uploads///Q Beauty overview

Inside Procter & Gamble’s Beauty Segment Organic Sales Growth in Fiscal 3Q16

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May. 3 2016, Updated 9:09 a.m. ET

Beauty revenue in 3Q16

Procter & Gamble (PG), or P&G, operates under five reportable segments:

  1. Fabric Care and Home Care
  2. Baby, Feminine, and Family Care
  3. Beauty, Hair, and Personal Care
  4. Healthcare
  5. Grooming

The Beauty, Hair, and Personal Care segment’s organic sales increased by 1% in fiscal 3Q16. The increase was primarily due to the positive impact of pricing (a 2% rise), which was partially offset by a -1% impact from a lower organic volume. This segment’s net revenue for fiscal 3Q16 was 8.2% lower than in fiscal 3Q15 at $2.7 billion.

PG made up 5.4% of the First Trust Morningstar Dividend Leaders Index (FDL) as of April 27, 2016.

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Organic sales

Double-digit growth on SKII and strong Old Spice sales in the US were partially offset by organic sales declines from the Olay brand. This was also due to competitive activity from Dove (UL), Clinique (EL), and L’Oréal (LRLCY). However, on March 24, a resident filed a lawsuit against P&G’s Old Spice deodorants, claiming they caused rashes, burns, and another discomfort.

Hair Care organic sales were unchanged as growth on Pantene and Head & Shoulders was offset by declines in Herbal Essences and Vidal Sassoon. In Latin America, both Pantene and Head & Shoulders gained market shares, but these gains were offset by declines in Russia and China.

Innovation and support

P&G continues to focus on innovation in Pantene conditioners in the US. The new conditioner is a blind test winner versus P&G’s best competition in North America, China, and Japan. Additionally, the company plans to support Head & Shoulders because it has delivered over 8% compound average sales growth over the past ten years, even with significant currency impacts.

P&G beauty brand merger with Coty (COTY) should also help P&G in its strategic portfolio reshaping. (To learn more about P&G’s Beauty segment divestment to COTY, read the series Coty Buys 43 Procter & Gamble Brands: What Investors Should Know.)

In the next part, we’ll analyze P&G’s Grooming segment.

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