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Beauty Sales Up, Grooming Sales Down at P&G

Beauty sales are being driven by SK-II, which was up 30 percent in the fourth quarter.

Procter & Gamble-owned SK-II just posted its 15th consecutive quarter of growth.

The brand, which boasts luxury price points, is one of the driving forces behind growth in P&G’s beauty offering, the star of its portfolio in terms of sales growth for its fiscal quarter with sales up 10 percent.

SK-II’s sales have averaged growth of more than 20 percent — this past quarter, sales were up more than 30 percent — driven by the brand’s luxury positioning, product offering and emotional marketing campaigns. Olay, P&G Beauty’s key turnaround project over the past few years, has finally turned around, and is contributing to the beauty sales gain. Olay has been particularly strong in China, where the brand has posted five consecutive quarters of double-digit organic growth.

“We’ve upgraded Olay packaging to prestige-like quality and attractiveness,” noted David Taylor, P&G’s chief executive officer, on the company’s earnings call Tuesday.  “We’ve completely revamped our Olay beauty counselor program, we reduced the number of beauty counters and upgraded the remaining counters with higher and tighter standards.

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“Olay and SK-II are serving different segments of the skin care markets and both are delivering strong results by improving superiority,” said Taylor.

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P&G has made several acquisitions lately to build its personal care and beauty portfolios, including natural deodorant brand Native, natural prestige skin-care brand Snowberry, and First Aid Beauty, an entry-price point prestige skin-care brand with specialty retail distribution in North America.

Those deals are happening as beauty looks to grow its ‘big brands,'” Taylor noted, adding that “it’s very important that we plant seeds in high growth areas.”

P&G’s hair portfolio also posted modest growth, the company said Tuesday.

Things in grooming, however, are not as bright, and the category posted a 1 percent dip in sales.

Over the past several years, P&G’s grooming portfolio has lost share due to an influx of newcomers like Harry’s and Dollar Shave Club, which have impacted its key Gillette brand. P&G has lowered prices in the U.S. market on some of its products and is working to get more competitive in the space, both in the U.S. and Europe, executives noted.

“We launched Gillette 3 and Gillette 5 razors in the U.S. last quarter to strengthen our position and opening price points for male shaving systems,” said P&G chief financial officer Jon Moeller. “We’ve strengthened our online program, increasing the rate of new user recruitment and retention. We’re currently growing volume and value share on a past three- and six-month basis.”

Moeller continued, “We face new challenges on Gillette as a value tier competitor expanding in store distribution in the U.S. and as competitors are expanding their direct-to-consumer propositions in Europe. We’re funding strong plans to protect the business, but competitive actions are likely to have at least some impact.”

On an earlier call with media, Moeller likened part of the difficulty in grooming to men simply shaving less. Noting the segment was “making strong progress,” he added that “what offsets that, to some extent, is the continued societal shift toward fewer shaves.”

For the fiscal year, P&G posted a 3-percent increase in net sales to $66.8 billion. Net earnings were $9.86 billion, down 36 percent. Diluted net earnings per share were $3.67, down 34 percent from the prior year due in part to the company’s divestiture of its beauty portfolio to Coty Inc.

Sales for the fiscal fourth quarter were up 3 percent to $16.5 billion. Net earnings were $1.89 billion, down 14 percent. Diluted net earnings per share were down 12 percent to 72 cents, which P&G said was because of non-core restructuring charges and early debt extinguishment costs.

For fiscal 2019, P&G is projecting organic sales growth between 2 and 3 percent, and core EPS growth of 3 to 8 percent.