P&G Beauty Sales Gain in Q2

In beauty, sales were boosted by Olay, SK-II, Herbal Essences, Pantene, Head & Shoulders and Rejoice.

Procter & Gamble’s net beauty sales were up 10 percent in the second quarter.

Total P&G net sales were up 3 percent in the quarter, to $17.3 billion. Income was also up 3 percent, to $4 billion. Diluted net earnings per share were 93 cents.

This is the first earnings period since P&G appointed activist investor Nelson Peltz of Trian Fund Management to its board.

In beauty, sales were boosted by innovation from Olay and SK-II in skin care, which grew double-digits, as well as low-single digit growth from Pantene, Head & Shoulders, Herbal Essences and Rejoice in hair care. Beauty net sales were $3.2 billion.

P&G chief financial officer Jon Moeller said there has been “strong progress in parts of the beauty business,” on a call with Wall Street analysts Tuesday. “Every part of our beauty business was up versus a year ago,” he said.

“We believe it reasonable that beauty growth, which meaningfully accelerated year-over-year, benefitted from sustained strong growth from ultra-premium skincare brand SK-II,” wrote Stifel analyst Mark Astrachan in a note.

Speaking Tuesday, Moeller gave examples of what did well in beauty, including the Olay business in China, which grew 30 percent in the quarter. The brand has revamped beauty counters, a new beauty counselor program, a new “super peptide formula,” upgraded packaging more in line with prestige products and a new advertising campaign that “has further driven consumption,” Moeller said. E-commerce sales in China were up 80 percent for Olay in the quarter, he said.

Last year, P&G did about $3 billion in global e-commerce sales — the goal for 2018 is to get them up to $4.5 billion, Moeller said.

Moeller also talked about progress made towards more natural products — in beauty and other categories — as important. “Meeting consumer needs related to sustainability and naturals is not new,” Moeller said. He ran through a list of laundry and other products where P&G has initiated sustainability programs, and called out Herbal Essences Bio Renew formulation, as well as a new Pantene Micellar cleansing shampoo launching next month, as the natural-leaning highlights in beauty. Head & Shoulders has also been using recycled beach plastic for its bottles, he noted. P&G also recently acquired Native, a natural deodorant business.

“[There has been] very broad progress in beauty across geographics, so I think it is sustainable,” Moeller said. “The main inflection point going forward is to address a couple items we’ve talked about on this call, which are grooming… and some of the issues in baby care.”

Grooming net sales were down 1 percent for the quarter, to almost $1.8 billion. P&G said the decline was because of price cuts in the U.S., which it implemented in the past year as it looks to compete with Dollar Shave Club and Harry’s. Those cuts, combined with innovation, did drive volume, which was up 1 percent.

“We accelerated organic sales growth and delivered strong productivity cost savings and cash flow,” said David Taylor, chairman, president and chief executive officer. “We remain on track to achieve our fiscal year objectives.” P&G is projecting 2 percent to 3 percent organic sales growth for the year, with EPS growth between 5 percent and 8 percent.