P&G Beauty Sales Rise 5 Percent to $4.4 Billion in Q1

P&G's first-quarter organic beauty sales rose 5 percent to $4.4 billion. The company's own verdict on that number: not good enough.

Hair care, personal care and skin care each posted midsingle-digit organic sales growth. Division earnings before interest and taxes increased 1 percent to $1.1 billion.

The grooming business, home to Braun, Gillette and Venus, did slightly better. Organic sales there climbed 5 percent to $1.9 billion, with EBIT up 6 percent to $619 million.

What is P&G changing?

Chief financial officer Andre Schulten, speaking to analysts on the quarterly conference call, described a company rebuilding much of how it operates.

"What we are changing is nearly every part of our execution framework to identify superiority gaps even faster and respond quickly to changes needed to product, package, communication, retail execution or value to ignite user growth of our brands," he said.

The proof point he offered is Pantene Abundant & Strong, a hair care line built on a specific medical insight.

"More than 50 percent of women will experience noticeable hair loss in their lifetime," Schulten said. "In the United States alone, female pattern hair loss affects approximately 30 million individuals. Pantene Abundant & Strong technology grew from research linking scalp oxidative stress to poor scalp conditions and hair quality."

The line uses a proprietary provitamin complex formulation. Schulten said consumers are responding.

"Consumers are delighted with improvements in hair strength and less shedding … and a tingling sensorial experience in the shower — is delivering midsingle-digit sales growth in the U.S. and is growing share," he said.

How far along is the turnaround?

Schulten put a number on the repair job: P&G is about 60 percent done fixing its category-country combinations.

"We're running at 29 out of 50 top category-country combinations growing or holding share," he said. "We need to conquer the rest, and that's the task ahead."

His ambition for beauty is blunt.

"I'll tell you, our beauty team isn't content with 5 percent of growth," Schulten said. "There's way more opportunity in that space that we need to capture."

What is happening in China?

China remains the problem child. Schulten called the business there "in the middle of reinvention."

"It's not growing," he said. "We need to get it back to growth, similar to North America."

The market itself is working against P&G. Schulten noted that market growth in the company's Chinese channels and categories remains below 100, meaning the overall pie is shrinking.

"We're not firing on all cylinders yet," he conceded. "But we're very happy with the China structural progress, and I have very high levels of confidence that we will fix the remainder of the portfolio and see even more sustained growth in China in a difficult market."

"Quite frankly, consumer sentiment is not improving. So a big congratulations to the China team for winning in a tough environment," he said.

The message to the beauty trade is clear enough. Five percent growth, a shrinking China and 21 category-country combinations still losing share leave a CFO with a to-do list, not a victory lap.