The Procter & Gamble Co.’s Beauty, Hair and Personal Care unit boosted profits in the first quarter despite weakness in the Prestige category.
The P&G unit registered net income for continuing operations of $710 million, up 2.9 percent from the $690 million recorded during the first quarter of fiscal 2014, as sales declined 0.9 percent, to $4.86 billion from $4.9 billion, and were flat on a currency-neutral basis.
During its conference call with analysts on Friday, P&G reported that organic sales for the Prestige category experienced a midsingle-digit decline “versus a base period that included initiative launches on Lacoste and Gucci. This more than offset Hugo Boss growth behind the Boss Ma Vie and Boss Bottled Unlimited innovation launched during the June quarter.”
Both Prestige and Skin Care had decreases on a global basis and in both developed and developing markets. Overall, organic sales were up in the Hair Care, Cosmetics, Deodorants, Salon Professional and Personal Cleansing businesses, although Cosmetics and Personal Cleansing were down in developed markets, where Hair Care’s results were flattish.
Jon Moeller, chief financial officer, noted on the call that Hugo Boss, the largest fragrance within Prestige, had a “pretty strong quarter” and that the Cosmetics unit enjoyed a midsingle-digit increase in organic sales, “with Max Factor growing shipments on a double-digit basis globally.”
Hair care was up 2 percent on a top-line basis, with Pantene sales in the U.S. enjoying an 11 percent growth spurt. Within Skin Care, “Olay remains a work in progress,” the cfo stated. “We are making some good progress in addressing some of the consumer benefits segments that we had neglected and that are important in the category, with items like Luminous, with items like Fresh Effects. But we still have work to do, both in North America and in China.”
He said the first-quarter results in the BHPC unit represented “sequential, quarter-on-quarter” progress “and we are hopeful we can continue that.”
Moeller reiterated P&G’s intention to pare its brand portfolio through all its business units, ultimately narrowing it to “70 to 80 category-leading, competitively advantaged brands organized into about a dozen business units and four industry-based sectors,” but declined to discuss the evaluation process. However, P&G did disclose plans to either partially or fully off-load the Duracell battery business as the company reported that it had sold its interest in a Chinese joint venture.
He described the three months ended Sept. 30 as “a challenging quarter from a macro standpoint, with slowing market growth in both developed and developing regions; strong foreign exchange headwinds; market-level challenges in the Ukraine, Russia and the Middle East, Venezuela, Argentina and Hong Kong, and increased consumption taxes in several large markets including Japan and Mexico.”
Overall, P&G’s net income declined 34.3 percent to $1.99 billion, or 69 cents a diluted share, from $3.03 billion, or $1.04, in the year-ago period. Subtracting restructuring and impairment charges and other nonrecurring items, adjusted EPS was $1.07, matching the consensus estimate of security analysts. Sales were essentially flat, down 0.2 percent to $20.79 billion from $20.83 billion in last year’s period. Analysts expected revenues of $20.83 billion.
Shares closed ahead 2.3 percent, at $85.16, in New York Stock Exchange trading Friday.