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Yahoo Finance’s Brian Sozzi speaks with Procter & Gamble CFO Jon Moeller about about the company's most recent quarter and outlook.
BRIAN SOZZI: And on this inauguration day, we're also watching shares of P&G. Quarterly earnings and sales beat estimates this morning. The tie maker also lifted its full year sales and profit outlook. So the report went a long way to shake the confidence of consumer staple stock bears on Wall Street. Here's what P&G vice chairman and CFO Jon Moeller told me in a chat earlier this morning.
JON MOELLER: Well, basically, you know, we're building on strong momentum that we've built over the last number of years. And that's continuing through the COVID environment. So if you look at calendar year '19 as an example, pre-COVID, we grew topline 6%, we grew core earnings per share of 15%, 102% free cash flow productivity, all based on a strong portfolio of brands, a set of strategies that we believe in, in an organization that's done a tremendous job of executing against those strategies.
And that enabled us to sustain momentum during the COVID period and, in many cases, build it. So, as you said, a strong quarter 8%, topline 15%, core earnings per share growth 18% on a constant currency basis, and 113% free cash flow productivity. As or more importantly, we feel we're very well-positioned to continue this momentum, even in what is hopefully soon a post-COVID environment.
BRIAN SOZZI: Yeah, let's talk about the post-COVID environment, Jon, because you talk to a lot of folks on Wall Street. And the thinking is that once the vaccination, once more people start to get vaccinated in the US and around the world, a lot of these consumer staple companies, their next 12 months might look a lot different than the past 12 months. But you're seeing these results are sustainable?
JON MOELLER: Yeah, and it's due to a couple of things. One, we're looking forward to serving what we believe will be a forever altered consumer need for products that help them with health, hygiene, and a clean home. There are habits that are being formed during this unfortunately long COVID period, which we believe will continue, to some degree, post-COVID. And then there are a number of categories, geographies, our cost structure that's been hit hard by COVID.
So it hasn't led to increased demand in every category. It's depressed demand, for example, in our grooming business and our deodorant business and part of our skincare business. Markets have grown during COVID in the United States, but they've declined significantly in parts of the developing world, with 13%, 15%, and 20% GDP declines.
And we've had whole channels of distribution that have been closed as a result of COVID-- the travel retail channel, the electoral channel in Europe, dentist offices, the away from home market with low occupancy in restaurants and hotels, which we serve. And, as I said from a cost standpoint, there's been some benefit from increased throughput, as we've stepped up to serve heightened consumer needs.
But it's been difficult sourcing the amount of material that's required to meet that demand, the cost of transportation, importantly, very importantly, the cost of ensuring a safe environment for employees. So, as COVID, as and when we get to a post-COVID environment, certainly some of the headwinds, or certainly some of the tailwinds, will dissipate. But some severe headwinds will also hopefully dissipate. And we're left again with the strength of our brands and strategy and the capability of our organization, which we feel very good about.
BRIAN SOZZI: You wear a lot of hats, Jon, at P&G. You're the CFO. You are also the COO, and you see a lot of different parts of the business because of those positions. COVID-19 costs, do those-- is this just the new way of doing business, or do you expect a lot of the cost that you have had to incur the past year of the pandemic, do those go away?
JON MOELLER: Some become a cost of doing business, but others will go away. I expect that some of the premium that's been placed on transportation services, both land and ocean, around the world will normalize over time. And there's also savings that we've been able to identify as a part of our experience with COVID, so today's necessity creating the productivity inventions of tomorrow.
I expect as we go forward, not necessarily quarter on quarter, but certainly, year on year, that we're going to be in an environment that allows us to continue to grow our topline and to continue to modestly grow margins, as those different cost buckets settle out.
BRIAN SOZZI: Hey, Jon, I'm not sure a lot of people know this, but today is actually the first-- the anniversary-- the one-year anniversary of when the first COVID-19 case was confirmed in the US, in a US laboratory. Looking back, how do you think the pandemic one year in here, at least officially based on today's anniversary, how do you think that's changed P&G?
JON MOELLER: I think it's made us stronger, more resilient, more agile, less assumptive, a stronger company overall.
BRIAN SOZZI: And today, I would be remiss not to mention today is, in fact, Inauguration Day. How do you think-- how do you think turning the temperature down in the US, in the US political scene, how does that change P&G's outlook for the next couple of years?
JON MOELLER: You know, first and foremost, first, second, and third, we're focusing on meeting consumer needs in a preferenced way, in a way that delights consumers and improves their everyday life. And when we do that and well, we're much less concerned about who or what party is in office or what the political environment is. And so, that's our focus. And again, we have confidence that doing that well will serve consumers, we'll serve our employees and partners, and we'll serve shareholders.
BRIAN SOZZI: Do you think this is a consumer confidence type boosting environment? Clearly, that would be good for your business.
JON MOELLER: Consumer confidence is very important. And to the extent that consumer confidence increases, that's a clear positive.
BRIAN SOZZI: Another positive, too, before I let you go, Jon, you're also boosting your stock buyback plan for this fiscal year to $10 billion. We're in a range of, what, $7 to $9 billion. What gives you confidence to pull the trigger on that?
JON MOELLER: The strength of the entire income statement from sales to earnings and then the cash flowthrough that's occurring-- I mentioned 113% free cash flow productivity in the quarter. So we are raising our share repurchase commitment to up to $10 billion combined, with $8 billion in dividends. That'll be an $18 billion return to shareholders this fiscal year, which is about 125% of earnings. We feel great about that.