With that, let me turn it over to Mike Polk for his comments.Michael B. Polk Thank you, Nancy. Good morning, everyone and thanks for joining our Q1 2012 results call. Our objective today is twofold: First, we'll review our first quarter results and share some observations about our performance; second, we'll discuss the progress we are making driving our growth game plan into action. Let's get into the results. We posted a solid set of Q1 numbers that represent the positives delivering full year results in line with our guidance. Importantly, we delivered these results in the context of a significant change agenda. We've aligned our organization around the new growth game plan, executed the European transformation SAP EPC cutover, driven Project Renewal into action, and delivered our third consecutive quarter of consistent results, getting the business back into a predictable cadence of delivery. I'm proud of the team. They've been fully engaged and continue to demonstrate their ability to drive delivery and drive change at the same time. Net sales growth this quarter was a very solid 4.6%. Core sales growth was 5.2%. We estimate that about $28 million in net sales were pulled forward from Q2 into Q1, associated with SAP implementation in Europe. Adjusting for this pre-buy, core sales would have been up 2.9%. The 2.9% underlying core sales growth is stronger than we anticipated when we guided the full year at the end of January. As you recall, we thought we'd be in the lower end of the 2% to 3% full year guidance range in the first half of 2012, as a result of less merchandising support in Western Europe during the SAP transition window and operational challenges on Décor. This planned slowdown was more than offset in Q1 by strong performance on our Professional and Baby businesses.
Q1 normalized EPS was $0.33, a year-over-year improvement of 14%, and $0.02 better than consensus. Adjusted for the benefit of the SAP pre-buy, normalized Q1 EPS would have been approximately in the middle of our full year EPS guidance range of 3% to 6%. We delivered 10 basis points of normalized operating margin improvement, despite increasing strategic SG&A, about 90 basis points. The increased strategic SG&A investment was fueled by continued progress on structural SG&A, down over 80 basis points versus prior year and good sequential and year-over-year improvement in gross margin to 38.3%, up 20 basis points versus prior year.Our 38.3% gross margin was our highest result in the last 6 quarters, despite continuing challenges from operational issues in our U.S. Décor business. Importantly, cash flow was over $60 million better than prior year, and we returned over $40 million to shareholders through dividends and share repurchases. In Q1, our Professional segment had another strong quarter, delivering core sales growth of 10%, with the reported sales up over 9%. This continued strong performance was broad based. Our Consumer segment core sales declined 2%, with reported sales down 2.6%. This downturn was driven by the continued challenges in Décor which, while expected, masked a very good quarter on the balance of our Consumer segment. Writing, in particular, had strong performance with excellent innovation on Parker and Paper Mate having a positive impact on those businesses. We have made good progress resolving the operational issues at Décor. Q1 represented sequential improvement in customer service versus Q4, and we believe we'll see further improvement in all key metrics in Q2. The Décor business should return to more normal operating rhythm in the second half of 2012. Our Baby & Parenting segment delivered outstanding growth in Q1, with reported and core sales growth of 21%. Our Baby growth rates were enhanced by weak year ago comparisons and some onetime benefits that either don't repeat or reverse out in the balance of the year.
Our expectation for the remainder of the year is for more modest performance. Importantly, the Baby results due reflect steady progress with Graco POS positive in the U.S., and excellent momentum on Aprica in Asia, partially offset by continued challenges in Europe.Excluding the SAP pre-buy, 8 of our 9 global business units grew core sales in Q1, 5 of the 8 grew core sales greater than 5%, and 2 of the 5 grew core sales greater 10%. In the emerging markets, core sales grew over 14% in Q1, with double-digit core sales growth in most of the major countries. Our Q1 core sales grew nearly 3.5% in the developed world. Excluding the SAP pre-buy, developed world core sales would have been up about 1%, with strong growth in Japan and solid results in the U.S., offset by continued sales declines in Western Europe. Our key growth initiatives yielded the impact we expected in Q1. Industrial Products & Services achieved their 9th consecutive quarter of double-digit core sales growth. Rich Wuerthele and his team are simply doing the fundamentals right, superior products, superior selling systems, new market entry and every day great execution. Read the rest of this transcript for free on seekingalpha.com