if it's coupled with innovation is a good thing for the market because it drives trial and ultimately repeat in higher net sales or higher unit sales items. So we see a relatively constructive environment right now.

Okay. And are those comments consistent across both the U.S. and Western Europe as we think -- both you see pockets, obviously.

You see pockets where there's an attempt to drive short-term volume growth in some categories, but they are temporary. And generally, we've chosen not to react they play out over a 30-day period or maybe even over 1 quarter. But they don't really result in value share gains. They result in short-term volume share gains, but those rescind quickly once the promotion comes off. And so as long as we don't see this as a structural tool to drive value disparity between our propositions and whatever is happening, we don't react and we haven't seen that yet.

Right. Okay. And if we look at the last 18 months, historically, you've been share gains for a number of years, pretty consistent. The last 18 months hasn't occurred as much, and there have even been slight losses. Why is that momentum slowed in your mind? And what actions are you taking to lift category growth? Obviously, share would be a byproduct, if you're lifting category growth. But what are the actions sort of incrementally today to reinvigorate some of those share trends?

I think the most important action is to really double down on the discipline of the business model and the execution of the business model. As I said, it's about being even sharper on the type of innovation we're launching, being even clearer on the consumer inside, being even more aligned with our retail partners, not only 3 months out, but 6 months, 9, 12 months out on how to bring those innovations to life in-store and online.

We're looking at a very different media environment, much more fragmented, much more -- much harder to read where you're actually being seen and how that translates into a transaction, closing that loop and giving us better insights on what part of the significant marketing investment we have made over the past few years is actually working and then rekindling that.

I think a more simpler setup in the organization, reduction of internal work, reduction of internal process and 100% focus of the entire organization outward towards the consumer, towards the retailer. I had to give you three points. Those are the three. And ultimately, creating focus by eliminating noise, and that's elimination via the restructuring program that we've announced. It's both elimination of small brands, category country combinations or even countries that require a disproportionate amount of resources and create a lot of noise without creating a lot of value, but also reducing the size of the organization, which will force the organization to use the tools we have available and we'll focus the organization to look where it matters, which is at the consumer and at the retailer.

Great. That's a great segue into the restructuring program. You've announced a significant reorganization. Can you take us through the genesis of the program, what it's designed to do, key action points? And then as you think about the savings, we talked about some of the top line volatility around the world, given the consumer environment. But I'd love to hear if that sort of gives you visibility that you'll have enough to invest behind the business, gives you visibility from an earnings perspective that you can hit your goals this year and algo as you move to the out years over the next few years here, how that sort of fits into the top line dynamics?

Yes. The genesis of the restructuring program was the desire for growth. I mentioned that we started creating the innovation pipeline about 2, 2.5 years ago, knowing that this hill would come where category is decelerating, and we would have to stimulate growth. Now we needed the organizational capability and the financial capability to invest behind those innovations, drive trial. And that's really the idea behind the restructuring program, the timing when it was launched.

So the whole idea is growth, growth in three ways: number one, create the financial flexibility to invest beyond what we need to create an acceptable EPS outcome. So the mantra is the restructuring savings we're generating are flowing back into growth investments. They are not here to boost the EPS, they are here to create future growth. We need to be able to deliver the EPS outcome from our core business and our underlying business growth.

Second element of growth is what I talked about is simplify the organizational structure. When -- we are a functionally oriented company. And the moment you have 9 functions, you have 9 team members on every team by default. Nine team members that all want to contribute, 9 team members that always have to report through their function, gain alignment report back. That is complex. It's a lot of people. It's very slow, and we simply wanted to change that. So the push to the business is you only need 3 or 4 in order to run these business teams. So every team is downsizing to 3 or 4 people who have bigger roles who can make decisions as a team and who have the authority and the decision authority to make those calls and who are ultimately responsible for a brand or a sub-brand results as an outcome.

That is digitally enabled. So a lot of process simplification, a lot of automation, a lot of data tools that we have invested in to make those teams functional. So we don't have to have the financial analysts who does data extraction. We don't have to have people who put data sheets together. That can happen in a very automated way. Analysis can happen and AI-enabled -- so that's the enabling mechanism.

The third component here is changing the portfolio and partially changing the go-to-market model. We announced a change in go-to-market model in Argentina. We have changed the go-to-market model or changing the go-to-market model now in Pakistan. Yes, those are attractive markets from a number of consumer standpoint. But they are very hard to create value in U.S. dollar terms with an organization and production on the ground. So we simply decided that our resource allocation would be better if we put those resources against bigger, more promising category country combinations and simply use a distributor-based import model to compete in those markets.

We divested small brands. We shut down some SKUs and category combinations in other markets, all of that to focus the organization. In a business of our size, it's amazing to me, the moment you have even a small part of the business show up as red on a scorecard consistently, the amount of resources that will flow to fix that red on the scorecard is amazing, and we just needed to eliminate the red on the scorecard.

Okay. And maybe tie productivity into earnings goals and relative to the top line volatility you've seen?

Yes. I think the -- look, you've seen our productivity progress outside of restructuring. We consistently deliver around $2 billion in gross productivity across cost of goods, media, overhead structure, and that is still intact. So that $2 billion, $2.2 billion is still flowing. I feel very good about the visibility that we have. And that's embedded within our guidance range for this year. And that's embedded in our desire to get closer to algorithm in the following years.

So we consistently said being on algorithm every year and every quarter is not the objective. The objective is to be on algorithm on a 2- to 3-year rolling basis. And with the productivity program, with the trajectory we're expecting on the top line, I think we're in a good place.

Okay. That's helpful. Maybe we can turn to AI and technology and how you're trying to use it to your advantage, particularly as it comes to marketing and innovation, if you view it as more of a top line opportunity or productivity opportunity. And perhaps also you can specifically touch on agentic AI. In theory, there could be some pressure to brands, which have developed brand equity with consumers over decades or centuries in your case, as you move to agents or prompts, et cetera. So just how you think about agentic AI, how you think about AI and technology advancements in general in terms of driving productivity and yield and top line yield for Procter.

I think AI and the underlying technology in a broader sense, have an enormous potential for the company and all the ways you described. We've been talking about Supply Chain 3.0 fully automated manufacturing operations. We've talked about our Berlin plant running an unattended night shift, which is enabled by technology, AI being part of that toolbox. That technology is now being rolled out across multiple sites, across multiple categories. So we will see more unattended manufacturing operations around the world.

We move to dark warehouses, unattended warehouse operations, including unloading and loading. We have automated and fully digitized quality control on the lines. So instead of people taking product off the line, doing batch testing, every sensor on the line, every image on the line is fed into an AI tool, which determines whether the product quality is up to par or not, which then in return, influences the center line of the manufacturing equipment.

We are building logistics steering centers, which are AI-enabled, which optimize the logistics flow between our retail partners and ourselves to minimize cost, maximize on-shelf availability. So I can keep going. So the manufacturing side, the logistics side is very exciting and very real because it's within the next 3, 4 years that we believe we can fully implement most of those programs.

I talked about the management side. So we are in the process of fully automating and digitizing our demand forecasting with AI, financial forecasting with AI, all of our marketing plans, including how we schedule media, how we optimize media, is technology enabled, and that will only increase as data integration between retailers and retailer platforms and manufacturers takes place. So there's enormous potential there to automate.

Creative side. We use AI for concept development, concept ideas, concept verification, copy testing, content testing and optimization, image creation, video creation. And again, it's in its infancy. We've got a ton of runway on the creative side as well.

And then R&D, consumer understanding is the third bucket I would give you. Molecular research is done with AI, which reduces the time we need to identify a specific property we want and find the right molecule to serve that property. Perfume development is done with AI today, and I can only see this increasing the more data we have available, we have one of the most data-rich companies I would argue in the sector.

The biggest challenge in all of this, Dara, is data because a lot of the data is available, it needs to be structured. It needs to be fit for use. So that's where we're heavily investing in terms of the underlying data infrastructure. So as we employ more and more of those tools, it can be done with the full power of the underlying data that we have. But I see significant upside. It's captured, I think, in Supply Chain 3.0 in a more consistent way. We're working to articulate this in a more constructive way with our technology leaders and with Seth, with our Chief Technology Officer, and we'll have that in one of our next presentations.

And Dara, one thing I'd add is that Andre mentioned the importance of the structured data. We started the digging of our data lake well before 6 years -- 5, 6 years before anyone could spell ChatGPT. And this is important because it gives us the chance to be a little further ahead, I think, in getting that data in all in the lake and structured in a way that's more usable so we can apply these tools potentially faster and create some competitive advantage that way.

You asked about agentic AI and buying behavior. I think it's a very important development that we all need to understand what will agents buy, how would they buy? What are the decision criteria? And most importantly, how do we feed into those decision criteria. So that's active work that's going on. For me, that's not different than Amazon buttons or voice-controlled Siri. It is a different path to purchase, we need to understand, and that's the work we're doing.

Great. We're coming up on a CEO transition here near term. There's always a chance under fresh leadership to reinvigorate the organization, right, push certain points more aggressively despite the strong performance, clearly under Jon's leadership. So just what are the points you're emphasizing the organization in terms of incremental opportunities going forward? And maybe for both of you, just any perspective on Shailesh's leadership and the path going forward.

He's listening. No, the -- look, I think it's -- Shailesh coming in will be exciting for the organization. Jon has left an enormous legacy for the company, and Shailesh comes in with a different lens, which will be very helpful. Shailesh is a brand builder at heart. He firmly believes in the strategy. He firmly believes that the underlying strategy is exactly where we need to go. But he's also clear that winning yesterday doesn't give us any guarantee that we can win today or win tomorrow.

And so I think the first thing he impresses on the organization is urgency. Urgency to do exactly what we talked about earlier in the conversation, urgency to start with the consumer and put the consumer firmly at the center of everything we do. Dig deep in consumer insights. We spend every -- and Shailesh and I have been traveling together for the last 2 years. Every visit starts in a consumer home for 2, 3, 4 hours to really understand how the consumer is interacting with our products, what they are looking for, what are the friction points. And to educate the teams that, that's where their work needs to start every day, not in the office, but in home with consumers.

He has a high degree of intellectual discipline. So when it comes to discussing whether a proposition is right for the consumer, will be winning in the market, will be winning versus competition, will meet our requirement to grow markets. There are two favorite questions he asks. One is why? And the second one is, how do you know? And they can be pretty disarming in the conversation if you haven't done your homework in a statistically and intellectually structured way. That's going to be powerful, I think, for the organization.

He is very high on urgency. So the next question he generally ask is, why not faster? So those things, I think just pressure, speed, focus on the consumer, discipline in terms of the core. One of his mantras is a bigger core, a more healthy core is the first thing we need to build. So you cannot not fix the core. Job number one is make sure our core brands are healthy and winning. And yes, you need to have ideas that can grow over time, but those better be big. So don't get lost in small ideas, don't get lost in flankers, don't get lost in elements that over time won't make any difference. He's very disciplined in that portfolio management.

And I think the last thing I'll leave you with, and then Chevalier, you can jump in here. I think he's a great judge of talent, which will also be good. So I'm very happy for him to come in. I'm very happy for Jon to have left the legacy that he has left, and I think he will do great things.

The only thing I would add is that John spent a ton of time as CFO and CFO, COO and as CEO, ingraining this idea of the importance of balanced top and bottom line growth and the importance of driving market growth as a priority, deeply into the organization and Shailesh is picking up right where Jon is handing the baton off. So that, to me, is reassuring that we're not going to see wild divergence in strategy, but a real even more disciplined and urgent focus on execution.

Great. That's helpful. Maybe we could switch to capital allocation. There have been a number of large deals in the consumer space recently across CPG. Just in theory, I think there are more opportunities in a difficult top line environment. We talked about muted category growth, particularly in the developed markets. So just your thoughts around M&A appetite, how you think about the size of deals, bolt-ons versus larger deals? And really, as you think about the strategic lens for M&A, where are you most focused on opportunities, whether it's product categories, geographies, et cetera?

We always want to be in a position where we don't need M&A to deliver the growth trajectory we want to deliver. And I think that's still the case. The opportunities to drive household penetration in all categories drive adoption, drive trade up, more consumers, more use and higher value jobs to be done is still enormous. That hasn't changed in enterprise markets, we see $10 billion to $15 billion of growth opportunity over the next 5 years there. We see $5 billion in the U.S. by serving underserved consumers in our categories today, $10 billion in Europe. So the growth trajectory that we're on is still sufficient for us to deliver algorithm over a rolling 2- to 3-year basis for the foreseeable future. So we never want to be in a position where we have to acquire to stipulate growth.

That said, we will always look at great opportunities for bolt-on acquisitions. And the success we've had, not everything works, but Native has worked brilliantly for example. And we have a few other examples that haven't quite grown to that size yet, but they show the same ability to grow across categories and become billion-dollar brands.

So that's our primary focus, find those $50 million to $150 million brands that we can scale, we can expand. They have a unique idea that we can build on in the categories that we are in. We are constrained. We can really only acquire materially in Health Care and in Beauty Care. So that's where we're going to focus.

We're in, I think, in a good position when it comes to any transformative deal would certainly come to us. So we'll look at that. And if it comes at the right value with the right strategic alignment, we will certainly consider, but it's not a core building block in our future growth.

Okay. And how do you think about the brand portfolio when you look at acquisitions? What are you looking for? I know that's a broad sort of holistic question. But what really would drive value for Procter as you look at targets out there?

Well, I think what drives value for us is we need to be sure the brand is built on performance. The brand has built on superiority and not on equity that is linked or lend from someone else celebrities, salons, et cetera. So we want to make sure it's a brand that can be built by improving its product performance, improving superiority across the vectors that we talk about. It has to be in a category where we can extend consumption. And it has to fit our activity and ecosystem and our strength. So we have to be able to innovate within the capacities and capabilities we have and the go-to-market capabilities we have.

And when it comes to bigger acquisitions, we have to make sure that the majority of the brands meet those criteria. Otherwise, the tail is too much to deal with and too much complexity.

Right. Great. Well, with that, we're out of time. So really appreciate you coming and attending the conference again. That was very helpful.

Thank you, Dara.

Thank you. Appreciate it.

Good morning, and welcome to Procter & 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&G's most recent 10-K, 10-Q and 8-K 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 & 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 & 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 Schulten.

Good morning. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for the first quarter of fiscal '26 and spend a few [indiscernible] environment. This marks 40 consecutive quarters of organic sales growth and keeps us on track for the tenth consecutive fiscal year of core EPS growth. Organic sales rounded up to 2%. Volume was in line with prior year. Pricing and mix were each up 1%.

Growth continues to be broad-based across categories and regions, with 8 of 10 product categories growing or holding organic sales. Skin & Personal Care led the growth, up high single digits. Hair Care, Grooming, Personal Health Care, Home Care and Baby Care each grew low singles. Oral Care and Feminine Care were in line with prior year, and Fabric Care and Family Care were each down low single digits. 6 of 7 regions held or grew organic sales. Focus markets were up more than 1%. Organic sales in North America were up 1%. Consumption in our categories decelerated throughout the quarter, with unit volumes essentially flat for both markets and P&G brands.

Price mix added a point of growth. The pricing for innovation and supply chain costs that was announced on June 15 went into effect on September 15. This caused some trade inventory volatility in the quarter, but shipments were largely in line with offtake for the full quarter. European focus markets organic sales were equal to prior year with strong growth in France and Spain, offset by a softer period in Germany and Italy. Greater China organic sales grew 5%, another quarter of sequential improvement and positive momentum. 6 of 7 categories grew organic sales in quarter 1 with Pampers and SK-II each growing double digits. This progress is the result of interventions made across the digital commerce and distributor business, along with strong innovation and execution of the integrated strategy.

Enterprise markets grew more than 1% for the quarter. Latin America organic sales were up 7% and with strong growth across Mexico, Brazil and the balance of smaller markets in the region. Organic sales in the European enterprise region were in line with prior year and the Asia Pacific, Middle East, Africa enterprise region was down low singles. Global aggregate market share was down 30 basis points, 24 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.99, up 3% versus prior year. On a currency-neutral basis, core EPS also increased 3%.

Core gross margin was down 50 basis points and core operating margin was equal to prior year. Strong productivity improvement of 230 basis points with healthy reinvestment in innovation and demand creation. Currency-neutral core operating margin was up 40 basis points. Adjusted free cash flow productivity was 102%, a very strong Q1 results. We returned $3.8 billion of cash to shareowners this quarter, EUR 2.55 billion in dividends and EUR 1.25 billion in share repurchases. In summary, a solid quarter to start the year in what continues to be a challenging environment, including heightened competitive activity in the U.S. and in Europe.

Moving on to strategy. Given the market and competitive challenges we face now is the time for increased investment in and flawless execution of our integrated growth strategy consumer firmly at the center of everything we do. We will drive superiority in every part of our portfolio across all value tiers where we play, all retail channels and all consumer segments we serve to grow categories, provide value to consumers and customers and create value for shareowners.

We will strengthen the integration of all vectors of superiority starting with a very strong innovation program this year, building stronger core brand propositions and growing bigger adjacencies and forms to enhance consumer delight, core and more. In U.S. Fabric Care, we recently started shipments of Tide's biggest upgrade to liquid detergent in 20 years. Tide's boosted formula combines its ultimate grease and stain fighting technology with an advanced perfume innovation, resulting in laundry that's cleaner, wider, brighter and fresher.

The significant innovation on liquid detergent strengthens the core of the Tide franchise as we continue plans for expansion of Tide evo, our new laundry detergent developed on our breakthrough Functional fibers platform. evo has started its first stage of national expansion with an online launch of Tide evo free and gentle. evo offers superior cleaning performance in a recyclable package, no plastic bottles or water. In test market stores, evo sales have been highly incremental to category growth and retailer demand has been well above initial expectations. We're in the process of adding manufacturing capacity to prepare for an eventual national launch.

We have a strong bundle of innovation launching across U.S. the U.S. Baby Care business this fall, including improvements on tempers, easy ups, Swaddlers, cruisers, and the first phase of restage to our mid-tier Pampers Baby dry line. Each are important upgrades to drive consumer trial and delight, especially considering the ramp-up in competitive promotional activity in the category.

In Greater China, premium body wash innovation on both the Safeguard and delayed brands drove 9% Personal Care growth in the quarter. Safeguard detox body wash is designed to provide superior deep for cleansing and skin transformation. The recent restage across all elements of the superiority has accelerated market conversion from bars to liquids and from basic products to premium offerings. Olay premium body wash launched in July, contains Olay facial skin essence and the first ever sparkling liquid to provide visible skin benefits and an unforgettable showering experience. Since launch, the new premium line has grown over 30% in off-line channels and 80% online driving category growth and Olay share growth.

In Latin America, Personal Healthcare grew organic sales plus 15% in quarter 1, driven by improved execution of the integrated superiority strategy. The combination of strong product and packaging innovation on the BIC brand compelling consumer communication, strong retail execution and superior consumer value drove both growth across markets and the region. Brazil led the growth up nearly 30%, along with growth in Mexico, Peru, Colombia and smaller distributor markets.

Our innovation program is designed to strengthen the core brand propositions combined with full media and in-store support across the portfolio. where we add new elements to our brands, like we are doing with Tide evo, we ensure the more is sufficient in size to warrant full brand communication and go-to-market support. Superiority integrated across all 5 vectors. We will continue to accelerate productivity in all areas of our operation, including the recently announced restructuring work to fuel investments in superiority, mitigate cost and currency headwinds and drive margin expansion.

We have an objective for growth savings in cost of goods sold of up to $1.5 billion before tax, enabled by platform programs with global application across categories with Supply Chain 3.0. We have line of sight to savings for improved marketing productivity, more efficiency, greater effectiveness, avoiding excess frequency and reducing waste while increasing reach. We're taking targeted steps to reduce overhead as we digitize more of our operations.

Visibility to more savings opportunities is increasing as the businesses continue to build their 3-year rolling productivity master plans and as we accelerate productivity with our restructuring efforts. We will continue to actively manage our portfolio across markets and brands to strengthen our ability to generate U.S. dollar-based returns in daily use categories where performance drives brand choice. The portfolio choices we are making as part of the restructuring program include different go-to-market choices in some geographies and surgical exits of some categories, brands and product forms in individual markets.

We've announced several steps so far, redesigning our business model in Pakistan to an import model with local distributors managing trade relationships, is continuing laundry detergent bars in India and the Philippines, exiting several low-tier oral care products in some enterprise markets, focusing the Olay brand on the most productive European markets, and streamlining our brown device portfolio and focus and enterprise markets. These steps are aimed at accelerating growth as we move further through the restructuring program. Also, these portfolio moves enable us to make related interventions in our supply chain, rightsizing right-locating production to drive efficiencies, faster innovation, cost reduction and even more reliable and resilient supply.

As part of the 2-year program, we are making additional organization process and technology changes to enable an even more agile, empowered and accountable organization, making roles broader, team smaller and faster and work more fulfilling and more efficient, actively reducing, eliminating or automating internal work processes, supporting teams with data and technology to increase capacity and capability to focus on integrated plans to deliver superior propositions to our consumers versus spending time internally.

We expect to reduce up to 7,000 nonmanufacturing roles or up to 15% of our current nonmanufacturing workforce over this fiscal year and fiscal '27. We're making very good progress with organization designs to deliver this objective. While not easy, we firmly believe this will further empower our highly capable and agile organization that is ready to step forward to create value for our consumers, customers and shareowners. We will continue our efforts to constructively disrupt ourselves our industry changing, adapting, creating new ideas, technologies and capabilities that will extend our competitive advantage.

These strategic choices across portfolio superiority, productivity, constructive disruption and our organization will continue to reinforce and build on each other. We remain confident in our strategy and its importance, especially in challenging times to drive market growth and to deliver balanced growth and value creation.

Long-term focus on the strength of our brands and categories is the best way to position ourselves for stronger growth when the economic climate and consumer confidence improves. This starts with a strong innovation plan and healthy investment to drive trial and user growth, the plan we are executing. As we said in the July earnings call, there are times when bigger steps are needed to both the growth and value creation. The teams are on it.

Moving on to guidance for fiscal 2026. As you saw in our press release this morning, we're maintaining all guidance ranges for the fiscal year. Organic sales growth of in line to plus 4% and Global market growth for our portfolio footprint is around 2% on a value basis at the center of our guidance range. As a reminder, this guidance includes a 30 to 50 basis point headwind from product and market exits that are part of restructuring work. As we consider phasing of top line growth, recall that Q2 last year benefited from 2 spikes in orders related to port strikes. The actual port strike that took place early October and the concern of another strike in January, these dynamics will likely result in quarter 2 this year being the softest growth quarter for the year with stronger growth in the back half.

On the bottom line, core EPS growth, in line to plus 4%, which equates to a range of $6.83 to $7.09 per share or $6.96, up 2% in the center of the range. While we delivered strong EPS growth in quarter 1, we expect modest earnings growth over the balance of the year as investments in innovation and competitiveness increase, particularly in the U.S. and in Europe. This outlook includes a commodity cost headwind of approximately $100 million after tax and a foreign exchange tailwind of approximately $300 million after tax.

Our fiscal '26 outlook now includes approximately $500 million before tax and higher costs from tariffs. While this is an improvement to the isolated tariff impact. Keep in mind that these -- that there are other offsetting impacts, including related supply chain investments and adjustments to pricing plans also assumed in our guidance.

Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year and a core effective tax rate in the range of 20% to 21% for fiscal '26 combined a $250 million after-tax headwind to earnings growth. We are forecasting adjusted free cash flow productivity in the range of 85% to 90% for the year. This includes an increase in capital spending as we add capacity in several categories, and as we incur the cash cost from the restructuring work.

We expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock, combined a plan to return roughly $15 billion of cash to shareowners in fiscal '26. This outlook is based on current market growth estimates commodity prices and foreign exchange rates. Significant additional currency weakness, commodity or other cost increases, geopolitical disruptions, major supply chain disruptions or store closures are not anticipated within the guidance ranges.

So again, a solid start to the year, growing sales and earnings and returning strong levels of cash to shareowners as we look to strengthen investments in demand creation throughout the balance of the fiscal year. We continue to believe the best path to sustainable balance growth is to double down on the strategy, excellent execution of an integrated set of market constructive strategies delivered with a focus on balanced top and bottom line growth and value creation, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. We are taking proactive steps to improve the execution of the strategy and our ability to deliver our growth and value-creation objectives.

With that, we'll be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Dara Mohsenian of Morgan Stanley.

So I just wanted to touch on the restructuring you announced back in June, given you're now a few months into putting the initial plans into place. A, just how do you think the organizational changes are being received internally by your workforce, given there's a significant reorg and also rationalization of the job roles at P&G? And then just b, the context externally is a more difficult top line environment in general in CPG, that's also volatile. So I just love a high-level overview of what the reorg does for the organization and P&G's competitiveness relative to that challenging broader industry landscape.

Dara, thanks for the question. Yes. So let me both -- take both elements here in turn, starting with the progress we are making. We are right now perfectly on track on all elements of the restructuring execution. This is never easy, especially when we're talking about reducing our enrollment.

I think the organization is taking it in stride because the mission is clear. We have now constructive plans in every business around the world on which roads to reduce and how to organize ourselves with the vision of creating a more agile and faster executing -- better executing organization for the future. So if you go through the 3 components of the restructuring program. On the portfolio side, this is just the regular execution of portfolio discipline. We have now reviewed all brand country and category combinations to ensure that we can add value and in those where we found that we cannot add value, you see us changing the business model or reallocating resources.

You heard us just talk about the projects that we can announce today, which is the business model change in Pakistan and some of the portfolio streamlining across our Fem care business et cetera. So those elements are now clearly defined. We are working through the execution, and I feel very good about the progress we are making. We'll end up with a faster-growing and more effective portfolio when we're done.

On the supply chain side, these portfolio choices give us flexibility to take another look at our supply chain. And again, I think the product supply teams around the world now have firmly confirmed what the interventions are they want to make, and we are in execution mode. This will give us both a cost savings element but also an agility and supply assurance element which we feel very good about.

The third component, the up to 7,000 loan manufacturing head count reduction really is the enabler for us to create smaller teams that are better set up. We are fully digitally enabled data access and analysis to focus on the consumer and focus on brand building. And those org designs have now been developed. They are slightly different in every category as they should be because the contacts and the work in every category is different but they have the consistent objective to create smaller teams that are focused on the brand.

They are digitally enabled, and we're building some of these technologies and platforms globally. Some of them are individual. And they will ultimately result in what I see as the third step of the organization evolution when we went from the ticket to fully enabled category end-to-end now to smaller brand teams that are enabled by technology to be much faster and much more consumer-centric.

And that, combined with Supply Chain 3.0, which will change the way that our supply chain operates via automation and digital towards is very exciting for us. The short-term benefit is cost and fuel for us to be able to invest over the next 12 to 18 months into the very strong innovation programs that we're launching. I think the longer-term benefit is just an even strengthened portfolio and a strengthened organization.

Your next question will come from the line of Peter Galbo of Bank of America.

Andre, I just wanted to maybe click in a bit more on some of the subcategories in North America. And in particular, on Fabric Care, and Baby Care, where you noted a bit more, I think, competitive activity. Obviously, there's a list of innovation that you outlined over the coming year. But maybe you can just give us a bit more detail on what you're seeing real time from a competitive standpoint, both in North America Fabric Care and Baby Care.

Yes, Peter, look, both are obviously big and important categories for us. And as you will have seen in the results, both are not delivering at the level that we want them to deliver. And as you pointed out, what we see is a heightened competitive environment, which is not unexpected, where consumers are a bit more careful in terms of purchase decisions and consumption. The market gets tighter. And some of the response -- competitive response is increased promotion and that's certainly what we're seeing both in Fabric Care and in Baby Care.

Our response to a more competitive environment has to be a more integrated answer, which is what we are executing across both baby and Fabric Care. So when we talk about driving integrated superiority, that's what we mean. And while value or promotion might be a component to that answer, the real solution here to create sustainable growth is to drive innovation and drive superiority, communicate that innovation with the right claims, meaningful to the consumer, meaningful to the retailer, get the retailer support online and in physical stores and thereby create value for the consumer that is attractive.

Where we've done that, specifically on Baby Care, we're seeing the results. So we've continued to innovate and stay ahead on Swaddlers, on Cruises 360, on the pants business, and we continue to do so, and we see share growth. We have intervened on the value tier with love Platinum innovation which we've launched in the fall of last year, and we have been able to grow share even competing in what is probably the most pressured tier within the baby care portfolio. And we are now expanding that same approach to the mid-tier, launching the first wave of Baby Dry, which is our mid-tier innovation in the fall.

And the second part of that innovation in the spring and we are confident that the share pattern will follow the same playbook as we've seen. You've heard us talk about the innovation in Fabric here. The Tide liquid innovation is truly exciting. The biggest upgrade in 20 years, a significant investment, great commercialization. We believe that is the right answer to drive [indiscernible] trade-up and continue to create category growth. We're adding on Tide evo, which will add a completely new form to the category. And again, that's the path forward to drive category growth, share growth in a sustainable way.

Last comment, this plan takes longer. It's not as easy as storing promotion funding out there. But again, we believe that is the way to both create value for our consumers and for our retail partners and shareholders.

Your next question will come from the line of Lauren Lieberman of Barclays.

Just wanted to touch on the market share as the global market share down 30 basis points. I know that can be very impacted by geographic mix to some elements, but even just at the 24 of 50 category country combinations are holding or gaining share is on the low side. So I'm asking for you to walk through the 26 that are troubled. Maybe just where might you call out some particular hotspots of activity things where is it a matter of macro and positioning and relative affordability at this time? Is it a matter of the innovation that's yet to come, you think will be the answer, but it was a pretty stark statistic, and I'd love to get your thoughts on that.

Lauren. Yes, global aggregate share, as you point out, is down 30 basis points over the past 3 and past 6 months. if you look the past 1 month, we're closer to flat. So the last reading is minus 0.1%, but I would view that as normal variability. I think the hotspot. So let's talk with the U.S. Let's start with the U.S. I think we're coming from a very strong base period. And there are some categories where we clearly see increased promotional activity. We touched on Baby Care. We've seen very aggressive rollbacks and promotion activity in the Baby Care mid-tier section. We also see very intense promotions in Fabric Care.

We've seen a period of intense promotion in Oral care. So certainly, the competitive aggressiveness has increased. And the way we respond is more structural. It takes a bit more time. While we will remain value competitive in the short term. We truly believe the right answer here is to drive integrated superiority with innovation and investment in our brands. And the positive read of the U.S. shares would be that if you look sequentially, we are actually increasing absolute share. So past 12, past 6, past 3, past 1 month, our absolute share in the U.S. went from $33.6 to $33.9 to $34.1 to $34.9. So absolute shares are moving in the right direction.

We are still annualizing a relatively high base period, but the plans are clearly in place, I think, to exit the year with share growth in the U.S. Europe is a very similar situation. Competitors have been not very active over the past years, and we see some of our competitors headquartered in Europe, get back in the arena which, if it's driven by innovation is a good thing in our mind. It drives attention to the categories. But in some cases, it's also very heavy promotion. So if you look at Fabric Care, for example, in our Germany business, we were up last year same quarter, 33%. We are down this year because we have competitive activity in the market. the playbook is the same. We will continue to invest in integrated superiority.

On the other hand, if I look at our China business, very strong progress. We probably started the right interventions in China because of a difficult market environment earlier about 2 years ago. And with the interventions in innovation, the interventions in go-to-market capability, we now see solid progress in a difficult market environment, again, China Mainland up 6%, SK-II Baby Care up 20%. So it gives us confidence that these interventions were driving. They take some time, but they ultimately result in what we want in terms of market growth and share growth.

Last example I'll give you on the success. If we do this right, is Latin America, again, 7% growth in the quarter, broad-based in Mexico, in Brazil and in a lot of smaller markets driven by a strong portfolio with strong innovation.

Your next question today will come from the line of Steve Powers of Deutsche Bank.

Andre, maybe talk a little bit more elaborating on China picking up on what you had just spoken to. A good result this quarter with Greater China, up 5%. Maybe just a little bit more perspective about what you've seen evolving on the ground in that market, how the business was trending entering the quarter versus how it exited. And just how confident you are in the relative progress you've seen so far just sustaining through the year?

Thank you, Steve. Let me maybe start with the team on the ground and the interventions they have made. I think it was clear to the team that the consumer environment will not get easier. The competitive environment will not get easier. And therefore, we had to fundamentally change many of the variables that drive the business. And that's, I think, what the China team has done very successfully. They basically lifted up every part of the business model across all categories. They completely changed the go-to-market model, including the incentive system for the distributor network, which is critical in China. They've launched consistently strong innovation grounded in local insights.

When I think about our Baby Care business growing 20%, that certainly is driven by absolutely superior consumer insights and innovation that matches those insights. And lastly, they've changed the way we communicate with consumers and the way we collaborate with our most strategic customers, many of them online businesses. So all of that has resulted in, I think, a good turn of the business. It is China. So I'm not pretending that this will be a straight line. this can go up and down. But now we have 2 points on -- that we can connect and both points are pointing in the right direction. But again, I would urge us to be also cognizant of the fact that we're dealing with a volatile market environment.

A couple of examples that we are particularly proud of, number one, SK-II, just the discipline with which the team worked on the brand fundamentals on strong innovation, having the courage to launch a super premium in addition to the core I think is paying dividends. SK-II up 12% and even the travel retail business has now turned positive. We have streamlined our Fabric Care portfolio, launched innovation that is truly superior. The business is up 5 points. The hair care business where we've been able to innovate is growing. And on the skin care business, the mass skin care business, Olay is growing and Skin & Personal Care in aggregate is growing 8%. And I mentioned Baby Care. So while the consumer sentiment is still somewhat less confident. I think the team has found a way to break through. Don't expect it will be a straight line, but I feel very good about the progress we've made.

Your next question will come from the line of Rob Ottenstein of Evercore.

Great. I want to swing back to the U.S. and there was a lot of talk about the need for competitive promos that are going on in the market. And I guess my question is, as you look at the other side of that, which is the consumer side and the research you're doing on the consumer, has affordability become a bigger driver of consumer choice in the quarter? Do you expect that to continue?

And then specifically, if that is the case, that it is a bigger driver, how do you look to address affordability apart from innovations, but looking at whether it's a change in shift in channel strategy, RGM, price pack architecture, other ways to get at affordability issues.

Thanks, Robert. I wouldn't call it affordability. I would say value is clearly in the center of the equation and value defined as price over integrated performance, which is the other 4 vectors that we're talking about. We continue to see consumers trade up, price/mix is positive, mix is positive in the U.S., where the value equation is attractive for consumers. In some channels, we see the majority of growth in our categories in the premium end, not in the value end of the lineup.

We also see continued decline of private label. Actually, private label shares in the U.S. are now down 50 basis points. So for the first time, private label shares dropping below 16%. And which was kind of the historical threshold. And as I mentioned, our sequential value share is actually improving by more than 1 point even though we've not quite caught the base period yet.

I think the right answer to the environment we're in is to serve the consumer where they want to shop and with the cash outlay and the value tier that they are prepared to go after. And I think we have built very strong price letters across different tax sizes. We continue to optimize those. So we find in some channels that we might have cross price points relative to competitive offerings we need to adjust. We will adjust those quickly. But we are present in every channel across the U.S. so we can compete with the right price points, both on shelves and in promotion as we need to.

We continue to innovate across every value tier. You heard me talk about love, for example, in baby dry -- in Baby Care, but we're also innovating at the top end, and both are successful if we do it if we do it right. I think the channel play is interesting because the consumers continue to move into a good part of the consumer continues to move into larger pack sizes. They shop in math in club and online. And so we need to make sure that we have the right value offering there, and we're working on that with all of our retail partners.

And then some consumers continue to live paycheck to paycheck, and they are looking for smaller cash outlay. They're really looking at low promoted prices so they can stretch the paycheck a little bit longer and we're, again, very intentionally driving our competitiveness there. But again, I come back to where I started. I wouldn't say it's affordability. I think it's sharper value and how we present that value to the consumer is critical. And we don't believe it's just price. We believe it's the combination of all factors that we need to integrate.

Your next question will come from the line of Chris Carey of Wells Fargo Securities.

I wanted to follow up on your commentary in China, Andre, I think it sounds like SK-II and Olay and as such, our broader personal care business in China were similar to last quarter. Correct me if that's wrong, but I do think it implies then that you're seeing improvement in businesses outside of that Skin & Personal Care segment in China. Would you agree with that assessment and are you seeing signs that improvement is durable? Or were there any factors that are specific to the quarter that may have helped that business. So I just wanted to test that just a little bit.

Yes. Chris, no, good pressure test. You're right. I think we're seeing our Skin and Personal Care business is moving along. It's slightly accelerating in terms of growth rate, but we see consistency in terms of results getting better. We also see the other categories picking up pace. As I mentioned, Fabric Care is up now 5%. We made portfolio interventions. We have strong innovation out there. We're driving distribution. Our Fem Care business is growing. Our hair care business is growing with a more streamlined and focused portfolio. Baby Care continues to accelerate with 20% growth. So the breadth is comforting. And the other comforting fact is that we understand what we did and what it's doing in the market.

So our approach to how we define the priority and how we execute it, I think it's paying dividends. So that's reassuring that better consumer understanding, innovation that is grounded in that understanding with better shelf and retail execution, online and in stores is paying dividends. So I have a high level of comfort with the results and the breadth of results and how we accomplish them. It's still China. So we will continue to observe. I would -- we continue to expect some volatility here.

We continue to expect strong competitive activity. But if I had to summarize, I think we are well positioned to continue to build the business in China. The market, hopefully, will strengthen over time, which will be a tailwind, and we'll keep track of where we are over the next 2 quarters.

Your next question today will come from the line of Andrea Teixeira of JPMorgan.

I was trying to -- Andre to dive into a little bit more on the price/mix and then by categories. I know you had invested more loves and in particular, in diapers in the U.S. So I was hoping to see if you've seen response from the consumer. You did say that consumers in general have been into premiumization, but obviously, that's a picture -- overall picture. I wonder if you can kind of give us some examples of ways the Procter has been more active in pivoting for that low-income consumer and in categories where they are looking for value not only in diapers but also in paper goods.

Thanks, Andrea, for the question. The first part of my answer will sound familiar, but where we choose to play, we choose to be superior. And that's across all value tiers. So when we innovate, we innovate across all tiers. So for example, the most recent Auto Dish innovation on Cascade was a formula upgrade across the super premium, the premium and the mid-tier. As we've talked many times on this call already, we've upgraded our product lineup on the super premium, the premium side and diapers the value side of diapers and we are about to upgrade the mid-tier.

The same is true across categories. In Olay, for example, the most successful lineup is the super serum lineup right now, and that's at a premium to the market. And we're driving innovation on the Jars business with better execution, better packaging, a shelf reset, which is going into the market starting in O&D. And when we get this right, the consumer responds. We see volume share growth and value share growth, and we see trade in and trade up, which is ultimately what we're trying to accomplish.

So when we're upgrading Tide liquid, we're also upgrading the other forms and tiers within the laundry lineup, for example, we're upgrading the gain lineup as well. And that combination of tier approach with the right [ tax ] sizes, as Robert pointed out, with the right channel distribution and the right promotion strategy to drive trial is what that drives the reports.

Now we've not done that across the full portfolio in the U.S. And that's really the work that we are approaching over quarter 2, quarter 3 and quarter 4 that is enabled by the productivity progress, by the restructuring that allows us to push the investment, and I feel very good about the aggregate of the plan, but you're pointing exactly at the right thing. We need to be sharp on integrated superiority in every value tier in which we play. If we do that, the consumer response, and we have the examples that I just mentioned to confirm that, that still works.

Your next question will come from the line of Filippo Falorni of Citi.

Andre, I wanted to ask on some of the items that you called out in the guidance. You clearly lowered the headwind from commodities and tariffs. So maybe if you can give us some more color on what drove that lower headwind on those 2 items. And then if you sum up all the items that you call out, it's now like a $0.19 headwind before it was $0.39. So you have some flexibility about $0.20, but obviously, the EPS guidance is unchanged. So can you walk us through like what is the offsetting factor? It seems like there's probably more investment in promotion in marketing to offset some of the competitive environment that you're seeing in the promotional environment. But maybe help us understand where is the incremental $0.20 of benefit being invested in.

Thanks, Filippo. The commodity headwinds, you see the news on the petro complex oil is not -- is coming down. That's helping us from the energy side. And the tariff environment continues to be volatile, but the biggest help on tariffs has been exclusion of materials, natural materials and ingredients that cannot be grown in the U.S. So when you think about eucalyptus pulp, when you think about cilium, which is the core ingredient in some of our PHC products that is imported from India.

So the administration having an open year to adjust policy where product or ingredients cannot be produced in the U.S. retaliatory tariffs coming down, Canada, resending retaliatory tariffs of 25% which just happened before the last quarterly call. And so those components in aggregate are representing the commodity and tariff headwinds.

On the question of guide impact. I will tell you there's really -- you called it out, right? Number one, we're in quarter 1. So it's still very early. And as you can see, the tariff environment can change very quickly. You heard the administration's comments on Canada. And so there's still volatility in the impact for the year.

Number two, a lot of the commodity -- a lot of the tariff changes. So for example, Canadian tariff we tended was linked to pricing. So as the tariff goes out, so does the pricing. So the net effect on the P&L within the year is limited. So volatility, it's still early, and you're very right, we want to absolutely preserve our ability to continue to invest because we have proof and we continue to be convinced based on the consumer reaction to where we successfully invested in integrated priority that this is the right path forward. It is the path to stimulate category growth back to 3% to 4%. and within that, the path for P&G share growth in a sustainable way. So early in the year, still volatile reserve investment.

Your next question will come from the line of Peter Grom of UBS.

So I wanted to ask a follow-up on North America. Andre, I think you mentioned consumption decelerated throughout the quarter, and you alluded to some of the phase-in considerations related to the port strike a year ago. So just maybe first, how do you see underlying category demand evolving from here? I know it might be a little bit harder now because you're lapping some of the impact, but just curious whether you would expect this deceleration to continue?

And then just related on the comment on the port strikes that will make 2Q the soft this quarter. Is there a way to frame how much of an impact these labs will have? Or maybe how much of a step back you would expect from where we started the year.

Peter. Look, I think the North America consumption decelerated. So that's correct. We are -- we probably entered the year at about a strong 2%, 2.4% value consumption. We're now a week or 2. So 1.8%, 1.9%. Some of that is just variability of base periods. But I do believe that for the next 2 quarters, the consumption will be around the 1.5% to 2% range.

And as you said, particularly in quarter 2, because of the port strike in October and then the threatened port strike in January, what we expect to see is that the run rates of consumption, both on the market side and P&G side is probably going to continue. But you have a point higher base period. So that's probably the best way I can describe what we're expecting.

And if there's 2 things you need to take away is quarter 2 is going to be lower than quarter 1 and half 2 is going to be higher than half 1. That's about the best logic I can give you. Over time, maybe last comment in the not too far future, if we are successful with everything we're doing with the investment, we expect category growth to return to percent, both in the U.S. and at a global level. And again, that's job 1, 2 and 3, drive more users in the category, drive more usage and drive value per use. That's how we get back to 3%.

Your next question will come from the line of Olivia Tong of Raymond James.

Two questions for you, Andre. First, in terms of the regional outlook. Obviously, you just talked about the U.S., you've been pretty guarded in terms of China. But what about rest of world, just thinking through dynamics with respect to demand, how the consumer is doing in Western Europe and Latin America, in particular.

And then in terms of some of the restructuring actions that you've taken, you mentioned some of the portfolio changes in the Middle East and then also in Fem Care. If you -- can you expand on that a little bit in terms of potentially bigger changes to the portfolio to make a step change in terms of the growth trajectory, either more culling -- more substantial culling of the portfolio or potentially looking the opposite way in terms of filling some of the gaps with inorganic growth.

Thanks, Olivia. Dynamics in Western Europe, very similar to North America, volume growth in the categories that we're in about 1%, value growth, around 2% week 2 and effectively, the same dynamics I described in North America. L.A. continues to be strong. We saw 7% growth in the quarter. Last quarter was very strong. and we continue to drive market growth in the region. Strength in Brazil, up 6% or 7%, Mexico up 4%. So the LA region is doing well from a consumer standpoint and from a P&G standpoint.

Asia, Middle East, Africa and Europe enterprise markets more muted, both geopolitically from a consumer standpoint and from a competitive standpoint, I expect that not to change. So in aggregate, I would say, enterprise markets probably around 3%, 4% developed markets, Europe, North America, around 2%. China is the wild card, still negative in terms of market growth. But again, we're making good progress. So that's as much perspective as I can give you.

On the bigger portfolio changes, look, the portfolio actions we are executing are really on the fringes, right? We are making sure that we do what we should do is ensure that we can create value in every category country combination in which we are, and if not, make the appropriate changes. And the type of change you've seen us announce in this release, that's about the type of change you should expect. There's nothing more dramatic that we're planning to do.

We're very comfortable with the core portfolio that we're in. We've chosen these 10 categories very carefully and we continue to believe these are attractive categories in which P&G can continue to drive growth. We have talked about the growth opportunities within the existing portfolio across regions driving our brands in North America, serving underserved consumers in North America is a $5 billion opportunity, getting Europe consumption in the European markets to best-in-class in Europe from a household penetration standpoint is $10 billion.

And driving enterprise market penetration in those markets that are similar to GDP per capita is Mexico, to the same level of consumption in those categories in Mexico is about $15 billion. And as I said last time, these are numbers on the piece of paper until you start allocating resources to those ideas, and that's exactly what we're doing. That's exactly why we want flexibility to invest. So we can drive the consumer insights, we can drive the innovation that goes after these growth opportunities. And if you add them up, you find that they will allow us to grow with an algorithm for the next 5 to 10 years.

So there's no need to have any transformational acquisition on inorganic growth opportunity added. If there is an attractive opportunity, we'll always look at it.

Your next question will come from the line of Nik Modi of RBC Capital Markets.

Andre, I was hoping maybe you can just kind of opine on agentic commerce and how you think P&G can leverage some of the advantages you have in kind of the brick-and-mortar shopping environment to this kind of new world that we're walking into, especially given the announcement with OpenAI and Walmart.

So just any thoughts you have. I mean, the big question I have is just how do suppliers get their products in the actual basket if people are shopping through comps? Any thoughts would be helpful.

Thank you, Nik. Indeed an interesting question. And the way I think about it is it is all opportunity, right? I mean if you think about it, we're in business for 187 years. We went from Kendall store to supermarkets to hypermarkets to online shopping to social commerce, all an opportunity. We went from newspaper ads to radio to TV to Internet to social media, all an opportunity. So I think it's about getting ready for that reality. And I do believe that it opens up new possibilities for brands to make themselves visible.

And it all comes back to the underlying fundamentals, do you understand the consumer, do you understand how they look for information, how the agent will find your product, how the agent will extract the information to decide whether your product should be in the basket or not and how you work with your retail partners to ensure that you have the best understanding and the best access to these algorithms so that you can communicate your superior brand proposition every day and every shopping opportunity. And that's the path forward.

I feel we're well positioned. I feel our data infrastructure, our consumer understanding, our collaboration with retail partners is very good. And so again, for me, this is all opportunity.

Your next question will come from the line of Kaumil Gajrawala of Jefferies.

Just a couple of clarifying questions. There was a commentary around tariffs and sort of natural products being exempted as Were there any particular deals or maybe just that the threat wasn't as much as what perhaps you had estimated earlier.

And then on China, a lot of conversations around distribution and distribution changes. Was there anything onetime in there as it relates to sort of a near-term benefit from flipping into a new distribution structure? Or is what we're seeing more related to an improvement in consumption.

Thanks, Kaumil. The change on the tariff side was before these products or these materials and ingredients were included in the overall tariff structure. And I think what the administration that has done is basically grant exceptions, broad exceptions in some of these tariff frameworks for those materials that cannot be grown in the U.S., which is highly appreciated and makes sense.

On the China question, we've made these interventions on distribution network in the fall -- summer and fall of last year. I know there were not any onetime distribution gains that drive these results. It is just a streamlining and changing the incentive system for the distributor network. So we have fewer distributors. They are better aligned to what we're trying to do in terms of quality execution in stores and online, and that is starting to pay dividends.

So this is not a onetime effect or onetime bump. This is actually the new go-to-market approach starting to pay dividends. And if everything goes well, I expect that benefit to actually slowly accelerate over time.

Your final question today will come from the line of Robert Moskow of TD Cowen.

This is Victor on for Rob Moskow. Two for me as well. So I think previously, there was a discussion of taking a mid-single-digit pricing on about 25% of your U.S. SKUs to mitigate the tariff impact. So now that the tariff impact is half of what it was before curious on how that affects your pricing strategy, if at all?

And then on LATAM, we've heard from competitors of consumer weakness and from a challenging macro backdrop, are you seeing this impact your trends at all? And if so, how are you performing so well? And did you gain other category share in the region?

On the pricing question, yes, we've taken in the U.S., we've announced pricing in July. It's gone into effect in September. Most of the pricing was innovation-driven and in aggregate, it's about a 2%, 2.5% price increase across the entire portfolio. The underlying tariffs that have contributed to the need for pricing has not really changed. The biggest change in the tariff exposure has been retaliatory tariffs on the other side. And those pricing effects have been taking out, I was talking about Canada.

But in the U.S., the majority of the pricing was underlying innovation-based with tariffs being a contributor, but not the main contributor, so no change to pricing approach. I think we've talked about the consumer backdrop in the U.S., plenty. We've talked about the share development. While we haven't fully annualized our base, we continue to make sequential progress in absolute share, and we expect to exit the U.S. with neutral to share growth by continuing to give the consumers better value propositions, we are integrated superiority every day. So I'll bring it back to integrated superiority to end the call.

So if there are no more questions, I want to thank you for your time, and thank you for your support of the company. We continue to double down on the strategy. We feel we are well set up both from a funding standpoint, from a strategy standpoint with the right innovation at hand, and we'll continue to drive forward. Thank you very much.

Concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.