For its third quarter, Procter & Gamble’s beauty business posted a net earnings increase of 17% to $624 million with net sales for the January to March period down 2% to $4.69 billion due to negative foreign exchange. Organic sales grew 2%.
Hair care, deodorants, personal cleansing—including new Herbal Essences body wash—helped drive growth, along with a high single-digit increase in cosmetics, thanks to CoverGirl Ready Set Gorgeous foundation and the Bombshell Eye Collection. In Asia, sales of salon products and skin care in Asia decreased.
North America’s beauty business continued to strengthen. “I wouldn’t say we have fully rounded the corner on U.S. skin care or U.S. Pantene, but certainly we are making significant progress,” said Jon Moeller, P&G’s chief financial officer on the division’s previously-reported weaknesses. Both were up “mid-single digits.”
In grooming, its highest margin business, P&G plans to unveil a “major” Gillette facial shaving product on April 29. Net sales in the category fell 4% to $1.86 billion with net earnings up 4% to $463 million. Organic sales rose 1%.
“Our third quarter beauty results reflect the strong progress on cost savings and marketing spend productivity which were key drivers in our +17% growth in net earnings,” said Paul Fox, a P&G spokesperson. “Importantly, we were able to achieve marketing efficiencies while increasing our reach and effectiveness.”
P&G has several programs underway to improve productivity across staff and systems.
To strengthen roles globally, P&G has renamed and refocused its Market Development Organizations (MDOs) into Sales & Market Operations (SMOs). The role of the SMO is focused on sales and merchandising. Meanwhile its Global Business Units (GBUs) will zero-in on product development and brand building. The modifications are expected to reduce duplicative efforts and make P&G a more fun and “easier place to work,” said Jon.
At the same time, supply chain efficiencies are underway in North America that will consolidate its 35 manufacturing sites into fewer facilities with multi-product capabilities. Its distribution system is being redesigned into fewer, more strategic locations that can get products to stores in one day within 80% of its markets. These concepts are also being considered for Europe. Together P&G estimates savings of $200 million to $300 million over three to four years. “We are changing our footprint dramatically,” noted Jon.
Advertising spend is also being trimmed as the company shifts to more digital options, including mobile and search.
Company-wide sales were flat at $20.55 billion with net earnings up 2% to $2.63 billion. Organic sales rose 3%. Core earnings per share were up 5% to $1.04. Jon said P&G is on track to reach its fiscal year goals of 1% net sales, 3% to 4% organic sales and earnings of 1% to 4%.