In beauty, hair care seemed to be the focus of Procter & Gamble’s news during the company’s earnings call on Friday.
Chief financial officer Jon Moeller said on a call with Wall Street analysts that the company’s beauty segment sales were bolstered by sales of Pantene and Head & Shoulders, but Herbal Essences did not fare as well.
“The strength in the U.S. is primarily behind Head & Shoulders and Pantene, both of which are doing very well,” Moeller said. “We’re not doing so well on the balance of the portfolio, the smaller brands, particularly Herbal Essences.…We’re relaunching Herbal Essences as we speak.”
That relaunch plan includes positioning Herbal Essences as a more natural product, featuring antioxidants, aloe and sea kelp as star ingredients and leaving out parabens and gluten, according to Moeller, who said nine new collections will be launched — they will be called Herbal Essences with Bio:Renew, according to a P&G spokeswoman.
The line is one of a few things P&G is doing as it expands its focus on the natural segment, Moeller said, elaborating on the business first “bio-based detergent” — PureClean, which he said provides the cleaning power of Tide with 65 percent bio-based ingredients.
P&G’s numbers got a boost on Friday from the company’s divestment of its specialty beauty portfolio to Coty Inc. in a deal that closed in October. Wall Street reacted positively, with shares up more than 2 percent in afternoon trading to $87.07.
Diluted net earnings per share were up 157 percent year-over-year, to $2.88, including a net gain of $1.95 per share from the beauty brands divestiture, the company said Tuesday. Net earnings were $7.8 billion, up from $3.2 billion in the prior-year period. Net sales for the quarter were $16.9 billion, down 0.6 percent from the prior year, impacted negatively two percent from foreign exchange. EPS was $1.08, up 2 cents from analysts’ consensus of $1.06.
The company’s beauty segment posted net sales of $2.9 billion, down 1 percent year-over-year, but with organic sales growth of 3 percent. SK-II continued to grow, P&G said, and hair-care sales also posted gains because of innovation and marketing for Pantene and Head & Shoulders. Pantene recently released a new marketing campaign about “fueling your hair,” for example. Grooming was also down 1 percent, but up on an organic basis, with growth coming from shave care and appliances, P&G said, specifying that volume overseas offset negative figures in the U.S.
Moeller also addressed potential policy shifts when asked about Donald Trump and China, specifying that P&G was still expecting the region to be a growth driver (sales there were up 3 percent in the quarter, year-over-year, he said). He noted China as a particularly important market for the business broadly, and one where online sales were growing “at a 30-40-50-percent clip.”
“We delivered good results in the second quarter in a difficult operating environment,” said chairman, president and chief executive officer David Taylor. “Stronger top-line performance in the first half of the fiscal year is enabling us to increase our organic sales growth outlook for the full year – another step toward the levels of balanced top-line, bottom-line, and cash-flow growth that will consistently put P&G shareholder value creation among the best in our industry.”
The business has raised its guidance for organic sales growth from 2 to 3 percent, which chief financial officer Jon Moeller said on an early morning media call was because the company’s previous two quarters were a half point better than expected. P&G’s EPS forecast remained the same, with expected growth in the midsingle digits from fiscal 2016’s core EPS of $3.67.