By  on October 27, 2010

Procter & Gamble Co.’s beauty business saw its profits expand in the first quarter, even though vigorous growth within the Olay skin care range was insufficient to move its top line forward.

For the quarter ended Sept. 30, the beauty unit’s net earnings from continuing operations rose 7 percent to $829 million, while sales were flat at $4.93 billion on volume growth of 4 percent. Organic sales in beauty gained 3 percent.

P&G’s overall profits decreased 6.9 percent to $3.08 billion, or $1.02 a diluted share, from $3.31 billion, or $1.06, a year earlier, due in part to the company’s sale of the pharmaceutical business, which was completed in October 2009. Sales grew 1.6 percent to $20.12 billion, from $19.81 billion in the prior-year period. Organic sales gained 4 percent and volume increased 8 percent with growth in all major geographic regions.

Olay is on a tear as it expands geographically and by product assortment. The company said Olay’s unit volume had a double-digit increase, and value share increased almost half a point. Shipments of Olay within the Central and Eastern Europe, Middle East and African region increased more than 50 percent compared with the prior year, said P&G.

Last month, P&G announced it signed country music star Carrie Underwood to a two-year deal to be the face of new Olay products slated to be launched over the course of next year.

“Our strategy of filling our categories up and down is working,” chairman, president and chief executive officer Bob McDonald told analysts during the company’s quarterly earnings call Wednesday

When asked by an analyst if P&G’s revamp of Pantene hair care has gained traction in the U.S. market, McDonald said, “Pantene’s initial sales results in the United States are mixed. In the first month of the launch, which was May, Pantene grew value share in the U.S. and in all key retailers. Both distribution and merchandising support were strong, with about six straight weeks of record display levels.

“More recently, though, shares are slightly down versus a year ago over the past three months,” he continued, “down about a point.…We’ve seen heavy competitive promotional activity following our introductory merchandising period. We’ve identified all the key opportunities to get Pantene growing more strongly and are obviously working to improve awareness, trial and feature levels, and we will get it going.”

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