P&G’s Q1 FY 2025: Restructuring hits hard, but core EPS still climbs—What’s next?

Procter & Gamble (P&G) reported a mixed performance for Q1 FY 2025, with net sales decreasing by 1% to $21.7 billion, while organic sales grew by 2% from the previous year’s base period, which had shown 7% growth. The diluted earnings per share (EPS) declined by 12% to $1.61, influenced by restructuring costs, but core EPS increased by 5% to $1.93.

Operating cash flow stood at $4.3 billion, with net earnings at $4.0 billion for the quarter. The company highlighted its adjusted free cash flow productivity of 82%, aligning with its targets. P&G returned $4.4 billion to shareholders, including $2.4 billion in dividends and $1.9 billion in share buybacks.

Impact of Market Restructuring on P&G’s Earnings

P&G’s diluted net earnings per share dropped by 12%, primarily due to restructuring charges related to the partial liquidation of operations in Argentina. This restructuring was part of a broader strategy started in FY 2024, focusing on realigning business operations in markets such as Argentina and Nigeria to combat macroeconomic challenges. The company recorded an additional $0.8 billion in restructuring charges after tax during Q1 FY 2025, contributing to a total of $1.2 billion in charges since the start of the program.

Segment Breakdown: How P&G’s Product Categories Performed

• Beauty: Organic sales decreased by 2%, with hair care showing low single-digit growth but offset by a decline in SK-II sales in Greater China.
• Grooming: The segment saw a 3% organic sales increase, driven by innovation-led volume growth, though geographic mix posed a challenge.
• Health Care: Organic sales increased 4%, supported by a favourable mix and growth in respiratory products.
• Fabric & Home Care: A 3% organic sales growth was recorded, aided by geographic expansion in North America and Europe.
• Baby, Feminine & Family Care: Sales remained flat, with minor gains in product mix offsetting volume declines.

P&G’s Fiscal Year 2025 Guidance Maintained Despite Challenges

Despite foreign exchange impacts and restructuring charges, P&G has maintained its FY 2025 guidance. The company expects all-in sales growth of 2% to 4%, with organic sales growth targeted at 3% to 5%. Diluted net EPS growth remains in the 10% to 12% range, equating to an expected range of $6.91 to $7.05 per share. Additionally, P&G forecasts capital expenditure between 4% and 5% of net sales and projects returning around $10 billion in dividends and $6 to $7 billion in share repurchases during FY 2025.

P&G has acknowledged potential headwinds, including $200 million in commodity costs and a $0.08 per share impact. The company also noted that favourable tax impacts from the previous fiscal year are unlikely to be replicated.

Expert Analysis: Will P&G’s Strategy Sustain Growth?

According to Jon Moeller, P&G’s Chairman, President, and CEO, the company’s integrated growth strategy remains critical in navigating current market challenges. Moeller highlighted P&G’s focus on maintaining product superiority and enhancing productivity, emphasizing the company’s efforts to innovate while managing costs and capital efficiently. The CEO expressed confidence that these measures would continue delivering balanced growth and value creation for shareholders.