Procter & Gamble returns to growth

Author | Wang Xiaojuan

Editor | Huang Yu

Global consumer goods giant Procter & Gamble has delivered a warming performance report.

On the evening of January 22, Procter & Gamble released its financial report for the second quarter of fiscal year 2025 (September-December 2024). In this fiscal quarter, Procter & Gamble's net sales reached $21.9 billion, a year-on-year increase of 2%, with organic growth at 3%, marking the largest increase in the past nine quarters.

An even more impressive achievement is the growth in net profit. The financial report shows that Procter & Gamble's net profit for this quarter was $4.659 billion (approximately RMB 33.8 billion), a year-on-year increase of 33%.

Due to Procter & Gamble's performance exceeding market expectations, the company's stock rose by 3.6% that evening, marking the largest intraday increase since January 2024.

One reason for the significant increase in Procter & Gamble's net profit is that its high-end brand SK-II began to reverse its decline this quarter, with sales growth in regions such as China.

In light of the current performance, Procter & Gamble is also quite satisfied.

Procter & Gamble CEO Jon Moeller stated, "The performance in the first half of fiscal year 2025 indicates that the company is likely to achieve its annual financial goals. Procter & Gamble will continue to focus on its daily product portfolio, enhancing product strength, packaging, brand communication, and retail execution, while driving production efficiency and innovation transformation to achieve balanced growth and long-term value creation."

Procter & Gamble's business mainly includes five major segments: beauty and skincare, grooming, health care, fabric and home care, and baby, feminine, and family care. In the current fiscal quarter, all five business segments experienced varying degrees of growth. Among them, the organic sales of home care achieved double-digit growth.

In the past year, many global cosmetics groups have faced challenges in performance, and even the giants have not been spared, with growth rates slowing down. In the past few fiscal quarters, Procter & Gamble's performance has remained at a slight increase of below 5%, largely due to price increases of several representative products.

For example, in fiscal year 2024 (June 30, 2023 - June 30, 2024), Procter & Gamble's net sales increased by 2% year-on-year to $84 billion, and net profit attributable to the parent company increased by 2% year-on-year to $14.879 billion. However, compared to fiscal year 2023, Procter & Gamble's price increases in fiscal year 2024 were relatively slower, with sales remaining flat compared to the previous year.

During the earnings call at that time, Jon Moeller stated that the overall performance of Procter & Gamble's beauty business was affected by two factors—SK-II and China. Procter & Gamble CFO Andre Schulten introduced that in key markets, organic sales in the Greater China region decreased by 9%. Later, when Procter & Gamble released its financial report for the first quarter of 2025, both revenue and net profit declined, and management once again mentioned the impact of the Chinese market.

The Greater China region's influence on overall performance was also noted.

After analyzing the reasons, Procter & Gamble began to take targeted measures, focusing on SK-II and the Chinese market starting in the second half of 2024. By the current fiscal quarter, the decline in the Chinese market had significantly narrowed, with Andre Schulten stating that organic sales in the Greater China region decreased by 3% this quarter Procter & Gamble's adjustments primarily stem from the restructuring of its e-commerce platform.

Previously, Procter & Gamble's Beauty Division CEO Alex Keith stated on Investor Day, "The company is adjusting its marketing strategy to adapt to the changes in Chinese e-commerce by heavily investing in the Douyin platform." On Douyin, many of Procter & Gamble's brands collaborate with influencers, often promoting discounts on OLAY-related products, thereby creating a perception among users of greater savings in the live streaming sessions.

"We are trying to strike a balance between this approach and the company's long-term strategy of marketing high-priced products," Alex Keith said.

For SK-II, in September 2024, Procter & Gamble launched the SK-II Luxury Line—LXP Craftsmanship Series, which contains highly concentrated PITERA™ technology in the Chinese market, gaining popularity among many consumers. Procter & Gamble executives revealed in this earnings call that SK-II's sales in Greater China increased by 5%.

However, Procter & Gamble also anticipates that it will take a considerable amount of time for performance in Greater China to recover and grow.

Procter & Gamble plans to continue its efforts in communication. Andre Schulten emphasized, "The way media communicates is changing. Therefore, it is necessary to adjust innovative methods and technological capabilities in the media field to provide consumers with unique products at the right frequency. As long as the market has not recovered, we will continue to face challenges."

The better-than-expected results this quarter have given Procter & Gamble more certainty regarding its expectations for the entire fiscal year 2025.

Management reiterated its sales and profit expectations for the current fiscal year (ending June 2025). It is expected that overall sales will grow by 2% to 4% compared to the previous fiscal year, with organic sales expected to increase by 3% to 5% year-on-year.

Challenges continue, and in addition to performance challenges in Greater China, Procter & Gamble, as an American company, must also face a series of impacts brought about by changes in the presidency. Whether future performance can continue to grow and whether further price increases will occur remain uncertain