Procter & Gamble Co. (P&G) beauty revival still a work in progress

CINCINNATI - Procter & Gamble Co. exceeded Wall Street's earnings expectations with a $3.4 billion profit in its second quarter. But sales growth was slightly below expectations and promised innovations in beauty care have yet to spark a turnaround in key brands Pantene and Olay.

“We’re as impatient as anybody,” Chief Financial Officer Jon Moeller told reporters Friday morning. “We’d like progress sooner than later but it needs to be done in the right way.”

Moeller also pointed to the rise of "Movember" as a hit on their razor sales. Movember is the movement for men to not shave in the month of November to raise awareness about prostate cancer. Many men grow mustaches or full beards, leaving a full 30 days, or more, without ever touching their Gillette products.

P&G shares initially fell 1 percent to $78.24 in pre-market trading, but they since rebounded as investors digested details of P&G's performance for the quarter. The maker of Tide detergent and Gillette razors says net income for the three months ended Dec. 31 fell to $3.43 billion, or $1.18 per share. That's down from $4.06 billion, or $1.39 per share, last year. In the year ago period the company had a 21 cent per share gain related to buying out its joint venture in Iberia. Excluding restructuring costs in the latest period, earnings were $1.21 per share, a penny above analysts' expectations. Revenue was flat at $22.28 billion, short of the $22.34 billion in revenue analysts expected.

P&G reaffirmed its prior earnings and revenue guidance for the full year. And it said sales growth was strong in emerging markets, countering investor worries over economic problems in China, Turkey and Argentina.

By late afternoon, P&G shares were up 1.6 percent to $79.50.

Procter & Gamble has identified its beauty as a key area of focus because it accounts for 23 percent of company revenue and 21 percent of pre-tax profits. Moeller said personal care and cosmetics brands are performing well, while hair care brands are growing in the single digits.

Pantene began rolling new product innovations last month, as WCPO reported Monday. Moeller praised a recent “Shine Strong” advertising campaign for generating more than 1 billion consumer impressions since launching in November. That’s almost as strong as the 1.6 billion impressions garnered by P&G’s highly touted campaign for the Winter Olympics.

“We’re happy with the return we’re making on our marketing investments, on our innovation estimates and we think that’ll start to show up in second quarter,” Moeller said.

Bernstein Research analyst Ali Dibadj said P&G is doing a better job of mixing product launches at the higher and lower end of the price spectrum. But he’s not sure they’ll produce the kind of revenue growth that investors want to see from the company.

“We’ve seen a lot of them,” he said. “Question is, do they move the needle and what’s their purpose?”

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