The Procter & Gamble Co.’s beauty business drove organic sales up 5 percent in the fiscal third quarter as the company leaned more on higher-end products.
“Skin- and personal-care organic sales increased double digits driven by continued strong growth of the super-premium SK-II brand and Olay Skin Care as well as premium innovation in the Personal Care category,” the company said in its third-quarter report. “Hair Care organic sales were unchanged as the impact from product innovation was offset by competitive activity.”
P&G’s beauty business drove net sales up 10 percent to $2.93 billion, reflecting the benefit of currency fluctuations. Net earnings from continuing operations gained 23 percent to $488 million.
The business includes SK-II, Olay and other brands that P&G held on to after shuttling 41 of its beauty brands to the control of Coty Inc. in a $12.5 billion deal that reshaped both companies, and the industry.
But the pressures that pushed P&G to reinvent in beauty continues to bear down, in beauty and other categories, particularly grooming, with shaving concept Harry’s Inc. picking up share and entering Walmart Inc. P&G also said it would pay 3.4 billion euros for Merck’s consumer heath business in Germany.
Overall, the consumer products giant saw sales rise 1 percent on an organic basis, or 4 percent on a net basis to $16.28 billion, while earnings fell 1 percent to $2.54 billion.
Investors were clearly looking for more and sent shares of the company down 3.2 percent to $74.98.
Chief financial officer Jon R. Moeller told analysts on a conference call that: “The ecosystems in which we operate around the world are being disrupted and transformed. We must change at an even faster rate, winning through superiority, stronger costs and cash productivity and the strengthened organization and culture. Retail trade transformation in the U.S. is reshaping our categories, rapid shifts to e-commerce and aggressive inventory management.”
David Taylor, president and chief executive officer, added: “I want to be very clear about something: This is not business-as-usual P&G. We will make additional changes needed to accelerate progress. The strategy needed to deliver balanced top and bottom line growth requires accelerated progress against the five elements of superiority, product, packaging, brand communication, retail execution and value.”
While not naming names, Taylor addressed the increased competition from Harry’s in the grooming category.
“We made a very set of tough choices to improve our position in grooming in the U.S. a year ago, and we’re seeing some positive progress,” Taylor said. “The U.S. male shave care business grew volume for the fourth-straight quarter with male shaving systems up 10 percent this quarter. We expect the strong shipment volume growth we delivered over the last year to translate into stronger sales growth now that the price changes annualizing this quarter. This is starting to play out as we’re growing volume share and value share.
“Ultimately, our objective is to grow the number of users of Gillette blades and razors,” he said. “Volume trends are encouraging. This is a big improvement following years of declines of as many as two million users.”