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Beauty Drives P&G Sales Gains

Beauty sales were up, driven by SK-II and Olay, but grooming sales were down in the quarter.

Beauty continues to be a bright spot at Procter & Gamble, but grooming is still struggling.

Net beauty sales for the quarter were up 4 percent year-over-year, to almost $3.4 billion, driven by SK-II and Olay, which have both posted double-digit growth for several consecutive quarters. P&G said gains were the result of premium innovation, product mix and increased pricing. Hair-care sales increased in the low-single digits, the company said.

According to Nik Modi, RBC analyst, P&G’s strong skin-care results could bode well for other beauty companies. “P&G specifically called out strong skin-care sales, especially for SK-II, which is a positive read for Estée Lauder,” Modi wrote in a note.

In grooming, net sales were down 9 percent, to $1.6 billion. P&G said the decline was because of volatility the quarter-to-quarter merchandising and increased competition in the space.

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On a call with media Wednesday morning, P&G chief financial officer Jon Moeller said those numbers continued to “reflect societal trends” in terms of shave frequency, and that the category has a long purchase cycle to begin with.

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“If you just purchase a package of 12 razor blades…we probably won’t see you again in the category for a year,” Moeller said.

He added that P&G is “pleased” with the level of consumption following a Gillette commercial that gained widespread attention for its focus on toxic masculinity. “We’ve received unprecedented levels of both media coverage and consumer engagement in that campaign — it’s part of our effort to connect more meaningfully with [consumers],” Moeller said.

He said retail sales are in line with pre-campaign levels, but that the campaign has generated significant conversation and a “huge number” of impressions.

P&G’s market share in grooming is flat, he noted, but said the company’s direct-to-consumer program is growing and “is the only club that’s growing users over the past six months.”

Gillette is launching Skin Guard, which Moeller called, “strong innovation,” in the U.S. and Europe in the second fiscal half.

Newness is also expected in the women’s shave business, he said.

The consumer goods giant reported total net sales of $17.4 billion for the quarter ended Dec. 31, with net earnings up 26 percent to $3.2 billion. Earnings per share were $1.25.

E-commerce sales were up almost 30 percent, and now make up close to 8 percent of total P&G sales, executives said. China continued to be a bright spot, with a 15 percent sales uptick. India and Japan also posted significant gains, with 16 percent and 9 percent sales increases, respectively, the company said.

“We do not see a sign at this point of slow down of the consumer in China,” Moeller said. “Market growth rates continue to be relatively strong.”

P&G is projecting 2 percent to 4 percent organic growth for fiscal 2019, with EPS growth between 3 percent and 8 percent.

P&G’s stock was up after the numbers came out, rising nearly 6 percent to $95.63.