After a fourth quarter in which profits fell 18 percent, Procter & Gamble Co. plans to add muscle to its marketing, Bob McDonald told analysts Wednesday during his first earnings call as president and chief executive officer of the consumer products giant.
P&G is teaming up with the National Football League in a major sponsorship deal that will kick off during the upcoming season. The arrangement, announced Wednesday but not a subject of the firm’s earnings call, encompasses more than a dozen P&G brands across male grooming, hair care, oral care and fabric care, and several of those brands will carry the “Official Locker Room Products of the NFL” logo.
The move comes as P&G revs up plans to build its men’s care business (or in P&G speak, its “win with men” strategy). In June alone, the company acquired two high-end grooming brands, Zirh and The Art of Shaving.
Despite the promise of these “tuck-in acquisitions,” a string of macroeconomic issues hampered P&G’s fourth-quarter results. Net income fell 18 percent to $2.47 billion, or 80 cents a diluted share, from $3.02 billion, or 92 cents a share, in the year-ago period. Sales fell 10.6 percent to $18.66 billion from $20.89 billion.
For the year, net earnings gained 11.3 percent to $13.44 billion, or $4.26 a share, from $12.08 billion, or $3.64 a share, on sales that dipped 3.3 percent to $79.03 billion.
For the quarter, P&G’s beauty earnings dropped 11 percent to $662 million as sales decreased 12 percent to $4.42 billion. For the year, the company’s beauty earnings declined 5 percent to $3.37 billion on sales that fell 4 percent to $18.79 billion. Consumers continued to show restraint when faced with discretionary purchases, sending P&G’s professional hair care down volume by a midsingle-digit percentage and its prestige fragrance sales down in the high-single digits. Volume in skin care declined by midsingle digits, due to the divestiture of the Noxzema brand and from a surge in promotional activity that affected Olay. The company said its premium-priced Olay Pro-X range continues to grow and is approaching an all-outlet share of 6 percent.
To offset rising commodity and energy costs, P&G raised prices on a number of items throughout the year.
Chairman A.G. Lafley said, “Despite $4 billion in price increases, we’ve basically held global value share across the majority of our categories, which is a reflection of our brand strength with consumers and retail customers.” He added the company will continue to focus its investment on its core brands, “the 23 billion [dollar] brands and the 20 half-billion [dollar] brands that account for 85 percent of sales and more than 90 percent of profits.”
Expounding on plans for the year ahead, McDonald said key efforts include growing core brands and categories, building business with “underserved and unserved” consumers and continuing to develop and acquire faster-growth, higher-margin businesses. He cited growing P&G’s current 13 percent share of the $300 billion beauty and grooming market as one objective.
McDonald also said P&G aims to accelerate over economic speed bumps in the coming year as a “flatter, faster and simpler” company. “We want to become a $100 billion company with the speed and agility of a $10 billion company.”
Shares of P&G fell $1.55, or 2.8 percent, to $53.91 in New York Stock Exchange trading Wednesday.
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