Brand Investments Should Buoy Wide-Moat Procter & Gamble's Competitive Edge Over the Long Term

Tepid sales characterized the end of fiscal 2024 for wide-moat Procter & Gamble, as the firm posted low-single-digit organic sales growth in each of the last two quarters, lagging the mid- to high-single-digit marks that have more recently characterized the business. This was primarily a byproduct of more muted price increased (low-single-digits, down from 7% in the first quarter). However, we don’t believe this suggests cracks in the firm’s competitive prowess. After rightsizing its category and geographic reach by shedding around 100 brands beginning about 10 years ago, P&G also embraced a more holistic approach to brand investing (consisting of how a product performs, the packaging, brand messaging, execution in stores and online, and the value a product offers its retail partners and consumers). And we think P&G’s strategic aims—investing in product innovation and marketing to support its portfolio of daily use, essential offerings—should ensure its brands maintain clout with retailers and consumers, supporting its wide moat over the long term.