Procter & Gamble (NYSE:PG) Announces Fiscal Year 2024 First Quarter Results
Net Sales +6%; Organic Sales +7%
Diluted EPS and Core EPS $1.83, each +17%
UPDATES ALL-IN SALES GROWTH OUTLOOK
October 18, 2023--
The Procter & Gamble Company (NYSE:PG) reported first quarter fiscal year 2024 net sales of $21.9 billion, an increase of six percent versus the prior year. Organic sales, which excludes the impacts of foreign exchange and acquisitions and divestitures, increased seven percent. Diluted net earnings per share were $1.83, an increase of 17% versus prior year.
Operating cash flow was $4.9 billion, and net earnings were $4.6 billion for the quarter. Adjusted free cash flow productivity was 97%, which is calculated as operating cash flow excluding capital spending and certain other items, as a percentage of net earnings. The Company returned $3.8 billion of cash to shareowners via approximately $2.3 billion of dividend payments and $1.5 billion of common stock repurchases.
First Quarter ($ billions, except EPS)
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GAAP 2024 2023 % Change Non-GAAP* 2024 2023 % Change
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Organic
Net Sales 21.9 20.6 6% Sales n/a n/a 7%
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Diluted
EPS 1.83 1.57 17% Core EPS 1.83 1.57 17%
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*Please refer to Exhibit 1 - Non-GAAP Measures for the definition and
reconciliation of these measures to the related GAAP measures.
“We delivered very strong results in the first quarter of fiscal year 2024, putting us on track to deliver towards the higher end of our fiscal year guidance ranges for organic sales and core EPS growth,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer. “We remain committed to our integrated strategy of a focused product portfolio of daily use categories where performance drives brand choice, superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization. The P&G team’s execution of this strategy has enabled us to build and sustain strong momentum. We have confidence this remains the right strategy to deliver balanced growth and value creation.”
July – September Quarter Discussion
Net sales in the first quarter of fiscal year 2024 were $21.9 billion, a six percent increase versus the prior year. Unfavorable foreign exchange had a one percent impact on net sales. Organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased seven percent. The organic sales increase was driven by a seven percent increase from higher pricing and one percent increase due to favorable product mix, partially offset by a one percent decrease in shipment volumes.
July -
September
2023
---------- ------ -------- ----- ---- ------- -------- ------- -------
Net Sales
Drivers Foreign Other Net Organic Organic
(1) Volume Exchange Price Mix (2) Sales Volume Sales
---------- ------ -------- ----- ---- ------- -------- ------- -------
Beauty --% (3)% 7% (2)% 1% 3% --% 5%
Grooming (2)% (3)% 9% 1% 1% 6% (2)% 9%
Health
Care 2% 1% 6% 2% --% 11% 2% 10%
Fabric &
Home
Care (1)% (1)% 8% 1% 1% 8% --% 9%
Baby,
Feminine
& Family
Care (3)% (2)% 8% 2% --% 5% (3)% 7%
---------- ------ -------- ----- ---- ------- -------- ------- -------
Total
P&G (1)% (1)% 7% 1% --% 6% (1)% 7%
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(1) Net sales percentage changes are approximations based on quantitative
formulas that are consistently applied.
(2) Other includes the sales mix impact from acquisitions and divestitures
and rounding impacts necessary to reconcile volume to net sales.
-- Beauty segment organic sales increased five percent versus year ago.
Skin and Personal Care organic sales grew low single digits as higher
pricing and innovation-based volume growth were partially offset by
unfavorable mix due to lower sales of SK-II. Hair Care organic sales
increased high single digits driven primarily by increased pricing.
-- Grooming segment organic sales increased nine percent versus year ago
as higher pricing and favorable product mix were partially offset by
pricing-related volume declines. All regions grew organic sales.
-- Health Care segment organic sales increased ten percent versus year
ago. Oral Care organic sales increased high single digits due to
increased pricing and favorable product mix. Personal Health Care organic
sales increased double digits due to increased pricing and volume growth
due to innovation and strong demand for respiratory products.
-- Fabric and Home Care segment organic sales increased nine percent
versus year ago. Fabric Care organic sales increased high single digits
due to increased pricing and favorable product mix, partially offset by
volume declines primarily in Asia. Home Care organic sales increased low
teens due to increased pricing and favorable premium products mix.
-- Baby, Feminine and Family Care segment organic sales increased seven
percent versus year ago. Baby Care organic sales increased mid-single
digits due to increased pricing and favorable product mix, partially
offset by pricing-related volume declines. Organic sales grew in all
regions. Feminine Care organic sales increased high single digits driven
by increased pricing and favorable geographic and product mix, partially
offset by pricing-related volume declines. All regions grew organic
sales. Family Care organic sales increased mid-single digits due to
increased pricing, partially offset by unfavorable pack size mix.
Diluted net earnings per share increased by 17% to $1.83, driven by an increase in net sales and an increase in operating margin. Currency-neutral EPS were up 21% versus the prior year EPS.
Gross margin for the quarter increased 460 basis points versus year ago, 520 basis points on a currency-neutral basis. The increase was driven by benefits of 330 basis points from increased pricing, 160 basis points of favorable commodity costs and 150 basis points from gross productivity savings. These were partially offset by 60 basis points of negative product mix and 60 basis points of product reinvestments and other impacts.
Selling, general and administrative expense (SG&A) as a percentage of sales increased 220 basis points versus year ago and 180 basis points on a currency-neutral basis. The increase was driven by 260 basis points of marketing investments, 140 basis points of wage inflation and other impacts, partially offset by 160 basis points of net sales growth leverage and 60 basis points of productivity savings.
Operating margin for the quarter increased 240 basis points versus the prior year, 340 basis points on a currency-neutral basis. Operating margin included gross productivity savings of 210 basis points.
Fiscal Year 2024 Guidance
P&G adjusted its guidance range for fiscal 2024 all-in sales growth to be in the range of two to four percent versus the prior year. Foreign exchange is now expected to be a headwind of approximately one to two percentage points to all-in sales growth. The Company maintained its outlook for organic sales growth in the range of four to five percent.
P&G maintained its fiscal 2024 diluted net earnings per share growth in the range of six to nine percent versus fiscal 2023 EPS of $5.90. This outlook equates to a range of $6.25 to $6.43 per share. The Company highlighted that it is maintaining the EPS range despite an incremental $600 million dollars after tax of foreign exchange headwinds since its initial fiscal 2024 guidance in late July.
The Company said it expects tailwinds of approximately $800 million after tax due to favorable commodity costs for fiscal year 2024. However, unfavorable foreign exchange rates are now expected to be a headwind of approximately $1 billion after tax. The Company continues to expect the net impact of interest expense and interest income to be a headwind of approximately $200 million after tax.
The Company is unable to reconcile its forward-looking non-GAAP cash flow and tax rate measures without unreasonable efforts given the unpredictability of the timing and amounts of discrete items, such as acquisitions, divestitures, or impairments, which could significantly impact GAAP results.
P&G now expects an effective tax rate of approximately 21% in fiscal 2024.
Capital spending is now estimated to be approximately 4.5% of fiscal 2024 net sales.
P&G continues to expect adjusted free cash flow productivity of 90% and expects to pay more than $9 billion in dividends and to repurchase $5 to $6 billion of common shares in fiscal 2024.