By  on October 20, 2017
Procter & Gamble; Procter and Gamble Signage outside Procter & Gamble corporate headquarters in downtown Cincinnati. Procter & Gamble reports financial resultsEarns Procter Gamble, Cincinnati, USA

Procter & Gamble is focused on China.For the first quarter of fiscal 2018, organic sales in the region were up 8 percent. E-commerce was up 60 percent — that part of the business is more than $1 billion; sales at Olay increased in the mid-teens, and sales at SK-II increased 40 percent, according to P&G executives. For the year, P&G is projecting sales in the region to grow in the mid-single digits. Six of seven categories P&G sells in China saw improvements in the quarter, according to P&G chief financial officer Jon Moeller, who broadcasted the company's earnings call from Guangzhou, China.Those shifts are significant — in fiscal year 2016 P&G's organic sales in the region were down 5 percent, largely because of a miss in the diapers category.Company-wide for the quarter, P&G posted almost $2.9 billion in net earnings, a 5 percent year-over-year increase. P&G had $16.7 billion in net sales, a 1 percent increase from the prior-year period. The business also posted 1 percent organic sales growth. Diluted net earnings per share were $1.06, a 10 percent increase from the first quarter for fiscal 2017. For the year, P&G is projecting organic sales growth between 2 percent and 3 percent.Beauty sales were up 5 percent from the prior-year period, driven by growth in China and acceleration of SK-II. Hair-care organic sales increased in the low-single digits due to increased pricing driven by product innovation, P&G said.[caption id="attachment_10723349" align="aligncenter" width="600"]SK-II R.N.A. Power Radical New Age Essence SK-II R.N.A. Power Radical New Age Essence[/caption]"Beauty in general is doing very well, SK-II is part of that success, but it’s much broader than that," Moeller said. "We’re seeing good growth in the hair-care portion of the business, as well as in the skin and personal care side of the business — that’s actually a bright point for us at the moment."P&G's Sumeet Vohra, vice president of hair care for greater China, characterized the market as the largest in the world, with $8 billion in retail hair-care sales with a market growing in the mid-single digits, and said four of the five top brands are P&G brands."SK-II is very clearly the most important brand [with] the best growth dynamics — they want to talk about Olay doing better, but it seems to me like the rest of that business, even if it’s doing better, is still losing share everywhere outside of SK-II, and they’ve been share losers now for well over a year in beauty after selling off to Coty," said Stifel analyst Mark Astrachan. Grooming sales dipped 6 percent in the quarter because of lower sales in shave care, which was partially offset by growth in appliances, the company said. P&G said organic sales in shave care decreased in the high-double digits because of price reduction in the U.S. and a “negative product mix.”On a call with journalists Friday morning, P&G executives indicated that "progress" was being made in the grooming category. Moeller called out North America and Brazil as the category's main problem areas. "If you take out North America and Brazil, you get to positive growth,” he said. In grooming, P&G has faced increased competition from start-ups such as Dollar Shave Club, now part of Unilever, and Harry’s, which is now sold at Target in addition to its owned channels. Edgewell also launched a razor replacement it touts as “compatible with Gillette, Fusion and Mach3 razor handles” and is sold online. P&G lowered prices about 12 percent earlier this year as it works to compete.“They’re still losing share," Astrachan said. "Price adjustments are resulting in something, but they’re still struggling and you’re seeing evidence of it in mix — the mix declining is representative of people trading down from Pro Glide Fusion to Mach 3 and disposable, which would suggest that even taking pricing down, there’s a problem and that the price gap is too high.”"Organic sales growth of 1 percent, while in line with consensus, was disappointing relative to expectations the company would have had a stronger quarter given uncertainty regarding the proxy fight with Trian," Astrachan in a note.P&G shareholders are still awaiting the final results of their Oct. 10 vote, which will determine if Trian Fund Management's Nelson Peltz, an activist investor with a $3.5 billion stake in P&G, will get a seat on the board. P&G said preliminary numbers aren’t enough to grant him the seat, but Peltz has contested that finding.

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