BEAUTY CARE

P&G’s beauty segment experiences decline in Q3, sees strength in some premium offerings

BY Antoinette Alexander

CINCINNATI Procter & Gamble’s beauty segment experienced a decline during the third quarter due in part to the current economic conditions and retailer destocking; however, its Olay Pro-X skin care line and Nice ‘n Easy Perfect 10 hair color proved to be bright spots.

 Net sales in beauty declined 9% during the quarter to $4.3 billion. Organic sales were in line with prior year as the benefits from higher pricing were largely offset by a 5% decline in shipment volume.

“There are a couple key factors driving these results. First, there are elements of this segment that are more discretionary compared to the balance of our portfolio,” stated Teri List, treasurer for P&G, told analysts during Thursday’s conference call. “The global economic slowdown causes significant market contraction in the prestige fragrance category. While we continue to build share in prestige, shipments were down more than 20% due mainly to significant market contraction and trade inventory de-stocking.”

In the United States, retail hair care value share was up about half a point, while value shares for Pantene, Head & Shoulders, Herbal Essences and Aussie remained essentially inline with the prior year. In U.S. hair color, the premium price Perfect 10 initiative behind Nice ‘n Easy helped offset declines in minor hair care brands and drove value share up nearly two share points, List said.

In skin care, the launch of its premium-priced Olay Pro-X line, which retails for about $40 to $50 per item, helped fuel Olay’s value share in the United States. The Olay all outlet value share facial moisturizers in the United States increased by a half a point during the quarter to more than 43%. Olay Pro-X achieved about 5% value share after only three months in the market.

Meanwhile, in U.S. color cosmetics, its CoverGirl brand built all outlet value share on both the unit and value basis. However, CoverGirl shipments were down high single digits during the quarter due to sharp retailer de-stocking.

“To summarize beauty, we continue to be pleased with the fundamental health of our beauty brands and their grown prospects over time. We do expect some continued pressure from retailer and distributor de-stocking,” List said. “It’s also likely that the markets for prestige fragrances will remain soft given its discretionary nature.”

During the call, A.G. Lafley, chairman and CEO, also fielded questions from analysts about a recent Wall Street Journal article discussing the restructuring of P&G’s beauty and grooming business and its plan to place a greater emphasis on men.

“This is something we’ve wanted to do for awhile. We think it’s the next logical phase in how you organize a beauty and personal business for even more success,” said Lafley. “Here’s the simple way to think about it: We’re going to organize more by consumer and customer or channel than by product category. It?s the first one of our major sectors that we?re going to do this with.”

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La Roche-Posay announces launch of new sunscreen

BY Allison Cerra

NEW YORK Skincare company La Roche-Posay announced the launch of its newest sunscreen.

The company announced Thursday the availability of  Sunscreen beginning May 1.

The sunscreen provides dual protection against exposure to harmful UV rays that can lead to short term and long term damage to skin cells, including skin cancer and premature aging.

Anthelios 60 is available in three, fast-absorbing textures, including an Ultra Light Fluid for face (normal to combination skin), a Melt-in Lotion for face (normal to dry) and a Melt-in Milk for body that is gentle enough for the face. Each has been specifically formulated for optimal patient compliance.

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Revlon appoints new president, CEO

BY Antoinette Alexander

NEW YORK Revlon’s board of directors has elected Alan Ennis president and CEO, succeeding David Kennedy, who will become vice chairman. News of the move, which was described as a “planned transition,” came as the beauty company posted a 7.8% boost in first-quarter net sales in the United States, thanks in large part to increased sales of Revlon and Almay color cosmetics and Revlon ColorSilk hair color.

Ennis previously served as Revlon’s EVP, CFO and president of Revlon International. In addition to serving as Revlon’s vice chairman, Kennedy also will serve as a senior EVP at MacAndrews & Forbes Holdings, Revlon’s largest shareholder. Both Ennis and Kennedy will remain on the company’s board of directors.

In addition, Chris Elshaw, who has served as EVP and general manager of the U.S. region, has been elected EVP and COO. Steven Berns has been elected EVP, CFO and treasurer. The appointments of Ennis, Kennedy and Elshaw are effective May 1. Berns will join the company later in May.

Kennedy has served as the company’s president and CEO since September 2006. In March 2006, he was elected CFO.

“This planned leadership transition ensures that we have highly capable executives to continue to lead our business. I am most confident that Alan is best positioned to lead the company, as he has strong leadership capability, strategic ability and financial acumen,” stated Kennedy. “In addition, Chris and Steven are well-equipped to assume their respective roles. Alan and Chris, along with the other senior management team that make up the operating committee, will provide the company with outstanding leadership.”

The news came as Revlon announced that net sales in the United States totaled $191 million, an increase of $13.8 million, or 7.8%, compared with $177.2 million in the year-ago period. First quarter 2009 net sales benefited from higher pipeline shipments of first half and some second half 2009 new color cosmetics products, as a result of timing of shipments and a more extensive new product lineup, including Revlon ColorStay Ultimate Liquid Lipstick.

Total sales for the quarter were $303.3 million, compared with $311.7 million in the year-ago period. Excluding unfavorable foreign currency fluctuations, net sales increased by 3.8%.

Net income for the quarter was $12.7 million, or 25 cents per diluted share, compared with a net loss of $2.5 million, or 5 cents per share, last year.

Net income in the current quarter benefited from lower interest expense, a gain on the repurchase of senior notes and lower income tax expense, partially offset by higher foreign currency losses and higher pension expense. First quarter 2008 net loss included a gain of $6 million related to the sale of a non-core trademark.

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