Will PG's Focus Markets Offset Weakness in Baby Care and China?

The Procter & Gamble Company PG continues to prioritize on expanding across the international markets, as a core pillar of its growth strategy. This reflects the company’s balanced approach to capturing opportunities across both developed and emerging markets. PG’s Focus Markets represent its largest and most profitable geographies and are central to its integrated growth strategy. These markets collectively generate approximately 80% of PG’s total sales and roughly 90% of its after-tax profit, underscoring its outsized contribution to overall performance.

In first-quarter fiscal 2026, PG’s Focus Markets rose more than 1%.  Organic sales in North America were up 1%. European Focus Markets organic sales were flat year-over-year with robust growth in France and Spain, offset by soft results in Germany and Italy. Greater China organic sales grew 5%, another quarter of sequential improvement. Consumption in PG’s categories decelerated throughout the quarter, with unit volumes almost flat for both its markets and brands.

Although Procter & Gamble is making progress in China, it continues to face negative market growth, reflecting a challenging operating environment. Weak consumer sentiment, intensified competition and a shift toward value-oriented purchasing weighed on category growth, which may limit near-term expansion. While performance across most categories is strong, the company is witnessing some softness in Baby Care.  It recorded a 1% year-over-year increase in the Baby segment, while organic sales in Baby Care remained flat.

Nevertheless, the company remains focused on translating superior consumer insights into highly relevant innovation that closely aligns with evolving consumer needs in its Baby Care business, reinforcing its commitment to sustaining growth and strengthening brand relevance in the category. Management cited that it has a robust bundle of innovations across the U.S. Baby Care business this fall. This consists of improvements on Pampers Easy Ups, Swaddlers, Cruisers and the first phase of restaging to the company’s mid-tier Pampers Baby Dryline.

At the core, Procter & Gamble is focused on expansion in the Focus Markets, which centers around prioritizing high-growth regions, tailoring products to local consumer needs, strengthening distribution and e-commerce reach, and reinvesting productivity savings into innovation and brand building to drive balanced growth across developed and emerging markets. This is expected to support growth and help offset softness in slower-performing regions.

PG’s Competition

Colgate-Palmolive Company CL and The Clorox Company CLX are competing with PG.

Colgate’s strategy is centered around strengthening leadership in its core categories through continuous innovation, while simultaneously pursuing growth in adjacent categories and expanding into new markets and channels to drive sustainable, long-term growth. CL’s premiumization efforts focus on offering top-quality, advanced products that deliver better performance. This includes innovations like high-end oral care solutions, specialized toothpastes, electric toothbrushes and premium personal and home care products. Colgate’s balanced strategy of driving premium innovation while sharpening value offerings positions it well to navigate near-term challenges and deliver growth.

Clorox’s expansion into new markets is a key pillar of its growth strategy, aimed at extending its category leadership beyond the US. The company is prioritizing select international markets and faster-growing channels where its trusted brands and health-and-wellness positioning resonate strongly with consumers. CLX focuses on delivering greater value to consumers through ongoing innovation, enhanced product performance and smart pricing. This helps Clorox set its brands apart from private-label competitors and support long-term growth.

PG’s Price Performance, Valuation and Estimates

Procter & Gamble’s shares have lost 9.2% in the past six months compared with the industry’s 10.8% drop.

From a valuation standpoint, PG trades at a forward price-to-earnings ratio of 20.16X compared with the industry’s average of 18.19X.

The Zacks Consensus Estimate for PG’s fiscal 2026 and fiscal 2027 EPS reflects year-over-year growth of 2.3% and 5.4%, respectively. The company’s EPS estimate for fiscal 2026 and fiscal 2027 has moved south in the past 30 days.

Procter & Gamble carries a Zacks Rank #3 (Hold). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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