Sales at Revlon rose 9.1 percent for the quarter.

Revlon, Elizabeth Arden and Procter & Gamble report higher revenues for the quarter while price pinch intensifies.

The price pinch is intensifying for some of the biggest names in the beauty world, and they’re fighting back with cost savings wherever possible to offset inflating commodity costs.

This story first appeared in the April 29, 2011 issue of WWD. Subscribe Today.

On Thursday, Revlon Inc., Elizabeth Arden Inc. and Procter & Gamble Co.’s beauty unit all reported higher revenues for the quarter ended last month, but their bottom-line results bore distinctly different signatures. Revlon’s profits were up and Arden’s loss was down while P&G’s beauty unit saw a contraction in its income.

P&G is seeking to increase its productivity and initiating cost savings measures to deal with the impact of a forecasted $1.8 billion in commodity cost increases this year.

The firm’s chief financial officer, Jon Moeller, said, “We are also facing rapid and significant increases in commodity costs. Since the beginning of the fiscal year, the year-on-year impact from higher costs has more than tripled.…In the March quarter alone, input costs are up more than $400 million before tax versus the prior year.”

He added, “For the first three quarters this fiscal year, we have generated an average of 150 basis points of cost savings per quarter.”

It’s also reducing its exposure to commodity and energy costs through sustainability efforts, and offsetting costs with selective pricing. For instance, in February, P&G increased prices on Gillette shaving cartridges and disposable razors in the U.S. More increases are planned for June, such as Head & Shoulders and a number of nonbeauty products.

For the company’s third quarter ended March 31, the beauty unit’s net earnings from continuing operations declined 3 percent to $547 million, while sales gained 5 percent to $4.87 billion on organic volume growth of 6 percent. Organic sales in beauty gained 4 percent.

P&G’s overall profits from continuing operations increased 11.1 percent to $2.87 billion, or 96 cents a diluted share, from $2.59 billion, or 83 cents, a year earlier. Sales grew 5.5 percent to $20.23 billion, from $19.18 billion in the prior-year period. Organic sales gained 4 percent and volume increased 5 percent with growth in all six business segments.

The company said it expects to maintain its current level of media spending at approximately 10 percent of sales. Bob McDonald, chairman, president and chief executive officer, said that, as P&G moves more toward different mediums, including digital, “We’re actually getting a lot more for our advertising spending than we ever have before.”

Revlon, for its part, for now is largely deflecting the impact of higher commodity costs. President and ceo Alan Ennis said, “Like other companies, yes, we are experiencing some input cost pressures particularly from oil-based commodities as it relates to plastics, etc. But we are looking for opportunities to offset those costs with other savings, so [it’s] nothing material to us at this point.”

Revlon saw first-quarter net earnings jump to $10.4 million, or 20 cents a share, from $2.2 million, or 4 cents, in the year-old period. The quarter included $9.7 million in costs associated with refinancing-related expenses. Sales for the quarter ended March 31 gained 9.1 percent to $333.2 million, from $305.5 million.

Revlon bolstered its nail color business by acquiring Sinful Cosmetics, a value-priced mass market brand sold primarily in the U.S., for $39 million on March 17.

“Revlon’s strategic objective for the last couple of years has been to drive profitable growth. And Sinful is a nice complement to our existing portfolio,” Ennis told WWD, noting that Sinful is the number-one nail color brand in Walgreens in terms of unit sales, according to Nielsen Co. data.

The firm also turned up the heat on competitors with increased advertising spending last year and in the first quarter. “We are spending at competitive levels and we’ll continue to do that,” said Ennis.

Elizabeth Arden said that, although it would experience “some level” of commodity inflation, particularly in glass and in fuel surcharges, it is finding ways to mitigate those costs with improvements in pricing or with efficiencies from its global reengineering initiative, launched two-and-a-half years ago.

These costs won’t likely materially harm margins, said company chairman, president and ceo E. Scott Beattie, who focused more on the fact that the “seasonably weak” third quarter was profitable for the first time in the company’s history.

“This fiscal year we will be profitable in our all four quarters and intend to stay that way going forward,” he said.

For the period ended March 31, Arden shrank its net loss to $3.3 million, or 12 cents a diluted share, from a loss of $3.9 million, or 14 cents, in the year-ago quarter. The company said its adjusted earnings totaled 2 cents a share.

The combination of an 8.4 percent increase in revenue in North America, to $142.8 million, and a 3.7 percent gain in international volume, to $88.5 million, lifted net sales 6.6 percent to $231.3 million from year-ago sales of $217 million.

Despite overall sales growth, the ceo noted that the pace of the brand’s international growth has decelerated greatly from the 12.4 percent increase generated in the second quarter. Beattie said the slowdown is related to issues like tightening distribution, raising prices and reinvesting in media spend, which should grow to 10 percent in the firm’s fourth quarter.

Shares of P&G rose 0.8 percent to $64.50 Thursday, while Revlon’s picked up 6.7 percent to $17.45 and Arden’s declined 3.1 percent to $30.75.


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