Procter & Gamble Co

NYSE:PG

Earnings Call Analysis

P&G Reports Strong Fiscal Year Amid Challenges

Procter & Gamble (P&G) reported a 4% organic sales growth for fiscal '24, despite facing significant market challenges. Core earnings per share rose by 12%, with a gross margin improvement of 360 basis points. North America and Europe showed robust volume growth, offsetting weaker performances in China. The company sees continued volatility but guides for 3-5% organic sales growth and 5-7% core EPS growth for fiscal '25. P&G also highlighted a 7% dividend increase and plans to return $16-17 billion to shareholders, reflecting strong cash flow productivity.

Strong Annual Performance Amid Challenges

P&G reported strong performance for fiscal year 2024, with organic sales growth at 4%, marking the company's sixth consecutive year of achieving this milestone despite a challenging market environment. This growth was broad-based, covering 8 out of 10 product categories, with strong contributions from Home Care, Hair Care, and Grooming segments, which saw high single-digit growth. Core earnings per share (EPS) rose by 12% to $6.69, driven by productivity improvements and significant marketing investments .

Regional Performance Highlights

North America continued to be a strong market for P&G, with a 5% increase in organic sales for the year. The European focused markets also performed well, posting an 8% growth in organic sales. In contrast, Greater China faced challenges, with organic sales declining by 9% due to weak market conditions and specific headwinds for the SK-II brand. Latin America stood out with a 15% increase in organic sales, highlighting the geographic diversity of P&G's growth .

Innovation and Investment Driving Growth

P&G emphasized its commitment to innovation and maintaining product superiority across five key vectors: product, package, brand communication, retail execution, and holistic value. Significant investments in these areas have been critical in driving both market growth and consumer delight. The company plans to continue this strategy, doubling down on productivity and superior offerings to navigate market challenges and consumer demands .

Guidance for Fiscal Year 2025

Looking ahead to fiscal year 2025, P&G provided a cautious but optimistic outlook. The company expects organic sales growth to be in the range of 3% to 5%, and core EPS to grow by 5% to 7%. Key headwinds include a $300 million after-tax impact from commodity costs and a $200 million after-tax impact from foreign exchange. Despite these challenges, P&G aims to maintain strong cash flow productivity and return $16 billion to $17 billion to shareholders through dividends and share repurchases .

Strategic Focus and Market Adaptation

P&G's strategy remains focused on growing markets by creating business value rather than merely taking it. This approach includes targeted portfolio adjustments and market-specific operating model adaptations. The company's ability to innovate and deliver superior products is central to its strategy, enabling it to delight consumers and outperform competitors. P&G also highlighted the importance of agile and accountable organizational structures to support this dynamic and sustainable growth strategy .

Addressing Regional and Product-Specific Challenges

The earnings call also addressed specific challenges in various regions and product lines. For example, the SK-II brand in China faced brand-specific headwinds due to its Japanese heritage, but the company expects these issues to stabilize over time. Additionally, the company has made strategic divestitures in Argentina, which will impact organic sales reporting moving forward. Despite these hurdles, P&G remains confident in its ability to navigate market complexities and continue its growth trajectory .

Earnings Call Transcript 2024-Q4

[Operator]

Good morning, and welcome to Procter & Gamble's Quarter End Conference Call. Today's event is being recorded for replay. This discussion will include a number of forward-looking statements. If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections.

As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures. Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non-GAAP financial measures.

Now I will turn the call over to P&G's Chief Financial Officer, Andre Schulten.

[Andre Schulten, executive]

Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year '24 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities. And we'll close with guidance for fiscal '25, and then take your questions. Fiscal '24 was another strong year, execution of our integrated strategies enabled the company to meet or exceed going in guidance ranges for organic sales growth, operating growth, cash productivity and cash return to share owners. All this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year.

Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and more challenging market conditions. Growth was broad-based across business units, with 8 of 10 product categories growing organic sales. Home Care, Hair Care and Grooming were up high single digits. Oral Care and Family Care up mid-singles. Fabric Care, Family Care and Personal Health Care grew low single digits. Skin & Personal Care and Baby Care were down low singles.

Focus markets grew 4% for the year, with North America up 5% and Europe focused markets up 8%. Greater China organic sales were down 9% versus the prior year, driven soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. E-commerce sales increased 9%, now representing 18% of the total company.

Our strategy focused on driving market growth continues to drive share growth for P&G all channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal '24. P&G consumption grew ahead of our fair share of category growth, driving modest and volume share growth for the year. We grew global aggregate value share, 30 of 50 category country combinations held or grew share for the year. Importantly, the share growth is broad-based, 6 of 10 product categories grew share globally over the past year.

Core earnings per share were [ $6.69 ], up 12% for the year, core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements enabled by significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends and $5 billion in share repurchase.

Moving on to fourth quarter results. Organic sales rounded down to 2%. Volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. 9 of 10 product categories grew or held organic sales in the quarter. Home Care, Hair Care, Grooming and Oral Care were each up high single digits. Feminine Care, up low singles. Skin and Personal Care, Fabric Care, Personal Health Care and Family Care were each in line with prior year. Baby Care was down mid-singles.

5 of 7 regions grew organic sales, with focused markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4%, with 4 points of volume growth and price mix in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down 1 point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high single growth in Brazil.

Of note, Argentina's overall contribution to organic sales for the region and the company were lower than in the last few quarters due to the divestiture of a portion of the business in March and a notable decline in volume for the remaining categories. As was announced earlier this month, we have divested the remaining tons of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year '25 and Select P&G brands will still be available in the market through a distribution and licensing agreement with a new owner of the operations.

Greater China organic sales declined 8%. Underlying market conditions have remained weak, and the 6 key consumption period was down sharply versus prior year, just as well in the 11/11 Chinese New Year and Valentine Day shopping periods. Also brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or 2 until we return to growth.

Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries, such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European focus markets. 25 of our top 50 category country combinations held or grew share for the quarter.

On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment. Currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to shareowners this quarter, over $2.4 billion in dividends and $1.5 billion in share repurchases.

In summary, we met or exceeded each of our going-in target ranges for the year: organic growth, core EPS growth, free cash flow productivity and cash return to shareowners. Strong performance again this year in a challenging economic and geopolitical environment.

With that, I'll pass it over to Jon.

[Jon Moeller, executive]

Thanks, Andre. I'll start with a few thoughts on results before discussing the strategy. Our team continues to execute the strategy with excellence, enabling strong results over each of the past 6 years, pre-COVID, during COVID, through a historic inflationary and pricing cycle and through geopolitical tensions. Organic sales growth of plus 5%, plus 6%, plus 6%, plus 7%, plus 7% and plus 4% over the last fiscal years. Strong earnings growth and gross and operating margin expansion. Very strong cash generation and over [ $96 billion ] of cash returned to share owners over those 6 years.

For fiscal '24, going-in organic sales guidance was 4% to 5%. We delivered 4% in a very volatile environment. Flat volume for the year was improving trajectory through the year, 2% growth in the fourth quarter. Strong volume growth in North America and Europe-focused markets, offsetting soft markets and enterprise regions in China. Going-in core EPS guidance of 6% to 9%, delivered 12%. Core gross margin at a 17-year high, with strong productivity improvement funding strong marketing investments.

Going-in cash productivity outlook of 90%, delivered 105%, which enabled a 7% dividend increase, the [ eighth ] consecutive year of increase and the 134th consecutive year paying a dividend. As Andre said, strong results in a challenging environment. To be very clear, there's still more work to do to continue improving areas in our control, which will be needed to offset the headwinds that are largely not in our control.

We'll double down on superiority across all 5 vectors. We'll double down on productivity, up and down the P&L and across balance sheet. We'll double down on enabling our organization to execute our integrated strategy with excellence to delight consumers and win in the marketplace, to deliver the level of balanced growth and value creation results you and we expect.

Our strategy is dynamic and sustainable. It adapts to the changing needs of consumers, customers and, society and is focused on growing markets, creating versus taking business, the most sustainable and typically most profitable way to grow. A focused portfolio of daily use products in categories where performance drives brand choice. The portfolio is performing delivering broad-based growth across nearly all categories and most geographies. As you know, we are active managers of our portfolio. Over the last several years, we've made some targeted additions and subtractions in that portfolio. We've adjusted our operating model in several markets. Each of these moves were made with a focus on long-term balance sheet growth and value creation.

The second strategy element, ongoing commitment to and investment in irresistible superiority, through innovation, across the 5 vectors of product, package, brand communication, retail execution and value holistically defined. Leveraging that superiority to delight consumers, grow markets and our share in them, to jointly create value with retail partners. The plans across the businesses are broader and stronger than any time in the recent past as each team works to increase their margin of superiority and consumer delight.

Superior innovations that are driven by consumer insights, communicated to consumers with more effective and efficient marketing programs, executed in stores and online in conjunction with retailer strategies to grow categories and our brands. And price to deliver superior value across each price tier where we compete.

We've talked many times about the superiority driven market growth, share growth and sales growth we've achieved with products like Tide and Ariel pods, downy and Lenor laundry scent beads, and Dawn & Fairy, EZ-Squeeze and [indiscernible]. Two more examples. Orab-B iO power toothbrushes deliver superior cleaning and delightful user experience. Superior communication includes the insight that manual brushes leave 50% of plaque behind. But Orab-B iO delivers 100% more plaque bacterial removal with its round head, and removes plaque and hard-to-reach places.

This superior proposition is accelerating in power brush trial and adoption, bringing new power brush users into the category, driving high single-digit market growth of the power brush category, double-digit sales growth for Oral-B Power and 2 points of Oral-B value share growth over the past 12 months.

Native, our premium Personal Care brand, is delivering superiority across all 5 vectors and across multiple product forms, including deodorants, body wash, shampoo and conditioners. Superior performance with fewer ingredients and irresistible scents. Transparent labeling and clean white packaging, superior retail execution and strong retailer partnerships, showcasing the full range of forms and scents. Premium positioning within the category, providing superior value for the consumer looking for an offering with more natural ingredients.

Native has driven a step change in market value growth for the U.S. deodorants and personal care categories from low singles to mid-teens. Native sales have grown nearly 10x over the last 5 years, totaling $700 million in fiscal '24.

Third strategy element, productivity improvement in all areas of our operations. In order to fund investments in innovation, brand building and market growth to mitigate cost and currency challenges and to expand margins and generate cash. We delivered very strong cost savings in fiscal '24. Visibility to more savings opportunities is increasing as the businesses continue to build their 3-year rolling productivity master plans.

We have an objective for gross savings and cost of goods sold of up to $1.5 billion before tax, enabled by platform programs with global application across categories like Supply Chain 3.0. We're working in a new way with retailers on the totality of the supply chain, end-to-end versus simply trying to optimize our respective pieces. One example, using data and machine learning algorithms to optimize truck scheduling to minimize idle time of drivers. We're also using digital tools to optimize freight and for dynamic routing and sourcing optimization. $200 million to $300 million of savings opportunity across these areas.

We have line of sight to savings from improved marketing productivity, more efficiency and greater effectiveness, avoiding excess frequency and reducing waste while increasing reach. We're taking targeted steps to reduce overhead as we digitize more of our operations.

Next, constructive disruption of ourselves in our industry, a willingness to change, adapt and create new trends, technologies and capabilities that will shape the future of our industry and extend our competitive advantage. We continue to be a constructive disruptor of brand building, in-housing more of the media planning and placement activity using our proprietary tools and consumer data to increase the effectiveness and efficiency of our communication. We're disrupting traditional lab-based innovation models to dramatically increase the speed and breadth of discovery.

Last, but clearly not least, we've organized -- sorry, we've designed and continued to refine an empowered, agile and accountable organization, an inclusive and diverse organization, enabling us to better serve and increasingly divert set of consumers. Strong progress across all strategic pillars with significant opportunity ahead of us. No reason to stand still. As illustrated by the 4 focus areas that we've outlined previously.

Number one, Supply Chain 3.0. It's delivering productivity as you can see in the results. We're also driving improved agility, flexibility, scalability and transparency in a rapidly evolving landscape. Optimized, sustainable and flexible, up and down the supply chain, inclusive of our retail partners. All of this is driving higher quality, increased supply assurance and higher on-shelf availability of our products, and of course, better cash and cost structures. These programs improve superiority with consumers and further strengthen what is already the top-ranked supply chain by our retail partners in third-party industry surveys.

Next, environmental sustainability. Superior propositions for consumers, customers and share owners that are more sustainable, driving sales and profitability while reducing the footprint of our operations, enabling consumers to reduce their footprint and innovating to deliver cross-industry solutions for some of our most pressing challenges.

The next focus area is digital acumen, leveraging data and digitization to delight consumers, streamline the supply chain, increase quality, drive productivity, all driving share owner value. One example is the improvement we've delivered in ad copy qualification and media buying, with proprietary digital tools we've developed and the digital molecule development worked in Fabric Care. We've built similar tools to drive faster, cheaper and better innovation in perfume, which benefits almost every product category in the company.

We're also digitizing more of our at-office work processes to lower costs and drive efficiencies, while delivering higher quality output. Each of these examples has obvious cost benefits, but they're also driving product and package superiority, superior brand communication to consumers, superior retail execution in-store and online, stronger internal controls and jobs that enable people to focus on higher order tasks with greater business impact.

Last focus area, a superior value equation for all employees for all rules, to ensure we continue to attract, retain and develop the best talent and are best positioned to serve all consumers. These 4 focus areas are not separate strategies. They simply expand our ability to execute our integrated growth strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption in the organization,reinforce and build on each other. We continue to believe there's merit in doubling down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity.

We remain as confident as ever in our strategy and our ability to drive market growth, and to deliver balanced growth and value creation to delight consumers, customers, employees, society and shareowners. At the end of the day, P&G serves people, with a strong desire to improve their lives and the lives of their families. I believe in the capabilities and commitment of P&G people to serve consumers and to do this in the most responsible way, consistent with P&G's values and principles.

I'm excited about what lays ahead. Of course, we'll continue to face challenges, but the future holds great promise. We have many opportunities ahead to grow markets, grow our business and create significant value for our owners.

With that, I'll hand it back to Andre to outline our guidance for the new year.

[Andre Schulten, executive]

Thank you, Jon. As we enter fiscal '25, we continue to expect the environment around us to remain volatile and challenging from input costs, currencies, to consumer competitors, retailers and geopolitical dynamics. As Jon said, we'll navigate these challenges with our dynamic integrated strategy guided by consumers every step of the way.

Our going-in guidance for fiscal '25 is consistent with our long-term algorithm. On the top line, we currently expect the market in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets. This translates to an organic sales growth guidance range of 3% to 5% for the fiscal year. Apologies, I have my mic muted.

On the bottom line, our algorithm calls for mid- to high single-digit core earnings per share growth. Our core EPS guidance range for fiscal '25 starts the year at 5% to 7%, versus fiscal '24 core EPS of $6.59. This guidance equates to a range of $6.91 to $705 per share, $6.98, up 6% at the center of the range. This outlook includes a commodity cost headwind of approximately $300 million after tax, and a foreign exchange headwind of approximately $200 million after tax. Combined foreign exchange and commodities are projected to be a headwind of $0.20 per share for fiscal '25 or a 3 percentage point drag on core EPS growth.

In addition, the prior fiscal year included benefits from several minor divestitures, and we expect a somewhat higher tax rate in the new fiscal year. Combined, these are an additional $0.10 to $0.12 headwind to core EPS. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay around $10 billion in dividends and to repurchase $6 billion to $7 billion of common stock. Combined a plan to return $16 billion to $17 billion of cash to shareowners this fiscal year.

While we are clear-eyed on the challenges in the market and the work needed to continue to drive the business, fiscal '25 guidance for top line, bottom line and cash are each consistent with our long-term algorithm. A few items for you to consider as you build your quarter-to-quarter estimates. On the top line, please keep in mind that the July to the September period has the most difficult comp for the year and many of the market-level challenges we've noted will not fully annualize or improve materially in our estimate until the second half of the year.

On the bottom line, the foreign exchange and commodity headwinds skew a bit towards the front half of the year, and the back half comps include the benefit of the tax items and minor brand divestitures I mentioned earlier. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions or store closures are not anticipated within the guidance ranges.

With that, I'll hand it back to Jon for his closing thoughts.

[Jon Moeller, executive]

We're very pleased with the strong results P&G people have delivered over the last year, and inclusive of prior years in a very challenging and volatile environment. The earnings power and value creation potential of the company are as strong as ever. We continue to believe that the best path forward to deliver sustainable, balanced growth is to double down on the strategy. Excellent execution of an integrated set of market constructive strategies, delivered with a focus on balanced top and bottom line growth and value creation, starting with the commitment to deliver irresistibly superior propositions to consumers and retail partners.

With that, we'll be happy to take your questions.

[Operator]

[Operator Instructions] The first question comes from Bryan Spillane of Bank of America.

[Bryan Spillane, analyst]

I guess the question that we've fielded a few times this morning, and if you could touch on this a bit, just the last couple of quarters, it seems like organic sales have come in maybe slower or lower than expected -- than you were expecting at the start of each quarter. So maybe if you can touch a little bit on just what's developed, especially in the fourth quarter, maybe different than what you were expecting. And then if you can add to that, also, just is that true for the market? So at a 2% organic sales for this quarter, are we above, below or in line with market growth?

[Andre Schulten, executive]

Bryan, I'll start and then Jon, I'm sure, will add some perspective as well. I'll start back where we kind of started the prepared remarks. I think we delivered a year where we exceeded on that all of our ingoing guidance metrics. Now the year wasn't linear, as you highlight. And I distinguish 2 parts of the business. 85% of the business is performing right in line with expectations and right in line with what we would have expected throughout the year. We have strong growth in North America, 4% in the quarter, 4% volume growth in the quarter. Europe focused markets growing volumes at 3%. Europe enterprise markets growing volumes at 6%. L.A., normalizing to about 8% organic sales growth.

So that part of the business where the trajectory is not impacted by significant external events, I think is moving right along. We expected the normalization and price/mix contribution as we have talked throughout the quarters. If you look at the headwinds that we started to communicate in December, they are really still with us in -- throughout the second half, and that's what's driving the volatility in the top line results. Those headwinds have accelerated in part. And honestly, in quarter 4, some of them developed late in the quarter. So when you think about China and SK-II were heavily impacted by 6/18, a weaker key consumption period in China. And overall, market sentiment in China has not improved throughout half 2.

We had highlighted that we expect the China recovery to be slow and to take time. And I think that's playing out in the results we see in the second half. The Middle East situation has not really improved. So we continue to see developing stronger impacts on Western retailers in some of these markets. And while the team has implemented many interventions, the execution in-store had been limited by some of these headwinds in the Middle East. The last element, we saw a softening in quarter 4 on the Argentina volumes driven by the general circumstances in the market, strong hyperinflation pricing in Argentina. So there was a softer contribution on organic sales growth in quarter 4 than what we've seen in quarter 3.

If you step back, though, the performance of the business and the way we set up for '25, I think, is very strong. 85 of the business is developing right in line with what we would have expected. We're growing share in North America. The balance of the markets are growing volume, which is really the shift we needed to see. Our gross margin is at record levels. Our productivity is very strong. That has enabled us to remain fully invested from a media perspective and from an innovation perspective. And so going into the year, we feel all the structural elements of the business are strong.

Now what is important to understand, and we mentioned it in the prepared remarks, those headwinds that we have experienced in half 2 will still be with us in half 1 of this fiscal year. So we expect this year not to be linear, and we have to accelerate sales growth throughout the quarters as some of these headwinds annualize and we return to growth. But overall, I think we're well set up to deliver against the guidance metrics we just communicated.

[Jon Moeller, executive]

I agree with everything that Andre just said. I will remind you, relative to the comment of performing versus our own actions -- precisely because of the volatility of the world that we all live and operate in, we don't provide quarterly guidance, we only provide annual guidance. And as Andre said, we met or beat each of those numbers that we're providing. There have been 2 kind of primary questions that have been -- that we've all been working through. One is, can we reaccelerate volume? And as Andre said, that is broadly happening and impressively so. So if we look at North America,over the course of the fiscal year, plus 3%, plus 3%, plus 4%, plus 3%. If we look at Europe, plus 2%, plus 35, plus 4%, plus 2%. Andre gave you figures for some of the other regions. But broadly, that question of can volume be reaccelerated is answered with an emphatic yes.

The second question that at least we've been working through is, can that happen in the context of continued margin expansion? If you look at the fiscal year numbers, top line to bottom line, that's definitely happened. If you look at gross margin in the quarter we just completed, which is -- which comes in at a 17-year high, we're certainly able to continue to reaccelerate volume growth, while holding our building margins.

So like Andre, I approached next year in a realistic fashion and realizing that the first couple of quarters are going to look a little bit more like the one that we just completed. But with overall, a belief that the fundamentals of the business are in very strong shape. And that as we bring the innovation that's planned to market throughout the fiscal year, we're going to be happy with the results in line with the guidance that he's provided.

One other element of the strength and health of the business fundamentally. If you look at the last fiscal year at a brand level, 21 out of 25 brands were growing. 11 of those 25 brands were growing at high single digit or higher rates. So again, from a breadth standpoint, I think we're positioned very well, and the team is doing a great job.

[Operator]

The next question comes from Dara Mohsenian of Morgan Stanley.

[Dara Mohsenian, analyst]

Actually, just wanted to follow up on those last 2 points you made, Jon. On the 3% to 5% organic sales growth guidance for fiscal '25, can you just parse out a bit more detail in terms of how you're thinking about the balance between pricing and volume? I know you won't want to be exact, but how you're thinking about that. And the 3% to 4% category growth assumption, do you think there's good visibility there given the slowing pricing? And then if you bless me with the Part B, I guess just how do you think about earnings flex relative to top line given some of the top line volatility? Obviously, significant year-over-year gross margin expansion in fiscal '24, but that's been dissipating. You boosted marketing a lot. You've got strong productivity, as you mentioned. There's a lot going on sort of in the margin line items. So just how do you think about earnings flex next year relative to top line growth given some of this volatility?

[Jon Moeller, executive]

Thanks, Dara. I'm going to turn it over to Andre to take us through some of the details, and then I'll round out the answer. But go ahead, Andre.

[Andre Schulten, executive]

Yes. Thanks for the question, Dara. The volume versus price/mix contribution is expected to be broadly balanced. We expect the markets to return to more sustainable growth rates of 3% to 4%. That is largely happening now. And if you look at the construction of that market growth, about half of that is driven by volume, the other half is driven by price/mix. I would expect our construct to look similar for the fiscal year. Obviously, it will differ by quarter and half front half versus back half, but broadly balanced between volume and price/mix.

On the margin perspective, you saw us make a choice to continue to invest fully in the business. We have delivered very strong productivity. More than $2 billion in productivity for the year. And we have significantly increased our media support. And we see the results for those investments in the strong growth we continue to deliver in North America, including share growth consistently across every period. The strong results in Europe focused markets, including strong volume growth, consistent across the quarters. So we feel good about those investments.

We'll continue to be very disciplined. And as we -- as you can appreciate, not all of those investments will have paid out. So as we do our post Q analysis, we'll reassess every step of the way, whether those are better flowed into the P&L or reinvest it somewhere else. Productivity for fiscal '25 is also very strong, as I mentioned in my previous comments, so that will allow us to maintain fully invested both in terms of market support as well as innovation, which is really the underpinning driver for our growth next year.

[Jon Moeller, executive]

And I would just add 2 or 3 comments. One, as Andre indicated, where you see the increase in marketing investment, that is largely in the geographies where we're seeing the growth a company that from a top line standpoint. As we also said, we will continue to monitor the effectiveness of that spending, and we'll adjust either up or down accordingly. Also, I just want to make sure we all understand that the return on those investments is not an overnight occurrence. We have a commercialization cycle that needs to run its course. We have consumer purchase cycles that can be annual in some cases. While we -- our portfolio is constructed to focus on categories where the product is used daily, that doesn't mean it's purchased daily. And so we -- it sometimes takes a little bit of time to evaluate and see the market response to those investments. But if you look at the last several years, it's generally always been there. And it's been one of the reasons for the growth over the last, call it, 6 years. As I mentioned in my remarks, plus 5%, plus 6%, plus 6%, plus 7%, plus 7%, plus 4% in a more challenging environment. So like Andre, I feel good about the balance that's implied in the guidance and in our internal plans. But it's something we wake up every day and continue to reevaluate and deliver in an optimal way.

[Operator]

The next question comes from Steve Powers of Deutsche Bank.

[Stephen Robert Powers, analyst]

I was hoping that we could talk about Fabric & Home and Baby & Family specifically, because it seems like those are the 2 segments that drove the most disconnect, at least versus external forecast. The release sites, promotional spending and at least a degree of share loss across those segments. And so maybe you could just drill down further into the headline numbers, give us a bit more context on what you're seeing both competitively and within your own momentum. And just how we should think about both the drivers and the timing of the build back in those businesses. Noting you've obviously got some challenging first half comparisons, especially in the current quarter. But just really understanding where you expect those businesses to trend and land over the course of fiscal '25.

[Andre Schulten, executive]

Steve. Look, Home Care I think it's just performing outstandingly well, 9% organic sales growth on the year, 13 quarters of sustained share growth and gaining momentum. So I think I focused my comments on Fabric Care. And I would tell you 2 things. Number one, we are annualizing record periods in Europe with differentiated pricing between competitors, where we had a bit of a tailwind last year, that is turning into a high base comp. But structurally, the business is in great shape in Europe. Ariel continues to perform extremely well. The innovation across unit dose and the broader portfolio, including FE, is doing very well. So I expect that business to reaccelerate very quickly. In North America, we are just launching the innovation bundle, the spring innovation bundle, which is supported with the right level of investment, including promotion investment and merchandising investment, and that's why you see the negative price mix component in the North American business. But the business is picking up momentum. We're growing share. So I expect also North America to continue to move in the right direction on Fabric Care. And we're very encouraged with the innovation, both the innovation they just launched and the innovation that is in the pipeline.

Last point, maybe on Fabric Care. In China, specifically, we also made a portfolio choice to focus on the most product part of the business. And so there are some short-term implications in terms of base period there. Again, for the longer-term benefit of the China Fabric Care business, I think that's the right decision, but it's part of the softness that you see right now in the current quarter. Baby Care, I'll talk 2 regions. One is North America, the Baby Care business on the premium end continues to be doing very well. We have Swaddlers growing share of 1.4%. Cruisers 360 is growing,

So on the premium end of the spectrum where we've been able to innovate over the past 1 to 2 years, we continue to see the momentum accelerating across Pampers. We have an opportunity. We had an opportunity on Love the mid-tier brand, where we postponed innovation due to some supply chain challenges. That innovation is now in the market. So again, very very significant acceleration expected given the innovation just launched in the market over the next few quarters.

In Europe, again, base period mostly in terms of share data, and that is something we need to work through. And certainly, in Europe Baby, I think that's one of the areas where we're watching our sufficiency of innovation very closely, simply because the spread versus private label is the most significant. So again, the team is working through strong communication and innovation that we'll be launching here over the next few quarters.

[Jon Moeller, executive]

I'm just going to go in a slightly different direction here, Steve. I fully agree with the Andre subscription. There are also categories and sectors that are making really strong progress that as we annualize the few challenges within them, should manifest itself more clearly than it is now. So we'll have the benefit of those as we go through the year. What am I talking about? If you look at Beauty as an example, the aggregate results are being heavily impacted by 2 things: SK-II in China, both of which should annualize by the second half of the year.

If you then step back and look at the balance of the business, Head & Shoulders in part behind the bear innovation increased sales by 7% last year. Pantene, in part behind the Pantene Miracles innovation, grew 10% last year. The Personal Care side of the business is growing extremely as well. So I just want to kind of complete the picture in terms of some of the progress that isn't as obvious in the aggregate look, but will make a difference going forward.

[Operator]

The next question comes from Lauren Lieberman of Barclays.

[Lauren Lieberman, analyst]

I was wondering if you could comment a bit, because one thing that's been absent in the discussion of the consumer, broadly. So I think it could be helpful to get some perspective on consumer environment. It feels like in U.S. and Western Europe, from what we've heard from other companies, is that things in the last month or 2 have kind of gotten demonstrably worse is a general statement. So curious your perspective on that, and then also differences in channel performance and what you're doing around that in terms of areas of particular focus or investment.

[Jon Moeller, executive]

So from a consumer standpoint, we generally don't see the dynamic that some are describing. And I'm not meaning to discredit their descriptions, but if you look at a couple of dynamics, private label shares as an example, which typically would be increasing during the time of significant consumer pressure, that's not what we obtained. Private label generally, both in North America and Europe, are in line with pre-COVID. And period-to-period, so last quarter to this quarter, are not changing significantly.

The second data point that we look at to assess the answer to your question is back to volume, is unit growth declining. And that's, again, not what we've generally seen. Now certainly, there are some consumers that are, I'm sure, under increased pressure and are probably modifying their behaviors and purchases correspondingly. But in our categories -- and remember, of course, these are less-discretionary categories. These are daily use categories, where performance drives brand choice. We typically have the best performing product in the market, at least that's our objective.

And as a result, we're not seeing any significant consumer-driven impact. I've been in Europe,quite a bit recently. I will be back there tomorrow. Andre was there earlier in the month of June with many of you at the Deutsche Bank conference, but also spend time with our business, and I'm not seeing it there either. So we remain encouraged as we go forward. It's something that we're very cognizant of and watch very closely. But so far, so good.

[Andre Schulten, executive]

And the market growth rates, I think, substantiated the point that Jon made. If you look at the U.S., I think the key point is over the past 1, 3, 6, 12 months, the category volume growth in our categories is consistently 2%. So consumers are not decelerating consumption across our categories. And similarly, if you look at value growth in Europe, it's also very consistent over the same period. So as Jon said, we're watching it, and we don't see it in the data.

[Jon Moeller, executive]

And even if we look at the responsiveness to many of our strong innovation. I mentioned in my remarks, Orab-B iO that's growing -- which is a significant premium to the balance of the market, both within the Power segment and across Power and Manual, and it's growing at double digits. We built 2 share points in the last year. So just an example of responsiveness to strong innovation in these categories where performance drives brand choice.

[Operator]

The next question comes from Robert Ottenstein of Evercore ISI.

[Robert Ottenstein, analyst]

A couple of follow-ups. Could you just talk a little bit about the enterprise markets, what they would have looked like ex Argentina? And then as you look at your guidance, how much of an actual rebound in China are you assuming? How much, if any, rebound in the Middle East issues are you assuming? And is that part of the range? Or is there no rebound at all in the range, if that's clear?

[Andre Schulten, executive]

Look, Robert, enterprise markets, I think in aggregate are performing strongly. For the year, up 6%. Last year, they were up, I think, 10%. So I think very strong continued growth. Latin America, as we said, is growing on the year, 15%. And in the most recent quarter, 8%. Europe focused market is up 8% for the year. Where we see headwinds is in the Middle East, in line with what we have described. So you see our Asia, Middle East, Africa markets impacted by those Middle East headwinds. And again, we expect those to be temporary. The Argentina contribution to the total number is decreasing by almost 1 point quarter-over-quarter. So it was only 30 basis points in the current quarter. Most importantly, we divested the Argentina business. So that effect will not matter anymore in the current year because it will be removed from the organic sales base as we move through the quarter here.

In terms of assumptions, I think that's part of the range, right? I would say we largely assume annualization. The upper end of the range would assume some level of improvement. But I think the main contribution to the midpoint of the range would be a normalization and annualization of those headwinds we're describing, including China, SK-II, the Middle East. And again, Argentina coming out of the base because of the divestiture of the business.

[Jon Moeller, executive]

And Robert, my view of those things, as it's reflected in guidance, generally or indirectly is just as Andre described, which is annualization. I think if things improve either in the Middle East or China, we should have the opportunity to deliver, ceteris paribus, even better results than the midpoint of the guidance range. On the other hand, we're not assuming -- I'm not assuming that they get worse and that can always happen. So I think we're centered on a realistic expectation of outcomes.

[Operator]

The next question comes from Andrea Teixeira of JPMorgan.

[Andrea Teixeira, analyst]

I was hoping if you can talk about a bit of the price elasticity you're seeing in the category. I do understand what, Jon, you just described as being a very low penetration of private label and customers are still driving the preference for your brand. But just curious about, in Laundry specifically, you had some promo and some of the things that you discussed are not necessarily impact price elasticity, but just wondering how you're seeing as we see more pricing coming through. And this -- you're planning embedded in any of these guidance, I understand it's a balanced approach to the organic sales growth at the midpoint of 4%. but Wondering if there is any ways of like mitigating some of the effects in some of these other places, which is natural. And therefore, we can see some pricing both through inflation led and some pricing also led by innovation.

[Andre Schulten, executive]

Andrea, yes, I mean, pricing and mix have been a positive contribution to our results for 19 years. I don't expect this year to be different. And I think it will be pricing for foreign exchange headwinds in some of the enterprise markets, which is in line with what the market generally executes. I also expect innovation-based pricing and trade-up as we have a strong innovation pipeline in the year. From a promotion environment, we see stability at the moment. We have pockets of incremental promotion. We're still operating at about 85% versus pre-COVID levels and we see general stability.

So as I said in the guidance, the construction on the top line, roughly, we see the market have price/mix driven, half volume driven. I don't expect our fiscal year numbers to be different than that, but they will look different, obviously, half 1 versus half 2 because of base period. But the general model is still the same as we executed over the last 19 years.

[Operator]

The next question comes from Filippo Falorni of Citi.

[Filippo Falorni, analyst]

I wanted to ask about the commodity outlook. Andre, you mentioned $300 million in headwind expected in fiscal '25. Can you maybe talk about the components of the headwinds, some of the key commodities, including pulp, resin? And also on the transportation side, given the recent rise in freight, any potential impact there? And then in terms of -- I know some of the commodities you cannot hedge, but like just the level of visibility given your contract rates on the headwind.

[Andre Schulten, executive]

Yes, Filippo. The commodity portfolio is actually, at the moment, relatively stable. Most of that headwind that is in the guidance is pulp at the moment. We continue to see strong demand on some of the grades and limited supply. So that's driving the run-up. The rest of the portfolio is actually stable. It won't be that throughout the year, as you know. I mean these things change quickly. So there's a level of variability here, obviously, and we're forecasting a spot rate as we always do.

The commodity effects, as we think through visibility, look, I mean the flow-through is different by commodity class, but I think we discussed this when we were in the middle of the commodity crisis. It generally takes 3 months to 9 months to flow through the P&L. So I think at the end of quarter 1, we probably have relatively good visibility on most of it through half 1, and then we'll grow step by step. But again, this is one that we forecast on spot. We don't hedge. So the flow through, again, is the key driver of latency in terms of P&L effect.

Exportation, look, generally, energy oil is relatively stable. So overall transportation is flat. Yes, we see some impact from increased transportation on the sea routes, but it is not material in the context of the year at this point.

[Operator]

The next question is from Peter Grom of UBS.

[Peter Grom, analyst]

I wanted to go back to Lauren's question on the consumer, and totally recognize that you may not be seeing some of the indicators that the consumer is not pressure today. But when we think about the 3% to 4% category growth assumptions you're embedding for your outlook, is there any cushion for the 85% of the markets that are currently performing well to potentially slow at all? Totally get the annualization commentary in the Middle East and China, but I just would love to get some perspective on what you expect maybe in North America and Western Europe from here.

[Andre Schulten, executive]

Yes, the 3% to 4% of the global number. Look, deconstructing that by market or by region is increasingly difficult. And we somewhat rely on the total [indiscernible] of regions to play out in the 3% to 4% range. To your question on the 85% of the business slowing, we see is actually what we had expected, right, that those regions slowed down from a market growth in the range of 5% to 8% to this 3% to 4% range because the price/mix component is coming down and the volume component is coming up. And that stabilization is built into our assumption for the year. So we expect most of those regions to play out the same way that we're projecting the global number, which is 3% to 4%, half of it volume, half of it price/mix.

[Operator]

The next question comes from Bonnie Herzog of Goldman Sachs.

[Bonnie Herzog, analyst]

I had a question on your Beauty segment. China has been a drag to your volumes for a while as you mentioned, and we've been hearing about the ongoing challenges in the region. But more recently, we're also hearing about the slowdown in the U.S. Beauty market. So curious if that's consistent with what you're seeing. And then how should we think about the growth potential for your Beauty segment this fiscal year? And is it fair to assume that these challenges could drive a further slowdown from here?

[Andre Schulten, executive]

If you look at the results outside of China and SK-II, I think they give a better indication of the growth potential and trajectory on. The business ex SK-II is growing 6% in quarter 4, 7% in the fiscal year that we just closed. When you go through the segments, and the core brands, if you look at Head & Shoulders, Pantene Herbal Essence, for example, grew high single digits to double digits. Those were the best results in the past 5 years. When you look at our Personal Care business, Old Spice, Secret and Native, double-digit growth. We talked about, Jon talked about Native, now being and reaching $700 million in sales, 10x what we got the brand with.

And our new brands, Mayel and Weigh, we are also growing double digits. So I think we see strength across the portfolio there. North America Hair Care is up 12%. Global Hair Care is up 9%. And the Personal Care business, as I said, is doing very well. I think the core of the piece we are annualizing is really China, both on the Olay business and on the SK-II business. And as we said, our expectation is that we'll annualize we don't yet assume a material acceleration in the fiscal year. So I'll leave it there. But again, I think the core of the business is strong. China is the one piece we'll need to see annualized across the first half.

[Jon Moeller, executive]

And obviously, we play in -- the majority of the spaces that we play in, in Beauty are more foundational versus prestige. And I think where some of the commentary in the marketplace is being directed relative to slowdown is really not in the base segments that we play in, and as Andre said, have continued to see very strong growth in. That's why I wanted to add to the question earlier because I think -- it's somewhat lost in the aggregate numbers, but I think it's important both for recognition of the team, but also a recognition of the potential.

[Operator]

The next question comes from Chris Carey of Wells Fargo Securities.

[Christopher Carey, analyst]

I know we're later in the call, so apologies for another China question, but maybe a bit more focused. Just it has been sluggish for a few years, which I think is why there's been so many questions about the effect of annualizing you're not the only company to see slower results in China. So I wonder if you could just maybe comment on, clearly, there are macro dynamics in the market versus micro parts of your portfolio, which specifically needs some work. SK-II has been well covered at this point.

So perhaps you can speak to some other businesses that are performing in line with your expectations or not, so that we can have a bit more of a portfolio view on why the annualization should deliver the outcomes you're expecting into the back half of the year. So sorry for another question on China, but it felt important.

[Andre Schulten, executive]

Chris, I'll start and Jon will add. Let me start by saying I think the China business, coming from a double-digit growth trajectory through a significant dip, and we don't expect it to go back to double digits, we expect it over time to go to maybe mid-singles. So more in line with what we see in other developed markets. So for sure, we don't expect the return to the growth rates that we saw pre-COVID. Many of the effects, specifically in China, SK-II, I think the run rate is now stable. So we're already seeing the run rate in terms of absolute volume and absolute dollar sales flattening. What's not yet there is the base period in line with those run rates. So unless we see a significant run rate reduction, that gives us confidence that the annualization would take place.

Maybe other points of confidence here, the toughest category to compete in, in China right now is probably Baby Care. Birth rates are down 15% to 25%, depending on how you define the market. And we've been able -- the team has been able to grow sales 6% and grow share in the market. Why? Because the portfolio and the innovation the team designed was very specific to the Chinese consumer, their needs, their preference in terms of superiority, and that's driving results. We've been able to grow the Braun business with strong innovation. So there are pockets of business where we are leading the market, and we need to find our way to that across more categories, which we're working on.

Fabric Care, as I said, is very focused on the profitable part of the portfolio, which allows them to drive innovation, which allows them to drive category growth, and that's really what's playing out across categories. But I think the most mechanical driver is run rates are stable and stabilizing. Therefore, unless we see a further decline in the market, which is entirely possible, but if those run rates hold, that will drive annualization towards the back half of the year.

[Jon Moeller, executive]

And just to round out, the largest business for P&G in China is Hair Care. And we've spent the last year plus, as we came out of COVID, ensuring that we had very strong Hair Care plans. I'm very pleased with the plans that we've put together and the execution of them on Pantene. The same on Head & Shoulders. Really significantly improved proposition, significantly improved packaging, really looking strong. Andre mentioned somewhere in our discussion that we had made the choice to exit the third brand, which was Vidal Sassoon. So that should not be a source of drag going forward. We're still working to be candid on the plans for Rejoice. But the net of all of that is pretty encouraging.

[Operator]

The next question comes from Kevin Grundy of BNP Paribas.

[Kevin Grundy, analyst]

Great. A question for both of you, perhaps, just on some context for investment levels, specifically trade spending and advertising [indiscernible] which are clearly moving higher. Gross margin and expansion there has naturally been supportive. I know it's not lost on you guys, we've seen what your key competitor in Oral Care is doing advertising and marketing there was the highest as a percent of sales in at least a couple of decades. We've seen trade spending move higher there. In their North American segment, advertising and marketing now for Procter has proctors moved up 200 basis points this year, including a big step-up of 300 basis points in the quarter. And we talked earlier in the call about [indiscernible] Fabric Care.

So it's all kind of [indiscernible]. If you could offer some context here for higher investment levels broadly we're seeing in the industry. And then perhaps a push from a proxy perspective is -- are we satisfied with the top line payback that we're seeing? Because spending levels are moving higher and the push would toward sales, understanding some of the idiosyncratic items in the quarter was a little bit soft, and we're kind of guiding for growth similar to what we've seen historically. So thank you for all that. But your context and any color would be appreciated.

[Andre Schulten, executive]

Yes. Let me start, Kevin. Generally, what I'd tell you is the -- we're happy with the payout that we're seeing in the markets where we can read the payout cleanly. And that's really where 95% of the investment is, meaning Europe-focused markets, some of the Europe enterprise markets, Latin America and North America. And I think the top line results support the overall payout of the aggregate of the media spend will obviously go way lower in terms of penetration. And it is probably the strongest push, both Jon and I and Shailesh have as we engage with the businesses to ensure that, that spending truly is productive, truly is driving market growth and sales growth, and helps us to deliver top line and bottom line for the quarter and for the fiscal year. If that's no longer the case, then we will change gears and adjust.

In terms of overall spend, I'm actually pleased to see increase in media spend and market support. That's market constructive. I think it helps the consumer understand the category better. It helps drive penetration, which is still a huge opportunity across multiple categories. So that's very positive. And again, the promotion environment in aggregate remains productive. And as long as those 2 results in what we see in North America, which is sustained volume growth on the category and sustained value growth on the category, I think we're in a good place.

[Jon Moeller, executive]

And it's something I've been pushing, we've been pushing for some period of time. When you have a strategy that's centered on innovation and superiority, and you have, in some cases, relatively low levels of advertising reach, that total equation doesn't make sense. We used to call it, David Taylor used to call it, confidential superiority. So we do -- we're trying to, in an effective way and in the most efficient way we can. And I mentioned this earlier, in this reach, so that more consumers are aware of our products and the benefits that they provide them.

Obviously, that effort at some point,reaches the right level of maturity. But we're on -- still on the incline curve in that regard right now, which I think is entirely the right thing to do. And as I mentioned earlier, it takes some time temporarily for the business to respond. It does not respond overnight, again, because of purchase cycles and commercialization cycles themselves. But as Andre said, take some assurance that you've got a former CFO and the CEO's chair, between the 2 of us, we're not interested in wasting money.

[Operator]

The next question comes from Olivia Tong of Raymond James.

[Olivia Tong Cheang, analyst]

Just a follow-on on promotion. If you could just talk about how much competitors catching up on innovation, driving you to spend more to stay superior versus a response to the tougher macros and even commit yourself more competitive on price. And then more importantly, you've obviously done substantial innovation at the premium end. What are you doing as we think about this evolving macro in your mid-tier products to remind consumers and value proposition there?

[Andre Schulten, executive]

I think our job is to lead market growth via irresistible superiority. And that starts with product package and communication, but it includes value, as you point out. I don't see that equation shifting. The competitive environment in terms of promotion is relatively stable. Our approach to promotion is relatively stable across the regions where we have the highest visibility, which is Europe and North America. So I don't view that equation as being different. And again, I think our our stance on superiority, which we talked about now for almost a year, to reset the level of superiority we expect our businesses to deliver, which moves from -- your job is no longer to just win against the next best competitor in the market, but is to create superiority at a level where consumers are drawn into the category.

So we create new consumption, we create new consumers coming into the category, increasing their usage or trading up. That's really what we are measuring ourselves against, and I think we're making very good progress. And I'm very confident that the innovation pipeline we see for the current year. I'm sure Jon has to add more.

On the mid-tier, absolutely, our job is to be irresistantly superior at every tier we compete in. And that's why the Luvs innovation is a great example, where -- and it's a great example for the strategy at work because if we're not superior in the mid-tier, the consumer tells us and it shows in the results. So the counteraction to innovate and drive superiority is what we do and really independent of the tier. So at any given point in time, we need to make sure that we deliver all 5 vectors, every tier, every pack size, every price point in every channel we compete in.

[Jon Moeller, executive]

And we just assume for a minute, Olivia, that we're wrong in the ongoing discussion that we've had about consumers being under sure, our contention is that, that really hasn't manifested itself as of yet. But just assume that we're wrong or that, that changes going forward. And to your question on innovation, it becomes very important that we're innovating in categories that are going to become -- that are going to see even higher levels of demand, if, in fact, there's any kind of consumer downturn. Andre mentioned Luvs.

Another example, I mean, what happens if there's a consumer downturn? People eat at home more often. They're going out less frequently. Traveling less frequently. And so categories like hand dishwashing, for example, become important. And our levels of innovation in that category, just as an example, are significant between power spray and Dawn and EZ-Squeeze. And Andre mentioned the growth rates that we're seeing in our dish business.

Typically, and this was certainly the case in COVID, which was an extreme condition, but people used more paper products if they're staying home more often. So things like the Sherman and Easy Tear scallop perforation, which is driving significant level to light and 5% growth on the Sherman business last year is another example of innovating, continuing to innovate in categories that are going to potentially be even more relevant in the event of a consumer downturn. And obviously, just in general, that handwash business is more of, if you will, mid-tier business than the auto dish business. So there's no discrimination in terms of our commitment to innovation.

[Operator]

The next question comes from Mark Astrachan of Stifel.

[Mark Astrachan, analyst]

I wanted to ask about SK-II more broadly and just how do you see this part of today's portfolio for P&G. I guess the slower improvement in China than anticipated. But just curious, if you take a look over the last, call it, 4 or 5 years, it does seem like the brand has grown in totality a little bit below what I'd peg is the peer group. So I guess I'm curious why you think that is, how you weave in improving trends in China with the overall expectations for the brand on a go-forward basis?

And I say all that, too, in the context of weakness predating the wastewater release in Japan, what is there? Is there more competition? Are you doing more from an innovation standpoint to broaden the appeal for the brand? Can you move it beyond Prestige skin care? I mean better strokes, again, in the context of how does it fit within the portfolio?

[Andre Schulten, executive]

Yes. Mark, I think your question specifically on China. I would say I don't think our brand portfolio is something that I would be unhappy with. I think the brand portfolio is strong. When we get it right and when the consumer is willing to engage, I think we show strong progress on Baby Care even in adverse market conditions. Jon mentioned the progress we see on Hair Care on Head & Shoulders and on Pantene. I think the parts of the portfolio where we had our doubts, we made the right choices. So we divested Vidal Sassoon, and believe that was the right change in Hair Care. We have trimmed the Fabric Care portfolio to ensure that we can focus on the part of the market where we can create value for the consumer and for the company. So I feel good about the product portfolio. The challenge, I think, in China, if I may, part of that is the channel shift, because our footprint was disproportionately developed over 30 years to be a brick-and-mortar footprint. And the digital acceleration, obviously, with COVID has shifted that into online, to a large degree, faster than anywhere else in the world. And within that online business, particularly to Douyin, heavily care well-led and heavily promotion-led.

And we're taking our time to transition our portfolio ensure we end up with the right balance between serving consumers and brick-and-mortar and creating value there, and supporting our brands with the right messaging, equity, price stability and innovation in the online channels. So that, for me, that is the transition we're still in. But I think that transition is going well, and it will show that, that portfolio that we operate, I think can sustain mid-single growth and value creation in China.

[Operator]

The next question comes from Kaumil Gajrawala of Jefferies.

[Kaumil Gajrawala, analyst]

I know as we get deep into the call, it gets quite granular. But if we could bring it back a little bit on something I think might have been missed as we chat global versus specific, which is maybe just thinking about North America specifically in the first half specifically, what is the direction of travel that you're assuming for the consumer? And when we think about annualization of pricing and such, should we be modeling a drag for North America in the first half that then reverses? Or is it meant to be closer to that balance for the full year of 50-50?

[Andre Schulten, executive]

Kaumil, it's very hard to predict, obviously, by quarter or half 1 versus half 2. I think your ingoing hunch is what I would share, as I think the price mix neutralization will continue through half 1. And the volume component, I think, is relatively stable. As I said, the market is continuing to grow at 2%. Price/mix has come down to about 1.5 points, and I think that's what I would expect from a market growth perspective for the front half. Our objective is, as always, to be within that range. So that's the -- that's my view. But again, that facility can be driven from the innovation cycles, it can be driven by its promotion cycle, by the shift. So there's a lot of variability within that. But we extrapolating from what we see in the market today, I think your hunch is right.

[Operator]

Our last question comes from Robert Moskow of TD Cowen.

[Robert Moskow, analyst]

Thanks for the question. I guess the only thing not covered on this call is the Olympics. I think I've seen about 100 ads for Procter & Gamble products, some of them great. And -- but I haven't noticed an increase in merchandising activity in our Nielsen tracking data in the U.S. around it. And I was just wondering, do you view the Olympic-ed sponsorship more as a a brand-building exercise for consumers? Or have you been getting and do you expect a lot of merchandising activity around it in the U.S. that we'll be able to see in our tracking?

[Jon Moeller, executive]

So we definitely view support of the Olympics as a brand-building opportunity, as a consumer outreach opportunity, and frankly, as a customer outreach opportunity. Where you'll see the activation in store is typically closer to the region of the event. So I wouldn't expect it to have a large activation in North America. I'm headed to Paris overnight tonight, I do expect to see significant activation in Europe. I'll be meeting with many of our retail partner CEOs at the games. We host them there and spend up to a couple of days together, building plans going forward, which would include both during event and post-event activation of the assets that we've put in place for the Olympics. Just like our earlier discussion on return, this is something that we look at annually. But thus far, it's proving to be an attractive vehicle. When we focus the messaging on brands and not so much when we focus the messaging on company, simply because nobody buys P&G., they buy Tide and Ariel and Pampers and Pantene and Head & Shoulders, et cetera. So all good. And I'm looking forward to being there with our our customers and our European team over the balance of the week.

Before we let -- not let. Before we officially end the call, I just wanted to provide, again, some longer-term perspective. And I'm free -- I'm happy to discuss it at any point during the balance of the day. We have been through -- the collective we, including you, have been through incredible challenges the last number of years, whether that's COVID, whether that's inflation, whether that's war, political divisiveness, regulation, you name it. And one of the things that I think is important to reflect on the quarter is important, and we've reflected a lot on that today, which is appropriate.

But it's also important to step back and say, how is this strategy working, not just for the quarter, but for longer periods of time. As I mentioned in my remarks, pre-COVID, during COVID, post COVID inflation and pricing, and then the big geopolitical struggles that we're all engaged in currently. Over that 6-year period, the team has added $17 billion in sales, which puts us at the 88th percentile of the S&P 500. And at the same time, they've added $5 billion in profit, which puts us at the 93rd percentile of the S&P 500. They've built more than 200 -- I haven't looked today, but before today, $200 billion in market cap in that 6-year period, which is more value than most of our competitors, I think all but one, have created over their entire history as a company.

So this is something that is working extraordinarily well. And I think that's important to reflect on as we move forward. We're in a stronger place in terms of executing against that strategy than we've ever been. We've talked about investment and innovation. We've talked about raising the bar on superiority. We've talked about the progress that we're making on productivity. We've talked about the support levels that our business has. We've talked about resuming volume growth in most of the major markets, and doing that while building margin and simultaneously increasing our investment and these kinds of things.

And I don't see any reason in a -- if we do find ourselves in a more difficult environment from a consumer economic standpoint, one of the things we talk about internally is would we change our approach if we either had confidence that things were going to get remarkably better from a consumer standpoint or remarkably worse from a consumer standpoint. What we do not want to be in daily use categories where performance drives brand choice, I think that's exactly where we want to be in either of those scenarios. We not want to be able to delight consumers and customers with superior products. I can't imagine how that would be a good idea.

Would we not want to have the productivity that enables us to fund those investments and accelerate innovation. Would we not want to have a more agile, accountable organizational structure. So all these things, to me, under any scenario, both because of the results that they've delivered and because of the potential they hold to delight consumers, customers, employees, society and shareowners, are the right path forward, which is why we talk about continuing to double down I've said many times, this will not be a straight line. There are all sorts of things that affect the trend line in the business. But over periods of time, this is, by far, if we just look at our history as a company, it has produced significantly positive results, and I expect that to continue.

So I just wanted to share that as we close out the call. Again, that is not trying to minimize some of the challenges that we've been discussing on the quarter and in the first half of next year. Those are real. They're important to talk about. But I don't think they're controlling as we think about the mid and longer term. Have a great day, and look forward to catching up with you soon.

[Andre Schulten, executive]

Thanks, everyone.

[Operator]

. That concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.