NEW YORK — Led by strength in its Clairol-enhanced beauty care division, The Procter & Gamble Co. produced its best quarterly sales growth in seven years and beat Wall Street estimates in the first quarter.
This story first appeared in the October 30, 2002 issue of WWD. Subscribe Today.
For the three months ended Sept. 30, the Cincinnati, Ohio-based beauty care and consumables behemoth posted a 32.6 percent increase in net income to $1.46 billion, or $1.04 cents a diluted share. That compares with last year when the firm reported earnings of $1.1 billion, or 79 cents.
Results included a $113 million aftertax restructuring charge related to the program to streamline the company’s operations and business portfolio. Special charges included employee severance costs of $51.5 million before tax and asset-related charges of $61.5 million.
Excluding those items and a $238 million aftertax charge in last year’s quarter, profits gained 17.5 percent to $1.58 billion, or $1.12, versus $1.34 billion, or 96 cents a year ago. The adjusted earnings per share figure of $1.12 beat analysts forecasts by 2 cents.
Total consolidated sales increased 10.5 percent to $10.8 billion from $9.77 billion last year.
“Despite continuing softness in the global economy,” said chief executive officer A.J. Lafley on a conference call with analysts, “we are maintaining momentum and are off to a good start in the new fiscal year. We are delivering ahead of our long-term business and financial commitments on all key measures.”
Of P&G’s five business divisions, beauty care showed the strongest results, with double-digit earnings, sales and volume growth, led by hair care and fine fragrances.
Net income in the beauty segment improved 23 percent to $548 million, where overhead and manufacturing cost reductions were partially offset by increased spending on marketing support. Sales increased 27 percent — including a 2 percent benefit from foreign exchange — to $3.12 billion, while unit volume rose 32 percent, driven by the Clairol acquisition. Hair care and fragrance products also made significant contributions to volume growth.
“The hair care businesses had a great quarter,” said vice president and treasurer J.P. Hernandez on the call. “Led by Pantene and Head & Shoulders, as well as the fine fragrance businesses, volume was up 10 percent, excluding acquisitions and divestitures, on a global basis.”
Core gross margin also accrued to the bottom line, expanding 120 basis points. P&G attributed the increase to a better business segment mix, structural base business and restructuring savings and lower material prices.
Chief financial officer C.C. Daley added on the call that gross margin gains also benefitted from the company’s shift to higher margin products such as health care and beauty products, especially from the Clairol brand.
Looking ahead, P&G expects volume to be in the high-single digits compared with last year and noted the Clairol acquisition will be annualized on Nov. 16. As a result, the net volume impact from acquisitions and divestitures in the quarter is expected to come in about two points lower, with the negative Jif/Crisco impact largely offsetting the reduced Clairol benefit. Earnings per share growth is anticipated in the mid- to high-single-digit range, despite the divestiture of Comet in last year’s period. P&G bought Clairol from Bristol-Myers Squibb last November for about $4.95 billion, as reported.
For the full fiscal year, P&G forecasts sales growth excluding foreign exchange of 4 to 6 percent, and reaffirmed its expectation of a double-digit rise in EPS.