使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good morning and welcome to Procter & Gamble's quarter-end conference call.
Today's 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, P&G wants to make you aware that, during the call, the Company will make a number of references to non-GAAP and other financial measures.
Management believes that these measures provide investors valuable information on the underlying growth trends of the business.
Organic refers to reported results, excluding the impact of acquisition and divestitures, and foreign exchange, where applicable.
Adjusted free cash flow represents operating cash flow less capital expenditures, and adjusted for after-tax impacts of major divestitures.
Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings, excluding divestiture gains.
Any measure described as core refers to the equivalent GAAP measure adjusted for certain items.
P&G has posted on its website, www.PG.com a full reconciliation of non-GAAP and other financial measures.
Now, I will turn call over to P&G 's Chief Financial Officer, Jon Moeller.
- CFO
Thanks, and good morning, everyone.
I'm joined this morning by AG Lafley and Teri List-Stoll.
I will start our discussion with a review of our fourth-quarter and fiscal 2013 results.
AG will discuss our key strategies and focus areas going forward, and I will then wrap up with guidance for fiscal 2014.
Fourth-quarter organic sales results were at the high-end of our forecast range, with core earnings per share slightly ahead of plan.
Organic sales were up 4%.
Importantly, this sales growth was underpinned by strong organic volume growth of 5%, and was achieved during a period in which underlying market growth rates were decelerating.
Pricing was neutral toward organic sales growth, and mix reduced sales growth by 1 point.
Foreign-exchange lowered sales growth by 2 points, resulting in all-in sales growth of 2%.
P&G global value share was around 20% for the March to May period, roughly in line with the prior year.
Market share improved sequentially throughout the quarter.
In May, the last period for which we currently have global share data, volume share increased 0.4 points versus prior year, with growth in all regions, except Central and Eastern Europe, Middle East and Africa.
On a mix-adjusted basis, May global value share was up 0.2 points.
In the US, while we have data through June, mix adjusted value share was up 0.3 points.
We held or grew global market share in businesses representing nearly 60% of sales in the March to May period.
In the US, we held or grew value share in businesses representing over 70% of sales.
Moving to the bottom line, core earnings per share were $0.79, $0.02 above the high end of our guidance range due to cost savings and $0.01 help in tax.
Core earnings per share was down 4% versus the prior year, as the benefits from top of range organic sales growth and strong cost savings were more than offset by mix, higher marketing spending, and a $0.06 per share, or roughly 7 percentage point earnings per share growth headwind from foreign exchange rates.
All-in, earnings per share was $0.64.
This includes a $0.02 non-core impact from restructuring costs, a $0.04 non-core impact from legal items in Europe, and a $0.10 non-core non-cash impact of the further impairment of intangible assets related to the Brown business, reflecting the 20% devaluation of the currency in Japan, where Brown earns the majority of its profits.
Core operating profit margin declined 130 basis points, as core gross margin was down 90 basis points, and core SG&A costs increased 40 basis points.
Operating margin was about 50 basis points less than we had originally anticipated, due largely to foreign exchange.
The core effective tax rate for the quarter was 22.3%, in line with last year.
We generated $2.8 billion in free cash flow in the quarter, repurchased $1 billion in stock and returned $1.7 billion of cash to shareholders in dividends.
Turning to the fiscal year, we met our commitments on each key measure.
Organic sales growth was 3%, in the midpoint of our initial guidance range of 2% to 4%.
We grew core earnings per share 5%, above our initial minus 1% to plus 4% guidance range, we absorbed the unexpected impact of the Venezuelan Bolivar devaluation and significant overall dollar strengthening, while increasing marketing investments as the year progressed.
We continued to make good progress in our productivity plan.
Through June, we reduced non-manufacturing enrollment by 7,000 roles.
This is 1,300 role reductions ahead of our initial enrollment reduction target for June 30, 2013.
We delivered over $1.2 billion in cost of goods sold savings, and improved manufacturing productivity by 7%, versus a target of 5%.
Our progress on working capital and capital spending productivity enabled us to deliver 98% adjusted free cash flow productivity, ahead of our 90% target.
We returned $12.5 billion to shareholders, 110% of net earnings, through a combination of $6.5 billion in dividends and $6 billion in share repurchase.
In April, we raise the dividend by 7%.
We are beginning to restore growth in the core US market that represents over one-third of P&G sales, and an even greater percentage of profit.
US work core organic sales grew at 7% on volume growth of 5%.
We maintain good developing market momentum.
Organic sales growth in our top 10 developing markets was up 8% in the fiscal year.
We grew profit, meaningfully ahead of sales in developing markets, while increasing investments in these markets year-on-year.
We stabilized global market share and ended the year with modest market share growth.
We are moving in the right direction, but there's more work to do.
To talk us through that, I will turn the call over to AG.
- Chairman, President & CEO
Thanks, Jon.
We have spent a lot of time doing a deep dive over the past two months, making sure we fully understand our reality, ensuring we see things as they are, not as we want them to be.
We've gotten grounded in the realities of our consumers and markets.
I have personally dialogued with customers, partners and suppliers, we've listened to a range of outside advisors, critics, as well as fans.
We've taken a hard look at business strategies, reviewed budgets and business plans, and we've dug deeply into innovation programs and productivity initiatives.
We know we are not winning like we know we can, and we are committed to make the changes we know we need to make to improve P&G's performance significantly.
First, we will establish value creation, first and foremost for consumers, but also importantly for share owners as our clear priority.
Operating TSR will be our primary business performance measure.
Operating TSR is an integrated measure of value creation at the business unit level, requiring sales growth, progress on gross and operating margins, and strong cash flow productivity.
We focused on business unit value creation because we are determined to have more P&G business units deliver more operating TSR, more consistently.
We will be guided by disciplined strategies and operating plans.
We will focus strategically on core businesses, our leading most profitable categories and brands, and leading most profitable markets, channels and customers.
Delivering consistently strong results in our core business is the largest contributor to shareholder value creation, and an important contributor to growth, and an important enabler of investments in developing markets and innovation.
Many of our strongest business units and total company positions are in the US.
We need to ensure P&G's home market stays strong and growing.
We will focus developing market investments on the categories and countries with the largest size of prize, and the highest likelihood of winning.
Developing markets, driven by demographic and household income growth, will continue to be a significant growth driver for the Company.
Will continue to focus the Company's portfolio, allocating resources to businesses where we can create disproportionate value, and continuing to exit those where we can not.
Second, we will strengthen and accelerate productivity and cost savings.
Productivity and innovation are the primary drivers of growth and value creation.
Productivity is particularly important in a slower growth world, and in an environment of increased volatility and foreign exchange, commodity, and interest rate markets.
And the more productivity means more opportunities to invest in core business growth in the developing market, expansion, and in innovation.
Here's what we are doing specifically with P&G's productivity initiatives.
We will deliver the productivity program we promised, on or ahead of schedule, but that is not an endpoint for productivity improvement.
It's just the next milestone along our productivity journey.
We know we can do more.
We have already mobilized to address the next round of productivity initiatives.
We are working these significant opportunities in parallel, not sequentially, that cover a full range of cost and cash opportunities, our projects are being led by business unit and function leaders, we are being worked on short cycles, some are yielding savings as we speak, others will take years to fully implement.
We have opportunities to further localize supply chains in developing markets, reducing costs and improving customer service.
In developed markets, we are taking a blank sheet of paper look at supply chains, designing from the consumer and customer back.
We are studying options that would reduce the number of facilities, build skill across categories and reduce cost and inventory, all while improving customer responsiveness and service.
This will require investment, but will generate very attractive returns.
It's a huge opportunity.
We will redesign and strengthen our go-to-market operations in North America and Europe to be more effective and efficient.
In Europe, we will look to scale operations across larger and fewer country clusters.
We will evaluate organization design options to improve effectiveness and efficiency in developing markets.
We will further reduce the size of support staff, and move from fully-dedicated functional support organizations to a more productive hybrid of dedicated and floatable work resources and shared services.
We will improve marketing ROI, driven by an optimized mix of advertising media, greater clarity of communication and messaging, and greater efficiency in non-advertising marketing spending.
The key point to understand today is that we are committed to making productivity a core strength for P&G.
Like branding, or innovation, and with innovation, a second big driver of operating TSR and value creation.
It has to, for P&G to deliver leading value creation and growth.
Productivity will become systemic, not episodic, we will continuously improve our effectiveness and efficiency, we will measure productivity, we will recognize it, and we will reward it.
Third, we will improve our operating discipline.
We simply have to execute better, more consistently and more reliably, every day, everywhere, to win with consumers and win with customers.
Execution is the only strategy they ever see.
Winning with consumers and winning with customers, day-in and day-out is what it takes to generate leadership returns in our industry, and that's what we've committed to do.
Fourth, we will reallocate some of our savings to make strategic investments in a very focused way, in innovation and go-to-market capabilities.
These are two of the Company's core strengths, and two important sources of competitive advantage.
They are critical to winning the first and second moments of truth with consumers.
We will build in past year, but we will be more focused.
We will commercialize brand and product innovations with excellence.
We will prioritize productivity initiatives, significantly simplifying and streamlining how we work together, and we will bring a sense of urgency to realizing hard savings.
We will focus on best-in-class execution, and we'll continue to invest selectively, where needed, to win.
I am confident that P&G has what it takes to win with consumers, with customers, and for all of our shareholders.
We have a strong brand portfolio, with 25 category-leading $1 billion brands and 15 more between $0.5 billion and $1 billion in annual sales.
We have leading brand equities in most of our categories, we have consumer preferred products in the majority of our brand product lines, we have a well-balanced geographic portfolio, we have the leading CPG business in the US, the largest and fastest growing in the developed market, and we have the leading household and personal care business in developing markets.
Both are significant sources of value creation opportunity.
We have an innovation portfolio and pipeline that will only get stronger, we have an exciting portfolio of productivity initiatives.
We are working hard.
We have outstanding people, the productivity and organization design changes we are making are freeing up P&Gers to fully leverage their creativity and initiative, their skills, and capabilities.
They are passionate about the consumers they serve and about their businesses.
They're committed to win, they are our most important asset, a critical source of strength and ultimately competitive advantage for this Company.
We are taking a hard look at what we need to do, how we need to change to perform better.
More business units have to deliver more consistently, we are committed to do what it takes to get P&G back to balance, consistency, reliability, and sustainability in the creation of value for consumers and customers, and value for shareholders and employees.
It takes time to work out of the tough patch, we take encouragement from the progress we've made in the year disclosed, but we are focused on the future, and we are determined to deliver industry-leading value creation.
- CFO
Thanks, AG.
As we said we would at the Deutsche Bank conference in June, AG, Teri, John and I have spent some time reviewing our guidance framework.
We talked to shareholders and analysts as we've done this work, and we've looked at a number of benchmarking studies.
Part of feedback we have received supports the decision we've made to focus our guidance on the fiscal year, which we will update quarterly.
This approach is the norm in our industry.
We believe it provides a better match between our guidance timeframe, the long-term view we take while managing the business, and the investment time horizon of many of our shareholders.
We've also reviewed long-term guidance targets.
We continue to believe that the right organic sales growth target is one that is modestly above the rate of market growth.
At current market growth rates, we see high-single digit bottom line growth as the right objective.
We believe these targets will allow the Company to strike the right balance between long-term investments and growth, flexibility to respond to macro competitive challenges, and delivery of consistent, dependable results, and our value creation goals.
With that, let me move to guidance for the fiscal year.
Fiscal 2014 presents several challenges and opportunities.
Headwinds include weaker underlying market growth, a much stronger dollar, higher commodity costs, and a highly competitive operating environment.
Opportunities include positive market share momentum, a number of promising innovations, and savings from productivity improvements.
We are currently forecasting organic sales growth of 3% to 4%, which is better than last year at 3%, and compares to expected market growth rates of about 3% to 4%.
Foreign exchange is expected to be a sales growth headwind of about 2 points, which leads to all-in sales growth in the range of 1% to 2% for fiscal 2014.
Moving to the bottom line, our current forecast is for core earnings-per-share growth of 5% to 7%.
Equal to prior-year growth at the low-end of the range, and within our long-term annual growth target range at the high end.
This core earnings-per-share guidance includes a 6-point impact from foreign exchange.
We expect the effective tax rate on core earnings to be in line with prior-year levels.
Our plans include another year of strong productivity improvement.
We have line of sight to $1.4 billion in cost of goods sold savings in fiscal 2014, including manufacturing productivity improvements of around 6%.
As I said earlier, we exceeded our overhead reduction targets by 1,300 roles as of the end of June, giving us a nice head start on the 2% to 4% reduction we were planning for fiscal 2014.
We will deliver this and accelerate fiscal '15 reductions into fiscal '14.
We expect marketing spending to increase in absolute dollars, but decrease modestly as a percentage of sales, as we continue to drive higher ROI.
On an all-in GAAP adjusted basis, we expect earnings per share to grow approximately 7% to 9%.
This range reflects somewhat lower non-core restructuring costs in fiscal year 2014 versus the prior year.
We continue to operate in a volatile environment, with uncertainty in the foreign exchange and commodity markets, decelerating market growth rates, and a rapidly developing policy environment.
Our guidance is based on mid-July foreign exchange spot rates, further strengthening of the dollar, or significant devaluations, for example in Venezuela, are not built into our forecast.
As we described last quarter, one particular risk not included in our all-in earnings guidance is the potential impact from revaluation of Venezuela Bolivars, earmarked for foreign currency transactions through the new Sicad auction rate market.
At this time, there's no official information available on details or planned frequency of the new auction process, or the underlying rates.
So far, we have measured all of our Venezuela exposures at the official exchange rate of 6.3 Bolivars to the US dollar.
If it becomes clear that the auction rate market forms, and it will operate on a liquid and transparent manner at a different rate, we may need to adjust our balance sheet, which will result in additional non-core impacted earnings.
We will keep you updated on this as we learn more.
Major changes in market growth rates or significantly adverse policy changes are also not assumed within our guidance range.
Absent these, or other unanticipated events, we believe our core earnings-per-share guidance range is realistic and balanced.
It reflects the headwinds we are facing, the investments we will be making, and the strong cost savings progress we are committed to deliver.
As you think about earnings progress throughout the year, there are several headwinds that will impact first-half earnings growth that will dissipate or disappear in the second half.
For example, foreign exchange will be a significant headwind in the first half, but should moderate in the second half.
We will continue to have relatively high spending and manufacturing startup costs, but this will largely annualize in the second half of fiscal 2014.
We will annualize the operating impacts of the Venezuela Bolivar evaluation in the second half.
Stepped up marketing support levels will also annualize, and productivity savings will build throughout the year.
Last, the first-half comparison includes the one-time gain from the Western European bleach business in the base period.
With all of these factors considered, core earnings-per-share growth will likely be down modestly in Q1, with slight improvement in Q2, second-half earnings will be much stronger.
We expect to deliver another year of about 90% free cash flow productivity, our planned assumed capital spending in the range of 4% to 5% of sales, and share repurchase of the range of $5 billion to $7 billion, continuing to deliver on our commitment of cash return to shareholders.
In closing, our primary objective for fiscal 2014 is to continue to build on the momentum we have created, making this year another stepping stone back to our long-term growth objectives.
Our plans are even more focused, and even more balanced.
We will make choice investments in our core business, most promising developing markets, and biggest innovation opportunities.
And we will aggressively drive productivity and cost savings.
Above all, we will remain focused on value creation for consumers, for customers, and our shareholders.
That concludes our prepared remarks.
As a reminder, business segment information is provided in our press release, and will be available on slides, which will be posted on our website, www.PG.com following the call.
AG, Teri, and I would now be happy to take your questions.
Operator
(Operator Instructions)
Your first question comes from the line of John Faucher with JPMorgan.
- Analyst
Welcome back, A.G., good to have you back.
Quick question for you, historically have talked about revenue growth, 100 basis points I think ahead of the market.
So, if you look at your organic sales growth guidance this year, it's more an in-line number.
Then when you factor in your dropping a decent amount of productivity to the bottom line, can you talk about maybe why you are not spending more to maybe get a little bit more market share, given the growth of the category?
What is driving the decision in terms of dropping more to the bottom line, versus potentially spending it back?
Thanks.
- CFO
John, we will continue, as we have good opportunities to drive return and create value, to invest behind innovation, as A.G. mentioned, behind go-to-market capability and advertising where we can generate return.
As I said many times before, cost savings is not the objective, value creation is the objective, and we will not follow cost savings out the window at the expense of capability and opportunity, of which we have many.
- Chairman, President & CEO
John, two quick points.
The past five years, two, three, three, three, three.
The most recent quarter, four.
So if you're going to see things as they are, we've got to demonstrate we can grow faster, point number one.
We are prepared to invest to grow faster and with clearer strategies, we will make investments or the size of the prize is attractive, and where we think we have the plan to win.
Second point, this is our external commitment, we have internal goals.
Operator
Your next question comes from the line of Bill Schmitz with Deutsche Bank.
- Analyst
Welcome back, A.G. You've talked about this deep dive that you did.
Can you talk about what you think P&G that was doing wrong during that period, and maybe what you are going to stop doing?
And maybe empirically how you're going to define success going forward, and let me try to put some numbers about it?
- Chairman, President & CEO
Okay I would like to take a couple minutes here to step back, because this is an opportunity to talk about strategy I think at the Company level and at the business unit level.
The quick answer to your second question or second part of your question, Bill, is the value creation.
The first place we've got to create value is for more consumers, more consistently, with our brands and product offerings, and then the second place we have to do it is for the Company and for shareholders and that's a balanced mix of next sales growth, gross and operating margin growth, and cash productivity.
If I may on the strategy, the business unit level, the business unit level, we want to be more choiceful, clearer, we want to be more focused, and we want to be really clear about our priorities, and we want to be very specific about what is winning for the business unit with consumers to create value.
We want to be very specific and prioritize where we're going to play.
We're going to be much more specific about our business model, how we're going to win, and we're going to get really clear on our core strengths, not just how we leverage the core strengths that the Company has but what very specific and particular core strengths we need to win in that industry, with that market.
So that's really the focus of business unit level.
Get more focused, get clearer, set our priorities, and then operate with discipline, and execute with excellence.
At the Company level, the key word is balance.
And you follow this Company, many of you followed this company and this industry for a long time, and when we have a pretty good decade, three things happen.
We grow the value of our core businesses, whatever our core is at that time, we find at least one major new business that we can turn into core, maybe diapers in the 1960s, Tissue and Family Care in the 1970s, Family Care in the 1980s, Hair Care in the 1990s, arguably we got Home and Oral Care and Family Care back into the core fold, the team did over the last decade.
We made some progress creating cores in Skin and Prestige Beauty, and we bought a shaving business, which is core.
So that's the second leg of the stool, the first leg of the stool is you grow the value of your existing core, the second leg of the stool is you find some new core, and the third leg the stool have been moving in the new space.
Generally we talk about geography, but it's also included channels.
And if you really look at the history of the Company, you know we found a new geography, we found and we also found a challenge.
But we need to do all three, we need to grow from the core, we need to accelerate growth into faster growing, higher margin, more structurally attractive, that means less capital-intensive, less competitively concentrated industries, and we need to extend into emerging markets.
And we are just trying to get that balance back, and as I said in my prepared remarks, generally, winning in the core drives a surprising -- the existing core, drives a surprising amount of the value creation and actually it's a surprising amount of the growth each decade, and here's the key.
It is what enables.
It brings us the capabilities, it brings us the cash, it brings us the human resources, to extend into new industries and categories that can be core, and to extend into new geographies in channels.
So we're just working hard to get the balance right.
And when you got an $80 billion-plus company that's in 15 to 20 different businesses, depending on how you count them, and the 100-plus geography balance is really important.
The other thing we're doing we are taking a hard look at our core strength.
again, as I said in my prepared remarks, we've got to turn productivity into just as strong a strength as innovation, because those are the two biggest drivers of value creation in the P&G business models.
We have to turn operating with discipline and executing with excellence into core strength, just as we turn choiceful sharpened strategies into our core strength.
We still have to have a deep understanding of consumers, we still have to be able to create brands and build them, forever, if we can.
We still had to be the innovation leader in the industries and categories we choose to compete in, and we still have to have our go-to-market capabilities and grow them, and we try to create as we go along, some scale.
So that's really where we focused.
We focused on balancing, getting crystal-clear about what is winning, balancing where we're playing, and taking a hard look at the core strengths.
So again we have balanced, a balanced set of core strengths to go forward.
We are locked on it.
I think at the Company level, all that's left to do is get the expression to the fewest possible words, which is a burden that Jon and I will predominantly carry in the next couple of days, and at the business unit level, as you might imagine, we are just grinding our way through one business at a time.
We've been through them all once, we have been through their operating plans and budgets for the next year, which is another shot at Adam, and now we are doubling down and working real hard where we think we have the most opportunity, either the most upside opportunity or the most correction opportunities.
So I hope that helps, because I think it's really important to understand.
Balance at the Company level, three legs of the stool, core, totally new businesses where we complete your strengths and hopefully create new core and new space, and right now, the biggest opportunity in new space happens to be developing markets, which are demographically and economically advantaged, but it's also e-commerce.
Like I said, I hope that's helpful, that's what we're trying to do, and now of course, we can execute.
Operator
You next question comes from the line of Lauren Lieberman with Barclays.
- Analyst
So I guess what I'm really curious about is thinking over the last year review of where things stand, and looking over the past few years.
The message of productivity couldn't be more clear, and is obviously very important to the go-forward capability to operate in a tougher world.
But if you look at the last, call it, two years or so, investment in the business has not really been a challenge.
There has money to spend, and even when there hasn't been a lot of money to spend, there has been money spent to try to drive top line, yet something has still been missing.
And I feel like over the last couple of years we have seen P&G have more disappointments on what was expected to be a good innovation pipeline, new ideas, things that would change the trajectory, and this is a broad statement, because it applies across the business units.
So in this deep dive, A.G., what have you seen that says to you, maybe we are not as good as we used to be, or why are we not as good as we used to be in understanding what the consumer wants, what the competitive landscape is?
Because there have been a lot of shortfalls that aren't about spending.
It's about what the Company's been spending on.
Thanks.
- Chairman, President & CEO
It may be a bad baseball analogy, but we've got to get our batting average and our OPS up.
And as we go through this, industry by industry, business by business, where the strategies are clearer and more choiceful, where we know who the consumers are that matter most, where the brand promise is crystal-clear and we execute it and the communication, and where our products are preferred by consumers, we get it done.
In any mix of businesses, in just the past few years, and I will miss a few, we have the Family Cares and we have the Prestige Beauties and we have Oral Cares, and I don't want to leave out the Home Cares and others that have been consistently performing.
But I think if you do your analysis or we do our analysis, it comes back to real clarity around who the consumer is, and deliverance for that consumer, ultimately is a better consumer value equation and a better experience.
Real strategic clarity, a proven business model, and by the way, it isn't a proven business model that lasts forever, you're continually adjusting your business model, right?
But a business model that's agile and still actionable and still works.
Frankly, the ability to operate with discipline and execute with excellence.
This is an industry where execution really, really, matters.
And, like I said, with a handful of businesses that have done it really well, we now have 15 to 20 businesses that are focused like a laser on doing it really well, starting July 1, 2013.
Operator
Your next question comes from the line of Dara Mohsenian with Morgan Stanley.
- Analyst
A.G., I was hoping for more perspective, specifically on beauty, and what strategy tweaks you're making behind that business to improve market share trends?
And as you look back over the last few years, what are some of the learnings as you look at the performance there?
And then also from a portfolio standpoint, are you comfortable with the current portfolio you have in beauty, or are there gaps you would like to fill in overtime?
- Chairman, President & CEO
Okay.
On the second one, we are continuing and we are always reviewing the portfolios at the Company level, at the business unit level, and again, as I said in my prepared remarks, if they're a strategic fit and they're performing, delivering value, they are in.
If they're not, we will deal with it.
On the first one, it is not really different conceptually, it's not really different in getting a consumer focus right, getting the brand and the product innovation program right, and having the clarity and sharpness in the strategy that translates to operating discipline and executional excellence.
That's all the same.
I think again, if you really look at the beauty business, we took the business, we put together this collection of businesses, and Mark and I and others know it was a collection in 2000, of businesses that we called beauty, and in six or seven years, we tripled that business, took it to $21 billion, the problem is we are still looking at it.
We actually took it to $22 billion plus, but we're still looking at a $20 billion business.
I view that as opportunity.
In seven years -- [Sinseido] has been in Beauty for 150 years, [Wayhouse] since 1900, so over 100 years, Estee Lauder since World War II, so over 60 years, we've been really at it for about 12 or 13 years.
Fortunately we picked up a couple of decent assets back in 2000, but it's a learning curve, and we clearly stalled in a couple of places.
But again, Prestige Beauty is in very good shape, we went from nothing in arguably one of the toughest segments to a $3 billion-plus business.
We have a very fine fragrance business that makes, and it's grown at a very consistent rate from the time we bought the two little pieces back in the early 1990s, we've grown at a compound annual growth rate on the top line of 11%, it is been -- while it's been volatile through the recession, it's been a pretty consistent value creator.
And hey, let's face it, we are up against some of the best in the world in prestige skin care and fine fragrance and we've done quite well, and the reason we done quite well is our strategy is sharp and our -- we know we need a certain set of core strengths to play in prestige beauty, and we've leveraged some of the P&G core strength to be a little different.
We stayed very steady on some of our hair care brands.
We have an issue on Pantene, we are working it.
It is primarily, but not exclusively, the US and North America issue.
We ground through those plans a few times, we took the Board through them, I'd been here like six days.
We went through an innovation review, we've been through the strategy, we know what the program should look like over the next 6 months, the next 12 months, the next 18 and 24 months.
Hey, business has stalled, but it stalled at $3 billion.
One things I learned in private equity the last four years, I would rather work -- we spent as much time and energy on a $1 billion business as you do in a $200 million business, and believe me, you get better value creation for if you can get it going.
On the skin care side, it's pretty much the same story.
We went from frankly, playing but not winning for the first 15 years after about we bought Olay from RBI to, all the sudden, we took a business that was several hundred million and we turned it into a $2 billion-plus business.
It stalled, and again, we took the Board through it and through the strategy and through the product program, we know what we're going to do over the next 6, 12, 18, and 24 months.
But these are assets, they have low connections with the consumer.
If we get the consumer connections back, if we get the brand promises and architecture collections, whatever you want to call it, right, and if we execute, like we think we can with our marketing and product programs, there is plenty of room to grow.
I guess the last point I want to make, because I know I'm going on a little long here, is remember why we chose to get in Beauty and Personal Care the first place.
They are large, they are demographically driven.
They grow a little faster, They are big in the US and developed markets, they're big in developing markets and only getting bigger.
They are structurally attractive, low capital, high gross margins, and they're fragmented.
It's not like anybody is dominating these spaces.
There's room for a lot of players who can get it done, to do well.
So long-winded way of saying hey, we stalled, a lot of it were choices we made, and maybe things we struggled at, but we know what to do and we are on it.
We are on it.
Operator
The next question comes from the line of Wendy Nicholson with Citi Research, please proceed.
- Analyst
First thing, I know you had a target of delivering a 50% improvement in your local currency EBIT margins if you will, or profits in the emerging markets.
Can you tell us we came out for the full-year on that?
Related to that, I'm having a hard time reconciling sort of the concept of balance and striving for balance when you're talking about EBIT growth, three or four or five times your top line growth.
I'm just wondering how that such you up?
I think A.G., your historical strategy was to deliver consistent results and I have a hard time seeing how that strong double-digit EPS growth is going to be sustainable.
And why you wouldn't in your first year here coming back to the Company, find a bucket to put some pennies in to save them for a rainy day, because it just seems like it's an awfully aggressive goal at this juncture.
Thanks.
- CFO
Let me provide a little bit of perspective on both of those questions, Wendy, we did grow profit in developing markets meaningfully ahead of sales, so we did build margin.
I'm not going to go into the actual number.
As you can imagine, with all the currency movements, the number compared today to what we were talking about three or even six months ago is not that relevant.
What's relevant is that we continue to go profit meaningfully ahead of sales, and I can commit that we have done and will continue to do that in developing markets.
While, by the way, somewhat in answer to your second question, increasing investments.
So this isn't about building profitability by pulling back, it's about increasing profitability through productivity, the localization of supply chain, through increasing scale, and through the right choices.
On the second piece, if we grow top line, let's just be optimistic for a second, at the high end of our guidance range, at 4%, that translates asset volume leverage to 4% on the bottom line.
And the productivity program, which is about $2 billion of savings per year, on its face, is worth another 11 points.
So that brings you 15.
We get benefit from share repurchase of 1 to 2 points, so you're 16 to 17, and we talked about a non-FX impacted number of something like 11 to 13, so there is a significant amount of investment back within that number.
As I said earlier, we are not going to be guided by specific metrics, we're going to be guided -- except one, which is value creation, and when there's an opportunity to create value through additional investment, we will not hesitate.
- Chairman, President & CEO
I just might and two or three points, Wendy, quickly.
We have a stronger product and branded innovation pipeline this year going in, but it's not huge yet.
So a lot of the pipeline is still in development qualification, or early stages of commercialization.
So you can't invest in it, in development.
Second point is, we said we are investing back in core strengths, without going into the specific number, we have invested back the biggest amount of money.
In this next year, we have to go back to the middle of the last decade to get that kind of investment, and as we went through the strategies and product programs, it was very clear to me and to others that we needed to make that investment back.
I guess the third thing I would say is we're trying to thread a needle here.
And we are trying to look at what we can really do, and what we really need to get ready to do, and I think it's going to take a couple of years before we've got everything in place, so that we are hitting on enough cylinders to perform to our full potential.
So we view this as a transition year, last year was a stepping stone year and we will see how it goes.
Absolute last point.
Jon and I and the team are totally together.
If we are on something that is taking off, we are going to invest in it, and hopefully we have given ourselves in a flexibility.
And in the end, we're going to do what's right for the business over the mid and long term, and we're going to create value as we do it.
- CFO
One more point, sorry, I spent a fair amount of time, maybe too much time in our prepared remarks talking about things that weren't in the forecast in terms of further FX weakening those kinds of things, and I told you before that we are not going to follow FX or commodities out the window just to deliver a number.
We're going to execute the strategy.
And I would just repeat that in terms of our commitment to do what it takes to get the business growing.
Operator
You next question comes from the line of Jason English with Goldman Sachs.
Please proceed.
- Analyst
A.G., welcome back, I wasn't covering you when you were here before, so I look forward to meeting you.
I have reviewed the history and some of the initiatives you spearheaded and how you are operating.
In your time apart, reflecting back with your private equity experience, and your work in academia, I guess my question is, how does that change your perspective?
And as you come back into the organization, how do you see yourself either managing or operating this business differently?
- Chairman, President & CEO
I think there are probably three things.
The first one is the importance, ultimately overriding importance, ultimately of value creation in a B2B business for your customers and shareholders and a B2B business like ours for your consumers and shareholders.
If we get just those two pieces right, a lot of this other stuff is going to fall in place.
Second thing is sense of urgency, private equity world you don't have, you have a certain amount of time to generate value, and I think bringing a sense of urgency is helpful.
Thirdly, you have to be very choiceful, and you have to be very focused, and you have to be very prioritized with your strategy choices, because they drive the operating budget and plan and they drive the execution.
I think we are tightening them down.
I guess the last one is our culture, we had a great conversation about this as a leadership team, and we are going to build on the strengths.
We've just got to, we've got to get to a much more agile, a much faster, a much more decisive culture.
We talked about agreeing, disagreeing, committing, and going and we're just trying to make decisions quickly.
We're delegating the decisions where they should be made.
I need to make a few, but most of these decisions are made by the business unit leaders or they're made in the markets where we are closest to the customers and consumers.
Getting clear about who makes the decisions, getting clear about making the decision, getting on with it, and then executing.
I think the last thing is, you get on very short learning cycles.
My point is you learn as much as you can from the past, you learn from your successes and you learn from your missteps, and then you get on with it.
You get focused on the future, and you get out there and you try it the next time.
Those are probably some of the things.
Operator
Your next question comes from the line of Ali Dibadj with Bernstein.
Please proceed.
- Analyst
A.G., from a quick clarification on 2014 and then a real question, and maybe Jon, this is for you.
I want to get a better sense of, you're saying the parts will be accelerated, but you're also saying that the restructuring charge will be lower in 2014?
And also just want to get a sense of how we should think about capital allocation assumptions on buybacks et cetera, that are embedded in your numbers.
But the bigger question, maybe A.G. for you, is the story you paint is very exciting in terms of fixing some things that were wrong, but I really want to get into more specifics if you can at this stage, so I get that the consumer wasn't read right.
How we going to fix that as a Company?
I get that execution wasn't right, but what's going to change on that?
I get that choiceful decisions weren't necessarily made perfectly, why are you heading to fix that?
I ask that in the context of, as you look at the Company today, you've done your deep dive over the past two months.
What are the big capability gaps that you think exist?
And particularly relative to your competitive set, that has clearly been progressing during, not just the past four or five years, but the past decade, on getting some of these core things that a CPG company does right, better?
- Chairman, President & CEO
I feel like I'm repeating myself, so I will try to get this clear.
In the external world that we have been in, choicefulness and clarity are even more important.
And it's not just me, as I said, the business leaders, the market leaders, channel leaders, customer leaders, country leaders.
Point number two, I'm not going to -- we have the methodologies, we have the tools and techniques to understand who our best consumer is, business by business, brand by brand, and to act on it, but you have got to use it, and you have got to act on it.
So we've rededicated ourselves to really understanding the consumer, really winning with the consumer, everything begins and ends with the consumer.
We win our consumer, we get a higher --
Our business model is very simple.
If we can get a higher trial and purchase rate and we can get better usage and more loyalty, that drives the value creation, all right?
But we need to be incredibly disciplined to stay on that business model.
The third thing is operating discipline.
The strategic discussion of the business unit level is about discipline.
The discipline of choice, the discipline of focus, the discipline the discipline of prioritization.
We need to be more disciplined in our operating plans, we need to be more disciplined in our financial forecasts, we just need to be more disciplined.
And the last one is, and again it's not that we don't know how to do it because we are doing it, we just need to do it more consistently and we need to do more broadly, we need to be disciplined in our execution.
This is a highly executional industry.
And we have to win one shopper at a time, one consumer at a time, one retail location, whether it's a store or an open market or e-commerce at a time, and we just need to be very executionally focused.
And I think some of -- those are the key things, those are the key things.
- CFO
And the answer to the first part of your question, Ali, on the relationship between the acceleration of productivity savings and the appearance of lower restructuring next year and how those things reconcile, I would just make three points there.
First, not every savings opportunity requires a restructuring investment.
So for example, improving our marketing ROI does not cost anything in terms of restructuring, and that's an area that we are going to get better at next year then we have been historically.
Not all cost of goods sold savings require restructuring investment, and to the extent that we can deliver savings that are at or ahead of plan with even less restructuring investment, that's a good thing.
Second, we talked about over the period of time, an enrollment reduction of 16% to 22%.
The 7,000 roles we've reduced represents about 13%, so we're going to keep going, and it doesn't stop at the end of the five-year period, but a big chunk of the role reductions was derived disproportionately restructuring spending have occurred, so that's kind of how that's happening.
As with the prior commentary, we are not fixated on a restructuring budget, if there are good opportunities to drive savings sooner and more, we will fund those.
And we'll be sure to update you on that as we progress.
Last, real quick on capital allocation, we will continue to prioritize the dividend.
This year was the 57th consecutive year we have increased the dividend.
As I've said before, without the 58, you'll probably be talking to somebody else, and we will continue to repurchase shares with the balance of cash that's available.
Our philosophy on this is very simple, cash that we have is not ours, it's yours, it's our job to deploy it to earn decent returns and what's left, we will distribute.
Really no significant change in capital allocation philosophy going forward.
Operator
Your next question comes from the line of Joe Altobello with Oppenheimer.
Please proceed.
- Analyst
Good morning.
Just two quick high-level questions.
I guess first, A.G., you've talked about looking at today's reality and seeing things as they are and not how you want them to be.
So I just want to clarify, what were you were speaking to there, not necessarily P&G capabilities and opportunities versus where they were three, four, five years ago, but more so what you're seeing in the marketplace and specifically market growth, which has obviously slowed in the last two, three, four years.
Related to that, you talked a lot about creating value, both for consumers as well as for shareholders.
I think part of the consumer value equation clearly is price, and so could you comment on how you sea price levels right now, generally speaking, are you comfortable with the price levels, or does there need to be some strategic change in parts of your business?
Thanks.
- Chairman, President & CEO
Okay, I guess let me talk about market, maybe some first impressions of consumer changes, and then talk about value and I will let Jon talk about the pricing situation.
First, market.
Obviously, developing markets are slowing, but they're still projected to grow at 6%, and as I said earlier, all you have to look at are demographics and economics, and I think that's a pretty long arc of growth for our industry, and is still a pretty big opportunity for this company.
We've grown with that -- we've actually grown since the Berlin wall came down and Guangzhou city markets opened in 1988 and 1989, we've got 9% a year compounded annual growth in developing markets.
We've grown 14% compounded in the last 10 years.
As Jon said in his comments, we've grow 10% in the BRIC markets this last year.
And that growth is there, that growth is there for a lot of the players in this industry.
Because a lot of it is still tailwind, right?
It's babies being born, households forming and incomes rising and you just get market growth.
Second point is how our consumers changed.
You don't go through the second biggest financial crisis in recent history and a prolonged global recession without changing some of your habits, practices, attitudes, and beliefs.
We of course been digging into that.
I think you could make an argument, I will use, you can make an argument that there may be three critical moments of truth right now for consumers.
I call it zero, other people call it something else, but there's clearly a period, driven by the desire to get the best value they can, not only the best price but the best value, and driven by technology, mobile technology, computer technology, the Internet, et cetera.
There's this period of information gathering, education, brand and product comparison, and that includes price comparison.
So a lot of shoppers are coming to the purchase decision with having done a lot more preparation.
Still what matters is the first one that really matters is the purchase.
We've got to win the preliminary.
We've got to get into the consideration set, we've really got to win purchase so we don't have a chance at winning the usage.
So I think that's one thing that's changed.
I think the second thing that's changed, and you see it in a number of our businesses is we really have to build a strong vertical and horizontal brand and product line portfolio.
And it's not just about developed markets and developing markets.
It's about giving more consumers more opportunities to try their way and make that first purchase into your brand and product line, and they're going to make the choice about where they spend, based on what they need and want, and based on what their value equation is.
So if you look at Shave Care or if you look at Hair Care, or you look at Fabric and Home Care, and you're looking at Family Care, we have tried to build much more robust vertical offerings, and we are continuing to work hard on that, so the consumer can come in at different points.
So think about it as we need to trade them in first and then we can work on trading them up.
And I guess so that's the market, that's the consumer.
And this third thing, no matter, I don't want to get into the details here, and I'm not going to, but every business that's really delivering, and we have at least a handful or more, they really know who their consumers are, they have very clear consumer segmentation model, and we need that.
We need that.
That's the math that we start with, so here's the key.
Regardless of what segment you are in, value is a factor.
So if you're buying SK2 at $145 for the opening price point on assets, $1 billion-plus brand in prestige and ultra prestige skin care, there still a value equation, and we have to understand what it is for that woman.
If you're buying Charmin Basic at $1 or $2 a pack, there is a value equation.
And we need to understand those value equations.
We are never going to compete purely on price.
We are a differentiated, branded, innovative, product company, But we are going to compete across a broader point of price points, and we are going to compete with brand product line architectures that attract more consumers, and give them a chance to try it.
- CFO
Clearly one measure of our success in presenting propositions with appropriate value equations to consumers is our share of the market, and right now you're modestly building market share growth, which would imply that more times than not, not always, but more times than not, we are getting that value equation right.
We will continue to refine that, this is something that requires daily attention, but generally, I think we are, across the broad portfolio, in the right place
Operator
You next question comes from the line of Connie Maneaty with BMO Capital Markets.
Please proceed.
- Analyst
In the context of your comments on execution and understanding and creating value, I was hoping to get your perspective on what's been going on with Tide PODS?
Is this a product that is actually creating value?
What went wrong with the execution?
We are looking at monthly sales that have been flat since the start of the year or the end of last year, even as the capacity issues were supposedly resolved.
So your perspective on that might help give a little bit of context to the things you see as you come back.
Thanks so much.
- Chairman, President & CEO
Well, Connie, I think first of all we are committed to Tide PODS, it's a $0.5 billion business with a lot of upside growth, and it clearly it's a good value for consumers who don't -- who don't want to think about the dosage amount, and who want the convenience of performance that is delivered in that brand's performance offering and product form.
The second thing is, yes, we've been struggling to keep up with demand.
I don't think we were merchandised until last month, drive that right, Jon?
And in the first month we were merchandised, ever merchandised so far in a US customer was last month, so I would argue we've been out there with one hand behind our back, because we can't display it and we can't support it.
I think as we reported beyond moving into Europe, it's a different source of supply, it's not going to impact what were trying to do here in the US and North America.
The last thing I would say is, for four decades, you work on a lot of disruptive new products and product forms, start-ups aren't easy, we don't always get it right the first time, we didn't on Tide Liquid back in the 1980s, we didn't on Tide with Bleach.
We haven't on some others.
But this one is so unique, it's so discontinuous, and for a group, a segment of consumers, at least so far, early returns they seem to like it if they try it, and they seem to come back and buy it again.
It is clearly creating value for the industry, and this is a category or industry that's hard to create value in.
Left to its own devices, some would commoditize it, And it's in our interest to keep it differentiated, branded, and innovative.
Hey, we are taking a mid-to long-term point of view on Tide PODS, and we're going to stay at it, and we're going to see what its ultimate potential is with consumers.
Operator
Your next question comes from the line of Javier Escalante with Consumer Edge Research.
Please proceed.
- Analyst
Good morning everyone, and welcome back A.G. I wonder whether you could, in the context of breaking out the four-quarter organic sales growth between the US, Europe, and developing and emerging markets, not just BRIC, how this execution that you want improved, is going to helped by the changes in the go-to-market capabilities.
Because one of the things that actually surprised us the most in the last couple of years is that the bulk of your business was in the US, was in the backyard.
So that the inability of the Company to adapt to the volatility of the consumer environment was surprising to us.
So to what extent the decision-making process review, beyond making the go-to-market capability more efficient in terms of saving.
Thank you.
- Chairman, President & CEO
Okay.
Two points.
But I think are relevant and important to your question.
We need to grow in the US.
Even at 2% to 3% estimates for the future, 3% GDP growth, market growth, you pick a number but it still growing and it's definitely going faster than Europe or Japan and given our position, we need to grow in US.
And we need to get stronger in the US.
Point number one.
I think you see, hopefully you can see that we reinvested in the US and we started to get it going again in the US and it's last year and it definitely showed up in the fourth quarter, but as far as I'm concerned, that's only the beginning.
Point number one.
Number two is we need to do a better job in all the important channels where consumers shop.
I won't go into the details, but we are clearly strong in some channels, we play in others, we need to get stronger in those channels and we are even testing coverage, in channels that we haven't served.
In the US and Canada.
So I do think there is a distribution opportunity, and I have a very simple principle.
If a meaningful number of consumers shop in this channel, whether it's e-commerce, whether it's small urban store, whether it's a drug chain, a Costco or whatever, we've got to be there.
We've got to be available, we've got to be in distribution, and we have to have the right mix of brands and products to meet her or his needs.
I'm totally with you.
I think there's an opportunity in the US.
By the way we also have opportunities in Western Europe along the same lines, and that's huge business for us too, so even though it's not growing we've got to get our share.
Right?
Developing markets is still a huge opportunity for the Company and part of the opportunity is distribution related.
Again I won't go back into the details, but we've gone back into some big strategically core developing markets and we've taken a hard look at our distribution and coverage position, and we are concluding that we have big opportunities there.
So you will see us, you will see us work hard on making sure we have availability, making sure we are in distribution, and making sure we have the right brand and product presence where we need to, which is where consumers shop.
Operator
Your next question comes from the line of Olivia Tong with Bank of America.
Please proceed.
- Analyst
Good morning, welcome back A.G. I wanted to talk a little bit about sort of the commitment to invest and spot spend.
You talked a lot about it on a high level, can you talk about it what kind of marketing spend you expect going forward?
And obviously the US growth was very solid.
Can you provide some color on the sustainability of that and the growth drivers behind that?
Thank you.
- CFO
So first in terms of advertising spend, we will again increase advertising spending pretty significantly year-on-year, but we will do it probably 20 basis points lower than the rate of sales growth.
That does not mean less advertising, it does not mean less reach, less frequency, it means more effective advertising, the right mix of media, and importantly, reducing non-advertising costs that consumers never see.
So that we feel good about our ability to continue to support growth in the business with a more efficient model.
A.G., do want to talk about the US?
- Chairman, President & CEO
Yes.
One very quick comment on the point Jon just made.
We are interested in effectiveness.
We are interested in effectiveness.
We know brand-by-brand in the US and in a lot of other markets the range of effectiveness we can deliver, and it is wide.
And so we are holding all of the businesses to a minimum ROI.
We are pounding away on communication effectiveness, we are pounding away on best media, our digital I think is now up to 35% in the US, roughly, it goes up and down 25% to 35%.
We have some businesses and brands where digital is incredibly effective and we are doing more.
We have other brands that are on the learning curve and they've got to get up the learning curve faster.
But it's a brand by brand, category by category, consumer segment by consumer segment set of decisions, and basically what we are going to do -- our problem is not the total amount we are spending.
Our problem is the mix, our opportunity is the mix of going to get the mix better and better and better, and there's a lot of opportunity there.
On the second question which is the US, yes, we think it's sustainable.
We definitely think sustainable, because if you crawl inside the four-quarter results we are doing much better overall, but we are still being carried fewer businesses than we would like to be.
There's an opportunity for all of our businesses to do better in the US and North America.
Operator
Your next question comes from the line of Michael Steib with Credit Suisse.
Please proceed.
- Analyst
My question relates to the portfolio overall.
You spoke at length about focusing on the core business.
Could you talk about what criteria you might use to determine what is not core for the longer-term growth prospects of the Company, since you mentioned, I think, a couple times, that you might have to exit some businesses?
- Chairman, President & CEO
Strategic fit.
Particularly, is it a strategic fit with our core strengths and core capabilities.
Value creation, potential and performance, and then, frankly, the ability to deliver.
That's it.
Operator
At this time, we have reached the time for questions.
I would like to turn the call back over for closing remarks.
- CFO
We would just like to thank everybody for joining us this morning.
We are very excited about the direction that we are on and the path ahead, and we will continue to keep you abreast of developments in that regard.
We are available the balance of the day, please don't hesitate to reach out if you've got a question.
We will also be reaching out to our shareholder group over the next couple of months, both A.G. and myself, and look forward to spending time with you.
Thanks a lot.
Operator
Ladies and gentlemen, that concludes today's conference.
Thank you for participation, you may now disconnect.
Have a great day.