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P&G Beauty Sales Drop 10 Percent in Quarter

Sales of SK-II increased, offsetting sales declines for Olay.

Procter & Gamble Co. reported $16.9 billion in net sales for the second quarter of fiscal 2016, a 9 percent decrease year-over-year. Foreign currency exchange rates are negatively affecting P&G’s numbers, the company says.

“We’re operating in a more volatile environment than we ever have,” chief financial officer Jon Moeller said. P&G estimated that its 2015 net sales were negatively impacted by about $4.8 billion in “unfavorable foreign exchange fluctuation compared to 2014.”

For the quarter, net sales for beauty were down 10 percent, to just under $3 billion. Organic beauty sales increased 1 percent. In beauty, lower organic sales volume was offset by price increases. “Organic sales increase in personal care and the super premium SK-II skin-care brand were partially offset by organic sales declines of the Olay brand,” the company said.

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P&G is in the process of selling 41 beauty brands to Coty in a deal that should close in the second half of this year, Moeller said. The company is shedding non-core assets to simplify its product portfolio and holding on to high-growth and high-margin brands. P&G acknowledged portfolio “cleanup” as a driver of lower sales volumes.

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Grooming sales for the quarter decreased 10 percent year-over-year to $1.8 billion; health care net sales were down 5 percent to less than $2 billion; fabric care and home care net sales were down 7 percent to $5.3 billion, and baby, feminine and family-care sales decreased 10 percent to $4.7 billion, the company reported. P&G said it has increased prices to make up for lower sales volumes.

P&G said net earnings of continuing operations for the quarter rose 35 percent to $3.2 billion from $2.4 billion a year earlier. In the six-month period, net earnings from continuing operations rose 33 percent to $5.8 billion from $4.4 billion. The company’s stock price rose 2.6 percent to $78.81 Tuesday.

Core earnings per share were $1.04, a 9 percent increase year-over-year from 95 cents. Excluding the impact of foreign exchange, currency-neutral core earnings per share increased 21 percent in the first quarter. Reported gross margin increased 170 basis points. Reported operating profit margin was up 340 basis points, and core operating profit margin was up 350 basis points, including a net 40 basis points of negative foreign exchange impacts.

P&G is expecting full-year organic sales growth in the low single-digits. Core earnings per share are expected to be down 3 to 8 percent because of foreign exchange impacts.