PROCTER & GAMBLE Co

Previous wording

•Results of Operations – Three and Six Months Ended December 31, 2023

Current wording

•Results of Operations – Three and Nine Months Ended March 31, 2024

Previous wording

•Segment Results – Three and Six Months Ended December 31, 2023

Current wording

•Segment Results – Three and Nine Months Ended March 31, 2024

Previous wording

The following table provides the percentage of net sales and net earnings by reportable business segment (excluding Corporate) for the three and six months ended December 31, 2023:

Current wording

The following table provides the percentage of net sales and net earnings by reportable business segment (excluding Corporate) for the three and nine months ended March 31, 2024:

Previous wording

The following are highlights of results for the six months ended December 31, 2023, versus the six months ended December 31, 2022:

Current wording

The following are highlights of results for the nine months ended March 31, 2024, versus the nine months ended March 31, 2023:

Previous wording

•Net sales increased 5% to $43.3 billion versus the prior year period. Net sales increased high single digits in Health Care and Fabric & Home Care, mid-single digits in Grooming and low single digits in Baby, Feminine & Family Care and Beauty. Organic sales, which exclude the impacts of acquisitions and divestitures and foreign exchange, also increased 5%. Organic sales increased high single digits in Grooming and Fabric & Home Care, mid-single digits in Health Care and Baby, Feminine & Family Care and low single digits in Beauty.

Current wording

•Net sales increased 3% to $63.5 billion versus the prior year period. Net sales increased mid-single digits in Health Care, Fabric & Home Care and Grooming and low single digits in Beauty and Baby, Feminine & Family Care. Organic sales, which exclude the impacts of acquisitions and divestitures and foreign exchange, increased 4%. Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Baby, Feminine & Family Care and Beauty.

Previous wording

•Net earnings were $8.0 billion, an increase of $127 million, or 2%, versus the prior year period due to the increase in net sales, partially offset by the non-cash impairment charge of $1.0 billion after taxes related to the Gillette intangible asset.

Current wording

•Net earnings were $11.8 billion, an increase of $484 million, or 4%, versus the prior year period due to the increase in net sales, partially offset by the non-cash impairment charge of $1.0 billion after taxes related to the Gillette intangible asset.

Previous wording

•Net earnings attributable to Procter & Gamble were $8.0 billion, an increase of $116 million, or 1%, versus the prior year period.

Current wording

•Net earnings attributable to Procter & Gamble were $11.7 billion, an increase of $473 million, or 4%, versus the prior year period.

Previous wording

•Diluted EPS increased 2% to $3.23 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring, increased 16% to $3.66.

Current wording

•Diluted EPS increased 5% to $4.75 due to the increase in net earnings. Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring, increased 15% to $5.19.

Previous wording

•Operating cash flow was $10.0 billion. Adjusted free cash flow, which is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the U.S. Tax Act, was $8.7 billion. Adjusted free cash flow productivity, which is defined as adjusted free cash flow as a percentage of net earnings excluding the Gillette intangible asset impairment charge, was 96%.

Current wording

•Operating cash flow was $14.1 billion. Adjusted free cash flow, which is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the U.S. Tax Act, was $12.0 billion. Adjusted free cash flow productivity, which is defined as adjusted free cash flow as a percentage of net earnings excluding the Gillette intangible asset impairment charge, was 93%.

Previous wording

Net sales for the period increased 5% to $43.3 billion. The increase in net sales was due to higher pricing of 6%, partially offset by unfavorable foreign exchange of 1% and a 1% decrease in unit volume. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales also increased 5%.

Current wording

Net sales for the quarter increased 1% to $20.2 billion. The increase in net sales was due to increased pricing of 3%, partially offset by unfavorable foreign exchange of 2%. Unit volume and mix had a neutral impact on net sales growth. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 3%.

Previous wording

Gross margin increased 520 basis points to 52.7% of net sales for the quarter. The increase in gross margin was due to:

Current wording

Gross margin increased 300 basis points to 51.2% of net sales for the quarter. The increase in gross margin was due to:

Previous wording

•240 basis points of manufacturing productivity savings,

Current wording

•260 basis points of manufacturing productivity savings,

Previous wording

•200 basis points of lower commodity costs and

Current wording

•130 basis points of lower commodity costs and

Previous wording

•a 190 basis-point increase due to higher pricing.

Current wording

•a 130 basis-point increase due to higher pricing.

Previous wording

•a 30 basis-point decline from unfavorable product mix including the decline of the super-premium SK-II brand,

Current wording

•a 100 basis-point decline from unfavorable product mix including the decline of the super-premium SK-II brand,

Previous wording

•20 basis points of product and packaging investments and

Current wording

•30 basis points of product and packaging investments.

Previous wording

Total SG&A spending increased 8% to $5.5 billion versus the prior year period due to increased marketing spending and overhead costs. SG&A as a percentage of net sales increased 130 basis points to 25.8% due to the increase in marketing spending as a percentage of sales. Marketing spending as a percentage of net sales increased 140 basis points as the increase in marketing spending was partially offset by the positive scale impacts of the net sales increase and productivity savings. Overhead costs as a percentage of net sales were unchanged as wage inflation, foreign exchange and other cost increases were offset by the positive scale impacts of the net sales increase and productivity savings. Productivity-driven cost savings delivered 100 basis points of benefit to SG&A as a percentage of net sales.

Current wording

Total SG&A spending increased 9% to $5.9 billion versus the prior year period due to increased marketing spending and overhead costs. SG&A as a percentage of net sales increased 210 basis points to 29.1% due to the increase in marketing and overhead spending as a percentage of net sales. Marketing spending as a percentage of net sales increased 180 basis points as the increase in marketing spending was partially offset by the positive scale impacts of the net sales increase and productivity savings. Overhead costs as a percentage of net sales increased 50 basis points as wage inflation, foreign exchange and other cost increases were offset by the positive scale impacts of the net sales increase and productivity savings. Other operating expenses as a percentage of net sales decreased 20 basis points. Productivity-driven cost savings delivered 60 basis points of benefit to SG&A as a percentage of net sales.

Previous wording

Interest expense was $248 million for the quarter, an increase of $77 million versus the prior year period due primarily to higher interest rates. Interest income was $133 million for the quarter, an increase of $67 million versus the prior year period due primarily to higher interest rates. Other non-operating income was $177 million, which is an increase of $22 million versus the prior year period.

Current wording

Interest expense was $233 million for the quarter, an increase of $11 million versus the prior year period due primarily to higher interest rates. Interest income was $104 million for the quarter, an increase of $21 million versus the prior year period due primarily to higher interest rates. Other non-operating income was $260 million, which is an increase of $81 million versus the prior year period due to gains from the sale of minor brands.

Previous wording

Net earnings decreased $466 million, or 12%, to $3.5 billion due to the decrease in operating income and an increase in the effective tax rate. Foreign exchange had a negative impact of approximately $78 million on net earnings for the quarter, including both transactional and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars. Net earnings attributable to Procter & Gamble decreased $465 million, or 12%, to $3.5 billion for the quarter. Diluted EPS decreased 12% to $1.40 versus the prior year period due to the decrease in net earnings. Core EPS, which represents diluted EPS excluding charges for the Gillette intangible asset impairment and incremental restructuring, increased 16% to $1.84.

Current wording

Net earnings increased $357 million, or 10%, to $3.8 billion due to the increase in operating income, increase in non-operating income and a decrease in the effective tax rate. Foreign exchange had a negative impact of approximately $220 million on net earnings for the quarter, including both transactional and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars. Net earnings attributable to Procter & Gamble increased $357 million, or 11%, to $3.8 billion for the quarter. Diluted EPS increased 11% to $1.52 versus the prior year period due to the increase in net earnings.

Previous wording

Net sales for the quarter increased 3% to $21.4 billion. The increase in net sales was due to higher pricing of 4%, partially offset by unfavorable foreign exchange of 1%. Unit volume and mix were unchanged. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 4% while organic volume declined by 1%.

Current wording

Net sales for the period increased 3% to $63.5 billion. The increase in net sales was due to higher pricing of 5%, partially offset by unfavorable foreign exchange of 1%. Unit volume and mix were unchanged. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 4%.

Previous wording

Gross margin increased 480 basis points to 52.3% of net sales for the period. The increase in gross margin was due to:

Current wording

Gross margin increased 430 basis points to 52.0% of net sales for the period. The increase in gross margin was due to:

Previous wording

•a 250 basis-point increase due to higher pricing,

Current wording

•a 220 basis-point increase due to higher pricing,

Previous wording

•180 basis points of manufacturing productivity savings.

Current wording

•220 basis points of manufacturing productivity savings and

Previous wording

•180 basis points of lower commodity costs and

Current wording

•180 basis points of lower commodity costs.

Previous wording

Total SG&A spending increased 12% to $11.1 billion versus the prior year period due to increased marketing spending, overhead costs and other operating costs. SG&A as a percentage of net sales increased 170 basis points to 25.7% due to the increase in marketing spending, overhead spending and other operating costs as a percentage of sales. Marketing spending as a percentage of net sales increased 140 basis points as the increase in marketing spending was partially offset by the positive scale impacts of the net sales increase and productivity savings. Overhead costs as a percentage of net sales increased 20 basis points due to wage inflation and other cost increases, partially offset by the positive scale impacts of the net sales increase and productivity savings. Other operating expenses as a percentage of net sales increased 20 basis points. Productivity-driven cost savings delivered 80 basis points of benefit to SG&A as a percentage of net sales.

Current wording

Total SG&A spending increased 11% to $17.0 billion versus the prior year period due to increased marketing spending and overhead costs. SG&A as a percentage of net sales increased 180 basis points to 26.8% due to the increase in marketing spending and overhead spending as a percentage of sales. Marketing spending as a percentage of net sales increased 150 basis points as the increase in marketing spending was partially offset by the positive scale impacts of the net sales increase and productivity savings. Overhead costs as a percentage of net sales increased 20 basis points due to wage inflation and other cost increases, partially offset by the positive scale impacts of the net sales increase and productivity savings. Other operating expenses as a percentage of net sales increased 10 basis points. Productivity-driven cost savings delivered 80 basis points of benefit to SG&A as a percentage of net sales.

Previous wording

The Company recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) on the Gillette intangible asset. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the limited market portfolio restructuring program. For further discussion of the Gillette impairment charge, refer to Note 4 to the Consolidated Financial Statements.

Current wording

In the period ended December 31, 2023, the Company recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) on the Gillette intangible asset. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the limited market portfolio restructuring program. For further discussion of the Gillette impairment charge, refer to Note 4 to the Consolidated Financial Statements.

Previous wording

Interest expense was $472 million for the period, an increase of $178 million versus the prior year period due primarily to higher interest rates. Interest income was $262 million for the period, an increase of $154 million versus the prior year period due primarily to higher interest rates. Other non-operating income was $309 million, which is an increase of $15 million versus the prior year period.

Current wording

Interest expense was $705 million for the period, an increase of $189 million versus the prior year period due primarily to higher interest rates. Interest income was $366 million for the period, an increase of $175 million versus the prior year period due primarily to higher interest rates. Other non-operating income was $570 million, which is an increase of $97 million versus the prior year period, due primarily to gains from the sale of minor brands and an increase in net non-operating benefits on postretirement plans.

Previous wording

The effective income tax rate for the three months ended December 31, 2023, was 22.3%, compared to 18.1% for the three months ended December 31, 2022. The increase in the effective tax rate was primarily driven by 180 basis points due to the net impact of the prior year recognition of operating loss carryforwards and 180 basis points due to unfavorable geographic mix impacts.

Current wording

The effective income tax rate for the nine months ended March 31, 2024, was 20.6%, compared to 19.6% for the nine months ended March 31, 2023. The increase in the effective tax rate was primarily due to the net impacts of the prior year recognition of operating loss carryforwards, partially offset by decreases due to higher excess tax benefits of share-based compensation.

Previous wording

Operating income increased $476 million, or 5%, to $10.2 billion for the period, due to the increase in net sales and the increase in gross margin, the components of which are described above. These benefits were partially offset by non-cash before tax impairment charges of $1.3 billion related to Gillette intangible asset and an increase in SG&A spending as a percentage of net sales.

Current wording

Operating income increased $688 million, or 5%, to $14.7 billion for the period, due to the increase in net sales and the increase in gross margin, the components of which are described above. These benefits were partially offset by non-cash before tax impairment charges of $1.3 billion related to the Gillette intangible asset and an increase in SG&A spending as a percentage of net sales.

Previous wording

Net earnings increased $127 million, or 2%, to $8.0 billion, as the increase in operating income was partially offset by an increase in the effective tax rate. Foreign exchange had a negative impact of approximately $249 million on net earnings for the period, including both transactional and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars. Net earnings attributable to Procter & Gamble increased $116 million, or 1%, to $8.0 billion for the quarter. Diluted EPS increased 2% to $3.23 versus the prior year period due to the increase in net earnings and a reduction in the weighted average number of shares outstanding. Core EPS, which represents diluted EPS excluding charges for incremental restructuring and the impairment of the Gillette intangible asset, increased 16% to $3.66.

Current wording

Net earnings increased $484 million, or 4%, to $11.8 billion, as the increase in operating income was partially offset by an increase in the effective tax rate. Foreign exchange had a negative impact of approximately $468 million on net earnings for the period, including both transactional and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars. Net earnings attributable to Procter & Gamble increased $473 million, or 4%, to $11.7 billion for the period. Diluted EPS increased 5% to $4.75 versus the prior year period due to the increase in net earnings and a reduction in the weighted average number of shares outstanding. Core EPS, which represents diluted EPS excluding charges for incremental restructuring and the impairment of the Gillette intangible asset, increased 15% to $5.19.

Previous wording

SEGMENT RESULTS – Three and Six Months Ended December 31, 2023

Current wording

SEGMENT RESULTS – Three and Nine Months Ended March 31, 2024

Previous wording

The following discussion provides a review of results by reportable business segment. Analysis of the results for the three and six months ended December 31, 2023, is provided based on a comparison to the three and six months ended December 31, 2022. The primary financial measures used to evaluate segment performance are net sales and net earnings. The table below provides supplemental information on net sales, earnings before income taxes and net earnings by reportable business segment for the three and six months ended December 31, 2023, versus the comparable prior year period (dollar amounts in millions):

Current wording

The following discussion provides a review of results by reportable business segment. Analysis of the results for the three and nine months ended March 31, 2024, is provided based on a comparison to the three and nine months ended March 31, 2023. The primary financial measures used to evaluate segment performance are net sales and net earnings. The table below provides supplemental information on net sales, earnings before income taxes and net earnings by reportable business segment for the three and nine months ended March 31, 2024, versus the comparable prior year period (dollar amounts in millions):

Previous wording

Beauty net sales increased 1% to $3.8 billion as the positive impacts of higher pricing of 4% and a benefit from acquisitions of 1% were partially offset by the negative impacts of unfavorable foreign exchange of 1% and unfavorable mix of 3% (due primarily to the decline of the super-premium SK-II brand, which has higher than segment-average selling prices). Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales also increased 1%. Global market share of the Beauty segment increased 0.2 points.

Current wording

Beauty net sales increased 2% to $3.6 billion as the positive impacts of higher pricing of 4%, unit volume increase of 1% and benefit from acquisitions of 1% were partially offset by the negative impacts of unfavorable foreign exchange of 3% and unfavorable mix of 1% (due primarily to the decline of the super-premium SK-II brand, which has higher than segment-average selling prices). Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 3%. Global market share of the Beauty segment decreased 0.2 points.

Previous wording

•Hair Care net sales increased double digits. Positive impacts of higher pricing (driven by Latin America, Europe and North America), a benefit from acquisitions, favorable product mix (due to the growth of premium products) and an increase in unit volume were partially offset by negative impacts of unfavorable foreign exchange. The volume increase was driven by growth in North America (due to innovation), Asia Pacific (due to innovation) and Latin America (due to market growth), partially offset by a decline in Greater China (due to market contraction and distribution footprint changes). Organic sales increased high single digits driven by more than 30% growth in Latin America, mid-teen increases in Europe and North America, partially offset by a double-digit decline in Greater China. Global market share of the Hair Care category decreased 0.5 points.

Current wording

•Hair Care net sales increased mid-single digits. Positive impacts of higher pricing (driven by Argentina, Europe and North America), a benefit from acquisitions and favorable geographic and brand mix (due to growth of the premium Native brand) were partially offset by negative impacts of unfavorable foreign exchange. Unit volume was unchanged as growth in North America (due to increased marketing support and distribution gains) and Latin America (due to market growth) was offset by a decline in IMEA (due to increased pricing and lower demand in the Middle East). Organic sales increased high single digits driven by more than 30% growth in Latin America, a double-digit increase in Europe and a high single-digit increase in North America, partially offset by a mid-single-digit decrease in Greater China. Global market share of the Hair Care category decreased 0.5 points.

Previous wording

•Skin and Personal Care net sales decreased high single digits. Negative impacts of unfavorable mix (due to the decline of the super-premium SK-II brand, which has higher than category-average selling prices) and a unit volume decrease were partially offset by higher pricing (driven by Greater China). The volume decrease was driven by a decline in Greater China (due to the decline of the super-premium SK-II brand and market contraction of skin care and personal care), partially offset by growth in North America and Europe (both due to innovation in Personal Care). Organic sales decreased mid-single digits due to more than 20% declines in Greater China and Asia Pacific, partially offset by a double-digit increase in North America. Global market share of the Skin and Personal Care category increased 0.4 points.

Current wording

were partially offset by an increase in unit volume and higher pricing (across all regions). The volume increase was driven by growth in North America (due to innovation in Personal Care) and Latin America (due to market growth). Organic sales decreased low single digits due to a 20% decline in Greater China, partially offset by high single-digit growth in North America. Global market share of the Skin and Personal Care category increased 0.1 points.

Previous wording

Net earnings decreased 5% to $868 million as the increase in net sales was more than offset by a 130 basis-point decline in net earnings margin. Net earnings margin decreased as an increase in gross margin was more than fully offset by an increase in SG&A as a percentage of net sales and a higher effective tax rate. The gross margin improvement was driven by increased pricing and productivity savings, partially offset by unfavorable foreign exchange impacts and negative product mix (due to the decline of the super-premium SK-II brand). SG&A as a percentage of net sales increased due primarily to an increase in marketing and overhead spending, partially offset by the positive scale effects of the net sales increase. The higher effective tax rate was driven by unfavorable geographic mix.

Current wording

Net earnings decreased 3% to $587 million as the increase in net sales was more than offset by a 90 basis-point decline in net earnings margin. Net earnings margin decreased as an increase in gross margin was more than fully offset by an increase in SG&A as a percentage of net sales and a higher effective tax rate. The gross margin improvement was driven by increased productivity savings and pricing, partially offset by negative product mix (due to the decline of the super-premium SK-II brand) and unfavorable foreign exchange impacts. SG&A as a percentage of net sales increased due primarily to an increase in marketing and overhead spending, partially offset by the positive scale effects of the net sales increase. The higher effective tax rate was driven by unfavorable geographic mix.

Previous wording

Beauty net sales increased 2% to $7.9 billion, as the positive impacts of higher pricing of 5% and a benefit from acquisitions of 1% were partially offset by the negative impacts of unfavorable foreign exchange of 2% and unfavorable mix of 2% (due primarily to the decline of the super-premium SK-II brand, which has higher than segment-average selling prices). Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 3%. Global market share of the Beauty segment increased 0.2 points.

Current wording

Beauty net sales increased 2% to $11.5 billion, as the positive impacts of higher pricing of 5% and a unit volume increase of 1% were partially offset by the negative impacts of unfavorable foreign exchange of 2% and unfavorable mix of 2% (due primarily to the decline of the super-premium SK-II brand, which has higher than segment-average selling prices). Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 3%. Global market share of the Beauty segment increased 0.1 points.

Previous wording

•Hair Care net sales increased high single digits. Positive impacts of higher pricing (driven by Latin America, Europe and North America), a benefit from acquisitions and favorable product mix (due to the growth of premium products) were partially offset by negative impacts of unfavorable foreign exchange. Unit volume was unchanged as growth in Latin America and North America were offset by a decline in Greater China (due to market contraction and distribution footprint changes). Organic sales increased high single digits due to more than 30% growth in Latin America, a mid-teens increase in Europe and a low-teens increase in North America, partially offset by a high single-digit decline in Greater China. Global market share of the Hair Care category decreased 0.4 points.

Current wording

•Hair Care net sales increased high single digits. Positive impacts of higher pricing (driven by Latin America, Europe and North America), a benefit from acquisitions and favorable brand mix (due to growth of the premium Native brand) were partially offset by negative impacts of unfavorable foreign exchange. Unit volume was unchanged as growth in North America (due to innovation) and Latin America (due to market growth) was offset by a decline in Greater China (due to market contraction and distribution footprint changes). Organic sales increased high single digits due to a more than 30% growth in Latin America, low teens increase in Europe and double-digit increase in North America, partially offset by a high single-digit decline in Greater China. Global market share of the Hair Care category decreased 0.4 points.

Previous wording

•Skin and Personal Care net sales decreased low single digits. Negative impacts of unfavorable mix (due to the decline of the super-premium SK-II brand, which has higher than category-average selling prices) and unfavorable foreign exchange were partially offset by the positive impacts of higher pricing (across all regions). Unit volume was unchanged as growth in North America and Europe (both due to innovation in Personal Care) was offset by a decline in Greater China (due to the decline of the super-premium SK-II brand and market contraction of skin care and personal care). Organic sales decreased low single digits, due to a more than 20% decline in Asia Pacific and a low-teens decline in Greater China, partially offset by a double-digit increase in North America. Global market share of the Skin and Personal Care category increased 0.5 points.

Current wording

•Skin and Personal Care net sales decreased low single digits. Negative impacts of unfavorable mix (due to the decline of the super-premium SK-II brand, which has higher than category-average selling prices) and unfavorable foreign exchange were partially offset by the positive impacts of higher pricing (across all regions) and an increase in unit volume. The increase in volume was driven by growth in North America and Europe (both due to innovation in Personal Care), partially offset by a decline in Greater China (due to the decline of the super-premium SK-II brand and market contraction). Organic sales decreased low single digits, due to a high-teens decline in Asia Pacific and a mid-teens decline in Greater China, partially offset by a double-digit increase in North America. Global market share of the Skin and Personal Care category increased 0.3 points.

Previous wording

Net earnings decreased 4% to $1.8 billion, as the increase in net sales was more than offset by a 160 basis-point decline in net earnings margin. Net earnings margin decreased as an increase in gross margin was more than fully offset by an increase in SG&A as a percentage of net sales and a higher effective tax rate. The gross margin improvement was driven by increased pricing and productivity savings, partially offset by negative product mix (due to the decline of the super-premium SK-II brand) and unfavorable foreign exchange impacts. SG&A as a percentage of net sales increased due primarily to an increase in marketing and overhead spending and higher foreign exchange transactional charges, partially offset by the positive scale

Current wording

Net earnings decreased 4% to $2.4 billion, as the increase in net sales was more than offset by a 140 basis-point decline in net earnings margin. Net earnings margin decreased as an increase in gross margin was more than fully offset by an increase in SG&A as a percentage of net sales and a higher effective tax rate. The gross margin improvement was driven by increased pricing and productivity savings, partially offset by negative product mix (due to the decline of the super-premium SK-II brand) and unfavorable foreign exchange impacts. SG&A as a percentage of net sales increased due primarily to an increase in marketing and overhead spending and higher foreign exchange transactional charges, partially offset by the positive scale effects of the net sales increase. The higher effective tax rate was driven by unfavorable geographic mix.