Ending its fiscal year on a positive note, Procter & Gamble’s beauty business saw a 1 percent uptick in net sales in the fourth quarter, with organic sales up 3 percent. Globally, P&G’s prestige beauty business climbed mid-single digits. For P&G, U.S. market continues to be troublesome.
While providing little detail, in the first call with analysts since his return, Chief Executive Officer A.G. Lafley said plans are being laid to bolster P&G’s stagnant hair care and skin care businesses in North America. “We know what we’re going to do over the next six to 12 months, to 18 to 24 months.” In defense of its weakened market share, he reminded that in a short time – from about 2000 to 2007 – P&G tripled beauty into a $21 billion-plus business. Pantene, he pointed out, is now a $3 billion business, skin care grew from several hundred million to $2 billion-plus and prestige beauty “went from nothing to $3 billion-plus.” “All businesses stall,” stated A.G. “We know what to do. We are on it.”
Corporately, A.G. said P&G would be focusing on bottom line productivity and “value creation,” meaning providing the right products for consumers and financial results for shareholders. Developing new distribution channels, including e-commerce, and delegating more decision making company wide for quicker action are on the agenda. Marketing budgets for 2014 are increasing, with an eye on sharpening digital prowess.
With the 1 percent growth, P&G posted net beauty sales of $4.85 billion; grooming slid 1 percent to $1.9 billion. Net earnings for the three months ended June 30 were $1.88 billion, down from $3.63 billion. Net sales overall grew 2 percent to $20.7 billion, compared with $20.2 billion in the prior year’s quarter. Unit volume gained 5 percent.
Meanwhile, Avon’s second quarter revenues slowed 2 percent to $2.5 billion, dragged down by skin care, while net income plummeted to $31.9 million from $61.6 million. The U.S. market remains a concern as sales in North America fell 12 percent to $380.3 million in the quarter due to an ongoing disruption from a redistricting program that eliminated regional managers. Overall beauty sales fell 14 percent in the region due to weakness in skin care.
CEO Sheri McCoy said she is “aggressively tackling skin care issues” and has been re-evaluating the portfolio to eliminate duplication and clarify offerings. A roster of new products is planned for the second half including items in Avon Color. A U.S. recovery plan is being fashioned with help from its newly hired North America President, Pablo Munoz, formerly of Tupperware.
Additionally, Avon said its offer of $12 million to settle bribery allegations was rejected by U.S. authorities. They are expecting the DOJ and SEC to make a counter proposal.