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P&G Beauty Profits Increase 3%

SK-II skin care line became the first brand in the firm’s prestige beauty division to chalk up more than $1 billion in annual sales.

Wall Street’s getting antsy for the Procter & Gamble Co. to innovate its way into better market share.

The consumer giant’s profits in beauty rose 3 percent to $523 million in the third quarter as sales inched up 1 percent to $4.8 billion. And the SK-II skin care line became the first brand in the firm’s prestige beauty division to chalk up more than $1 billion in annual sales.

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RobertMcDonald, chairman, president and chief executive officer, acknowledged on a conference call Friday that the company can do better and batted away tough questions from Wall Street analysts, some of whom want P&G to move faster.

Ali Dibadj, an analyst at Sanford C. Bernstein & Co., asked: “How long do you expect investors to wait? How long does your current plan have to work? How much patience does the board have?”

McDonald said he was happy with the steps the beauty business has taken to keep its offering moving forward.

“Obviously, we’ve underperformed in beauty care for some time now,” McDonald said. “We’ve worked to improve the innovation program; it does take some time, but I think you’ll see sequential improvement quarter-to-quarter as we go forward in beauty care. We have reviewed this within the company, and within the leadership of the company, and we’re working hard on doing that.”

McDonald said the North American beauty business in particular had not shown enough innovation. “We’ve had some great innovations…the facial hair removal innovation on Olay, but the base brand needs innovation and that’s what we’re focused on now,” he said.

P&G beauty’s organic sales grew 2 percent in the quarter, with a volume increase of 1 percent and a pricing boost of 5 percent.

Global skin care shipments were down by midsingle digits, with developing markets seeing roughly flat shipments.

“We had some challenges in markets like China,” said P&G treasurer Teri List-Stoll. “In North America, volume declined due to significant competitive activity in the midpriced area. We’re taking steps to address these trends by introducing six new items into the midtier antiaging and cleansing segments and starter kits across the Pro-X lineup.”

Overall, net earnings attributable to P&G fell 16.1 percent to $2.41 billion, or 82 cents a diluted share, from $2.87 billion, or 96 cents, a year earlier. Sales for the three months ended March 31 rose 1.5 percent to $20.19 billion from $19.89 billion. The firm’s adjusted earnings of 94 cents came in 1 cent ahead of analyst estimates.

But the company projected adjusted earnings for the year of $3.82 to $3.88 a share where Wall Street was looking for profits of $3.96. The stock fell 3.6 percent to $64.44.