PG

Business Context and Reporting Period

This Form 10-Q covers The Procter & Gamble Company (P&G) for the quarterly period ended March 31, 2026 (Q3 Fiscal 2026) and the nine-month period ended March 31, 2026. P&G is a global leader in fast-moving consumer goods, operating across five reportable segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. The company reported 2,328,598,978 shares of Common Stock outstanding as of the period end.

Key Financial Metrics

Note: Debt figures are derived from the Consolidated Balance Sheet (Current Debt: $13,174M; Long-Term Debt: $23,852M).

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 7% in Q3 and 4% for the nine-month period. Growth was driven by favorable foreign exchange (4% in Q3, 2% in 9M), unit volume increases (2% in Q3), and higher pricing (1% in both periods). Organic sales grew 3% in Q3 and 2% in the nine-month period.
• Profitability: Operating income remained flat in Q3 ($4.6B) but declined 2% for the nine-month period ($15.8B). Gross margin decreased 150 basis points in Q3 and 110 basis points in the nine-month period due to unfavorable product mix, higher restructuring costs, tariff impacts, and commodity costs, partially offset by productivity savings and pricing.
• Non-Operating Items: Other non-operating income increased significantly due to a $343 million pre-tax gain from the dissolution of the Glad joint venture business in Q3 2026. This contrasts with a $752 million non-cash charge in the prior year related to the liquidation of operations in Argentina.
• Restructuring: The company incurred $198 million in restructuring charges in Q3 and $782 million for the nine months ended March 31, 2026, related to a portfolio and productivity plan announced in June 2025.

Guidance, Outlook, and Risks

• Restructuring Plan: P&G expects to incur approximately $1.5 to $2.0 billion in before-tax restructuring costs over two years (fiscal 2026 and 2027), with over half expected by the end of fiscal 2026. This includes a reduction of up to 7,000 non-manufacturing overhead personnel.
• Share Repurchases: The company reaffirmed an expectation to reduce outstanding shares through direct repurchases of approximately $5 billion in fiscal 2026. In Q3, 3.9 million shares were purchased at an average price of $159.79.
• Core EPS: Management highlights Core EPS (excluding restructuring and Glad JV gain) as a key metric. Core EPS increased 3% to $1.59 in Q3 and 2% to $5.46 for the nine-month period.
• Risks: Key risks include foreign currency devaluation, global inflation, geopolitical tensions (Middle East, Russia/Ukraine), supply chain disruptions, and the potential impairment of the Gillette indefinite-lived intangible asset, which is susceptible to changes in growth rates and discount rates.
• Tariffs: The company previously paid ~$200 million in IEEPA tariffs which may be recoverable following a Supreme Court ruling in February 2026, though no recovery has been recognized yet.

Investor Verification Checklist

• Organic Sales Drivers: Verify the sustainability of the 3% Q3 organic sales growth, particularly the volume increases in Beauty and Fabric & Home Care segments.
• Margin Compression: Assess the impact of ongoing tariff costs and commodity price volatility on future gross margins, given the 150 bps decline in Q3.
• Restructuring Execution: Monitor the pace of the $1.5–$2.0 billion restructuring plan and the associated headcount reductions to ensure cost savings materialize as projected.
• Goodwill Impairment Risk: Review the sensitivity analysis for the Gillette brand intangible asset ($12.8B carrying value) against potential macroeconomic shifts.
• Cash Flow Productivity: Confirm the 92% adjusted free cash flow productivity ratio remains stable as restructuring costs are paid out.