BEAUTY CARE

P&G posts 2Q results

BY Antoinette Alexander

CINCINNATI Procter & Gamble posted second-quarter earnings per share and organic sales in line with company expectations as it acknowledged that the environment will likely “remain difficult and highly volatile” in the near term.

“As expected, this was a particularly challenging quarter,” stated chairman and CEO A.G. Lafley. “Despite this, we grew organic sales 2% and delivered against our going in EPS guidance. We expect the environment will remain difficult and highly volatile—at least in the near term. We are focused on the fundamentals that are critical to success in our business. We will continue to build brands that deliver better value for consumers by leading innovation and managing cost and productivity programs with discipline. Our effort in these areas give me confidence that P&G will continue to grow profitability and generate attractive returns for shareholders over the long-term.”

Net sales declined 3% to $20.4 billion for the quarter driven by unfavorable foreign exchange and lower shipment volume. Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, were up 2% for the quarter.

Net earnings rose 53% to $5 billion and diluted net earnings per share rose 61% to $1.58. Net earnings from continuing operations slipped 7% to $3 billion due to lower net sales and operating margin.

In beauty, net sales slipped 4% to $4.9 billion for the quarter, as organic sales were in line with the previous year-end. According to P&G, net sales were down due to a 4% unfavorable foreign exchange impact and a 1% decline in volume, partially offset by a 1% positive pricing impact. Net earnings declined 10% during the quarter to $799 million primarily because of a reduction in net sales and lower operating margin from higher commodity costs.

In grooming, net sales declined 7% to $2 billion. Organic sales increased 1%. Volume declined 6% primarily due to a double-digit decline of Braun. Price increases taken across premium shaving systems added 4% to net sales.

Product mix contributed 1% to net sales behind continued growth of premium innovations such as Gillette Fusion. Unfavorable foreign exchange reduced net sales by 6%, and the net impact of acquisitions and divestitures reduced net sales by 2%. Net earnings decreased 3% to $416 million for the quarter primarily due to lower net sales, partially offset by higher operating margin from price increases and improved product mix.

For the 2009 fiscal year, the company expects organic sales to grow by 2% to 5%. Organic volume is expected to be flat to down 2%. Foreign exchange remains highly volatile and is expected to reduce sales by about 5%. The net impact of acquisitions and divestitures is estimated to be flat to negative 1%. Total sales growth is expected to be flat or negative 4%.

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BEAUTY CARE

Prestige beauty industry hit hardest last year

BY Antoinette Alexander

PORT WASHINGTON, N.Y. The prestige beauty industry struggled in 2008 while the make up and skin care categories in the mass channel experienced growth, according to The NPD Group, a market research company.

The NPD Group presented the findings at its annual “Hot off the Press” event at the Rainbow Room in New York on Wednesday.

According to NPD, the total U.S. prestige beauty industry experienced a decline of 3.3% in dollar sales in 2008 compared with 2007. Of all the categories tracked by the research company, fragrance experienced the biggest decline.

“Conversely, fragrance may hold the greatest opportunity for growth,” noted Karen Grant, senior global industry analyst and VP beauty. “The most pressing concerns for the fragrance category are not only the loss of users, but decreasing frequency of usage. It is important that the industry find new ways to engage consumers, especially as they become more independent about their product selection.”

Fragrance sales in the mass channel (excluding Wal-Mart) also experienced a decline; however, make up and skin care sales in the mass channel experienced growth.

Globally, the prestige beauty industry outpaced U.S. performance in 2008. China experienced ?impressive? sales growth in the fragrance, make up and skin care segments, as did Mexico. Meanwhile, Italy and France saw an increase in make up sales, as skin care sales declined in both countries.

Fragrance sales were flat in France and Italy.

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Barbie celebrates 50 years at New York’s Fashion Week

BY Antoinette Alexander

EL SEGUNDO, Calif. Barbie is celebrating five decades as a fashion icon and pop culture princess with a line-up of celebrations, including the first-ever Barbie Runway Show at Fashion Week in New York in February.

On Feb. 14, 50 fashion designers will come together to showcase real-size, Barbie-inspired looks at Mercedes-Benz Fashion Week in the Tent at Bryant Park. Designer names are expected to be announced in early February.

In addition, cosmetics brand Stila has been named the Official Prestige Makeup Partner for 2009. In celebration of all things Barbie, Stila will introduce beauty products, including a limited edition spring collection of beauty cans and talking palette. This will precede a larger collection and Barbie beauty program slated for fall 2009 (available at Sephora 5th Avenue store, Sephora International stores and Sephora.com beginning in late January; fall collection due in late summer). The beauty program will extend beyond cosmetics and into hair care with partner T3. The T3 Barbie Hair Dryer is coming this fall.

Additional celebrations and partnerships taking place throughout the year include a Barbie Boutique & Exhibit at colette in Paris; the Jonathan Adler Loves Barbie collection of home decor for grown ups; and the opening in March 2009 of the brand?s first-ever flagship store in Shanghai. The Shanghai flagship store will house 1,500 square meters and six stories of Barbie retail-tainment. Designed for girls of all ages, the store will be a place where girls can shop, dine, enjoy a day at the spa and become a fashion designer or runway supermodel.

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