Procter & Gamble (PG) reported first quarter results that were better than Wall Street analysts had been expecting. In an interview with Yahoo Finance, P&G CEO Jon Moeller says the company has built a portfolio in which "performance drives brand choice" which means "you need to perform. And we're continuing to invest to deliver value to consumers through better performance and increase that margin of performance advantage."
According to a press release from the company, "gross margin for the quarter increased 150 basis points versus year ago, 220 basis points on a currency-neutral basis. The increase was driven by benefits of 470 basis points from increased pricing and 210 basis points from gross productivity savings."
Moeller went on to comment on the status of the Chinese market calling it "choppy," but maintains a positive outlook citing aggregate global results, calling them "absolutely fantastic. thats true by the way not just on the top line but the bottom line. 17% earnings per share, core earnings per share growth plus 21%, excluding currency, and thats all while significantly increasing the investments in our brands."
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Video Transcript
SEANA SMITH: Let's get to another mover, and that's Procter & Gamble. They reported better-than-expected earnings in its fiscal first quarter, seeing $21.87 billion in revenue on earnings of $1.83 a share. Yahoo Finance Executive Editor Brian Sozzi sat down with P&G CEO Jon Moeller this morning and asked him about the company's commitment to its brand portfolio and what they call competitive superiority. Well, let's take a listen to what he had to say.
JON MOELLER: We've focused our portfolio into 10 categories, daily-use categories, where performance drives brand choice. And if you're going to play primarily in categories where performance drives brand choice, you need to perform. And we're continuing to invest to deliver value to consumers through better performance and increase that margin of performance advantage quarter by quarter.
BRIAN SOZZI: Within the big investments you're making, Jon, where are some of your biggest bets being made right now? I tell you, I look at that health care result, and I imagine-- and that's in large part because of new tooth whiteners. But what else are you seeing in that business?
JON MOELLER: Well, let me just talk first to the breadth of the progress that's being made because the great news here is it's not just one category or one product line. So in the quarter we just completed, 7% organic sales growth. Home care grew in the teens.
As you mentioned, health care was very strong double digits, feminine care, oral care, fabric care, hair care, grooming, all high single digits, baby and family care in the mid-single digits, and skin and personal care in the single digits. So this strategy and our innovation efforts, our brand building efforts, our customer support efforts are working across the portfolio. You asked for examples.
A couple of examples, one, Dawn Powerwash, which has grown the Dawn business 50% since it was launched. Dawn has accounted for 90% of the category growth, which is a great bonus for our retail partners. And we've built a significant share, about 10 points, over the last three years.
So that's just one example. Another example would be Ariel PODS, the four-chamber pods in Europe, combined with the EcoClick package, which led to 25% growth in a very mature category, fabric care, in the last quarter.
BRIAN SOZZI: Do you not see consumers struggling, Jon? I've been talking to a lot of the food players and, of course, another consumer staple like P&G, but of course, they're selling food. And they're seeing consumers focus more on value and lower price points and private label brands. I mean, realistically, from your lens, how stressed is the US consumer?
JON MOELLER: Well, I can only really speak intelligently to their behavior within the categories in which we compete. And they're continuing to buy our products. Our market share in the quarter that we just completed, for example, in the US was up 50 basis points just from a value standpoint, 60 basis points on a volume standpoint. Our global aggregate share was up 40 basis points.
And if you look at private label shares as a measure of trade-down in the US-- though it's really only relevant in the US and Europe. In the US, 16% market share pre-pandemic. Today, it's 16%. Very little movement while we've been building share.
And why is that? How does that happen? It happens through the value that's created for consumers with superior-performing products in categories where performance drives brand choice.
BRIAN SOZZI: From an economic perspective, is there, you know, a series of data that you watch that would suggest the economy is OK? For example, we just had a much better-than-expected jobs report. Is that a good indicator of how people are able to spend a little bit more on P&G products?
JON MOELLER: It is. You know, we obviously look at retail sales and overall GDP. It's been a little bit of a mixed picture across the globe. But overall, again, when it comes to buying P&G products, the consumer continues to be very loyal.
BRIAN SOZZI: You're also calling out in terms of guidance or reaffirming your earnings outlook for the fiscal year, but calling out what, $800-million benefit from commodities. But oil is back on the rise. I mean, do you think you can hit that number? How confident are you?
JON MOELLER: Well, we've provided for a range for general volatility and a range of outcomes within our guidance range. That's why we have a range. And, well, commodities have been a help. Foreign exchange has been a hurt, exceeding the amount of help from commodities.
Interest rates are a hurt. And it's why with a strong quarter, we're continuing to hold our guidance range on both the top and bottom line because there is a certain degree of volatility and uncertainty in the world that we live in. But we are acknowledging that the first quarter was very strong. Puts us on a very solid path to deliver against those guidance ranges, potentially at the higher end.
BRIAN SOZZI: Within your guidance, look, you've appeared to have continued success with higher prices. Are there more price increases planned?
JON MOELLER: I really can't comment from a legal standpoint on future pricing plans. What I will tell you is that our volumes continue to hold up. If we look at the last quarter, plus 3% in the US, plus 2% in Europe.
Some of our big enterprise markets, Mexico, Brazil, India, strong volume progress. So we're happy with where we sit currently.
BRIAN SOZZI: Better-than-expected growth results out of China, Jon, here this morning. Do you see those results being reflected in yours? It looked like you called out some weakness in the SK-II line. I believe that plays in China. But what are you seeing there?
JON MOELLER: You know, we're seeing kind of a choppy market in China. There are some good signs, but generally, the market hasn't grown out of COVID like people had assumed it would. We were pretty clear that we didn't see a linear path forward.
And then specifically on SK-II, purchase in China has been affected in the short term by the dynamics associated with the f*ckushima wastewater release in Japan because SK-II is produced in Japan. But overall, we continue to be very encouraged by the prospects in China. Despite the choppy market there, you've seen the aggregate global results, which are absolutely fantastic.
And that's true, by the way, not just on the top line, but the bottom line, 17% quarter earnings per share growth plus 21%, excluding currency. And that's all while significantly increasing the investments in our brands.
BRIAN SOZZI: Jon, of course, you lead a very visible global company. And compared to three months ago when I last talked to you, it's an increasingly risky world in light of what is happening in Israel between Israel and Hamas. What has been your message to employees the past week while this has been unfolding? And then does this change how you lead a company like P&G for the next couple of years?
JON MOELLER: Well, first and very importantly, we condemn violence in any form. When crises exist, we have a clear set of actions that we take that we're following in this situation. And that is first and foremost supporting the health, safety, and well-being needs of our employees and their families, working hard to ensure that product continues to flow into the market in these daily-use, essential categories, and supporting humanitarian efforts, both with donations of products and other resources, as needed.
So we're focused on what we can do on the ground to make the situation better, doing the things that we know how to do.
BRAD SMITH: And now, thanks to Brian Sozzi for that interview with Procter & Gamble CEO Jon Moeller.
