BEAUTY CARE

P&G sees increase in quarterly net sales year-on-year

BY Antoinette Alexander

CINCINNATI Procter & Gamble released on Wednesday solid quarterly results driven in part by cost control and Gillette synergy benefits.

“This quarter is yet another demonstration of the power of P&G’s product category and geographic diversification and disciplined focus on cash and cost productivity,” stated A.G. Lafley, chairman and chief executive officer. “P&G delivered strong results in-line with long-term targets in a challenging economic and competitive environment with broad-based sales and share growth, earnings growth and overhead cost improvement.”

Net sales totaled $20.46 billion, up 9 percent compared with the year-ago period.

Net earnings totaled $2.7 billion, or 82 cents per share, compared with $2.5 billion, or 74 cents per share, in the year-ago period.

Operating profit was up 13 percent as a result of higher net sales and improved operating margin. Operating margin was up 60 basis points as a reduction in overhead spending as a percent of net sales more than offset higher commodity and energy costs.

SG&A expenses were 31.2 percent of net sales, an 80 basis point improvement versus the year-ago period because of lower overhead spending as a percent of net sales. Overhead spending improved as a result of increased productivity, Gillette synergies and scale leverage. Marketing spending was up 9 percent, in-line with net sales growth.

In beauty, net sales rose 9 percent to $4.7 billion. Volume was up mid-single digits in hair color behind the Nice ‘N Easy Perfect 10 launch and in cosmetics behind the CoverGirl Lash Blast mascara initiative. Retail hair care volume was up mid-single digits as high-teens growth on Head & Shoulders and double-digit growth on Rejoice were partially offset by a decline on Pantene in North America. Net earnings in beauty were down 2 percent to $589 million as the impact of higher net sales was more than offset by higher commodity costs and base period gains from minor Wella fragrance brand initiatives.

Grooming net sales rose 13 percent to $2 billion behind 6 percent volume growth and a 7 percent favorable foreign exchange impact. Price increases taken across premium shaving systems added 2 percent to net sales. Product mix had a negative 2 percent impact on net sales as favorable mix from growth on Fusion was more than offset by a negative mix impact from disproportionate growth in developing regions. Blades and razors volume was up high-single digits behind double-digit volune growth in developing regions on the successful expansion of Fusion and the launch of Venus Embrace in North America.

Fusion will deliver more than $1 billion in net sales this fiscal year, making it P&G’s 24th billion-dollar brand and the fastest ever to reach this milestone, including Mach3, according to P&G.

Net earnings in grooming were up 30 percent for the quarter to $403 million behind higher net sales, lower overhead spending and a more profitable product mix.

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BEAUTY CARE

Following Del acquisition, Coty lays out unification plan

BY Antoinette Alexander

WEST PALM BEACH, Fla. With the acquisition of Del Laboratories complete, Coty Inc. is now working to bring together the best practices of both companies and unify its sale force—moves that, along with continued product innovation, will help it achieve its goal of becoming a $5 billion global beauty company.

“Our goal is by July to come together as one united organization and take the best practices and best people of both organizations and really come together and leverage our synergies,” said Mary van Praag, senior vice president of sales, during a meeting with members of the media on Saturday at NACDS Annual. “From a customer perspective, we are going to have one unified sales force.”

As part of that move, Mike Ferrara, who is currently head of U.S. marketing for fragrance and personal care, will be moving to the sales side heading up fragrance and personal care for sales strategy and customer marketing. In addition, Bruce Kowalsky, who currently handles the sales operations and customer marketing for the Del Lab’s portfolio, will be vice president of sales, national accounts for all of Coty Beauty.

The Coty Beauty brand portfolio includes, but is not limited to, fragrances Celine Dion, David and Victoria Beckham, Shania Twain and Stetson, and cosmetics brand Rimmel. The deal enabled Coty to extend its portfolio offering, which, prior to the acquisition, made well over half of its sales (68 percent) in fragrance. Prior to the deal, color cosmetics accounted for 15 percent of Coty’s sales, while toiletries stood at 14 percent and skin care/sun care only at 3 percent of sales.

Through the acquisition, which closed Dec. 31, Coty Beauty’s portfolio has been bolstered with the addition of the Del Lab’s Sally Hansen, N.Y.C. New York Color and La Cross brands. Including the Del Lab acquisition, Coty’s annual net sales currently total $3.5 billion.

Having such brands makes Coty an even more powerful player in the beauty space and the momentum shows little signs of slowing as the company gears up for 2008/2009 launches, including fragrance. In fragrance, Coty currently holds a 30 percent share.

“Fragrance has been one of those categories that hasn’t seen a lot of growth from 2004 to 2007. What we are excited about though is that Coty has not only been the No. 1 player but we are on the right side of the growth track. In fact, in this year alone we contributed over 60 percent of the absolute dollar growth,” said van Praag.

Coty is looking to stay on the growth track with several major upcoming launches including a signature fragrance by actor and country music star Tim McGraw and a debut fragrance by actress Halle Berry.

In addition, the company will launch next spring a new brand from Stetson aimed at the younger male market.

Ferrara added that his No. 1 objective is improving the in-store environment and that the company is putting “significant resources” behind that initiative, including consumer insight research.

“You need some organization to the shelf and key purchase motivators are all about seeing and smelling the product,” said Ferrara. “Bottom line is we are going to make the environment more engaging and shoppable for her when she is in the store so she feels there is a reason to come over to beauty and, more importantly, when she is in beauty to think of it as a place to buy fragrance.”

While the initiative is in its early stages, the company is on the fast-track and Ferrara said they are already talking with some key customers about in-store tests, some of which could be seen for fall launches.

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Alberto Culver reports solid 2Q results

BY Antoinette Alexander

MELROSE PARK, Ill. Alberto-Culver, whose brands include TRESemme, Alberto V05, Nexxus and St. Ives, reported solid second quarter results thanks, in part, to strong sales of TRESemme and Nexxus.

“In am particularly proud that in the U.S., TRESemme and Nexxus’ consumer consumption rates, a critical measure of the health of our brands, both increased at double-digit rates during the latest 12 and 52 week periods, far outpacing the category,” stated president and chief executive officer V. James Marino. “In a challenging retail environment, characterized by mixed consumption trends, we were able to deliver another record quarter of sales and earnings growth for our shareholders.”

Net sales for the quarter increased 7.7 percent to $412.8 million from $383.4 million in the year-ago period.

Including continuing and discontinued operations, the company reported net earnings of $29 million, or 28 cents per share, compared with net earnings of $22.6 million, or 23 cents per share, in the year-ago period.

In November 2006, the company separated its consumer products business from its beauty supply distribution business. It resulted in the formation of two separate and independent publicly-traded companies: new Alberto-Culver, a manufacturer and marketer of beauty care and other personal care products, and Sally Beauty Holdings, a distributor of professional beauty supplies. Beginning in the first quarter of fiscal year 2007, the results of operations of Sally Beauty and Beauty Systems Group are reported as discontinued operations.

The company also announced that its board of directors has approved the regular 6.5 cent quarterly cash dividend. The dividend will be paid on May 20, 2008 to shareholders of record on May 5, 2008.

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