Chief Financial Officer at Procter & Gamble
Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions.
Execution of our integrated strategies continued to yield good results in the July to September quarter and provides a solid start to the fiscal year. We're growing organic sales in all 10 categories, holding global aggregate market share, accelerating productivity savings, and improving supply sufficiency. Together, this progress enables us to maintain guidance ranges for organic sales growth, core EPS growth, free cash flow productivity and cash return to shareowners.
Despite continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets.
Moving to the first quarter numbers. Organic sales grew 7%, pricing added nine points to sales growth and mix was up one point. Volume declined three points, primarily due to lower shipments in Russia. Growth was broad-based across business units with each of our 10 product categories organic sales.
Personal Health Care grew high teens. Feminine Care was up double digits. Fabric Care and Home Care were up high single digits. Baby Care, Grooming, Hair Care and Skin and Personal Care were each up mid-singles. Family Care and Oral Care grew low single digits.
Focus markets grew 4% for the quarter, with the U.S. up 5%. Greater China organic sales were down 4% versus the prior year, modest sequential improvement in the market still affected by COVID lockdowns and weak consumer confidence. Longer term, we expect China to return to strong underlying growth rates.
Enterprise markets were up 16% with each of the three regions, up 13% or more. Global aggregate market share was in line with prior year with 26 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with 6 of 10 categories holding or growing shares.
On the bottom line, core earnings per share were $1.57, down 2% versus prior year. On a currency-neutral basis, core EPS increased 7%. Core margin decreased 160 basis points and currency-neutral core margin was down 130 basis points. Higher commodity materials and freight cost impacts combined with a 550 basis point hit to gross margins. Mix was 120 point headwinds. Productivity savings and pricing provided 580 basis points of offset.
SG&A costs as a percentage of sales were lower by 90 basis points, as sales leverage and productivity improvements more than offset inflation and foreign exchange impacts. Core operating margin decreased 70 basis points. Currency-neutral core operating margin increased 10 basis points. Productivity improvements were a 230 basis point help to the quarter.
Adjusted free cash flow productivity was 86%. We returned nearly $6.3 billion of cash to shareowners, approximately $2.3 billion in dividends and $4 billion share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, good results across top line, bottom line and cash to start the fiscal year.
Our team continues to operate with excellence, executing the integrating strategies that have enabled strong results over the past four years, which are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories, where performance plays a significant role in brand choice. The [Phonetic] priority across the five vectors of product, package, brand communication, retail execution and value.
Productivity improvement in all areas of our operations to fund investments is a priority offset, cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future especially important in this volatile environment.
Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver against our priorities around the world.
Going forward, there are four areas we are driving to improve the execution of integrated strategies, supply chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build the priority, reduce cost to enable investment and value creation and to further strengthen our organization. Jon touched on each of these in our July earnings call, and they will be a central part of our discussion at Investor Day in November.
Our strategic choices on portfolios, priority, productivity, constructive disruption and organization are not independent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners.
Now moving on to guidance. We fully expect more volatility in costs, currencies and consumer dynamics, as we move through the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence has positioned us well to manage through this volatility over time.
Raw and packaging material costs inclusive of commodities and supplier inflation have remained high since we gave our initial outlook for the year in late July. Based on current spot prices at latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal '23.
Freight costs have also remained high. Though we have seen some easing in spot prices, we've made a modest downward adjustment in our outlook and now expect a $200 million after-tax headwind from freight and transportation costs in fiscal '23.
Foreign exchange has continued its strong move against us as the U.S. dollar has strengthened significantly against essentially all major currencies around the world. Based on current exchange rates, we forecast a $1.3 billion after-tax impact, an incremental hit of $400 million versus our initial outlook for the year.
Combined, headwinds from these items are now estimated at approximately $3.9 billion after tax or $1.57 a share, a 27 percentage point headwind to EPS growth for the year. We will offset a portion of these cost headwinds with price increases and productivity savings. We will continue to invest in irresistible superiority, which is even more important, as we compete in some markets with local or non-U.S.-based competitors that don't see the same foreign exchange rate impact.
As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the business. As I noted at the outset, our good first quarter results enable us to confirm our guidance ranges for the fiscal year across all key metrics. We continue to expect organic sales growth in the range of 3% to 5%. On the bottom line, we are maintaining our outlook of core earnings per share growth in a range of in line plus 4% versus prior year. However, the steep increase in foreign exchange impact pushes our current expectations towards the lower end of the range.
We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion in common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. The outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range.
To conclude, the macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't immune to the impact. We've attempted to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and delivering strong results.
We'll continue to step forward towards the opportunities that we may fully invest in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to maintain balanced top and bottom line growth.
With that, we'll be happy to take your questions.