Beauty business brief: Price hikes keep industry buoyant amid high raw material costs

08 Aug 2023 --- Personal care and cosmetics giants Procter & Gamble Company (P&G), Colgate-Palmolive, E.L.F. Beauty and Edgewell Personal Care have each released financial outlooks pertaining to their business performances in the recent quarter and fiscal year. 

Industry is still affected by high raw material costs and softness in some markets like China. However, companies have reported a rise in sales amid these economic conditions, supported by price increases.

Procter & Gamble Company
P&G reported fiscal year 2023 net sales of US$82 billion, an increase of 2% versus the prior year. Organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased by 7%.

Colgate-Palmolive net sales increased 7.5% and organic sales grew 8% (Image credit: Colgate).The organic sales growth was due to a 9% increase from higher pricing and a 1% increase from favorable mix, partially offset by a 3% decrease in shipment volumes.

“The April-June quarter provided a very strong finish to fiscal year 2023 – top-line growth, bottom-line growth and cash generation,” remarks Jon Moeller, chairman of the board, president and CEO. 

“The team met or exceeded our going-in plans for sales, earnings and cash in a difficult operating environment and despite significant cost headwinds.”

Beauty segment organic sales increased 11% versus a year ago. Hair Care organic sales increased high single digits due primarily to increased pricing and positive product mix, partially offset by volume declines in Asia-Pacific and Greater China. 

Skin and Personal Care organic sales increased in the low teens due to increased pricing, positive mix from the growth of the premium SK-II brand (versus a prior year period impacted by pandemic-related lockdowns) and volume growth from innovation.

Organic sales in the Grooming segment increased 8%, versus a year ago, primarily due to higher pricing. However, the company experienced some trade disruptions in Europe.

P&G’s Fabric and Home Care segment organic sales increased 8% for the quarter. Fabric Care organic sales increased mid-single digits driven primarily by higher net pricing and positive product mix, partially offset by lower volumes primarily in Greater China. Home Care organic sales increased double digits due to increased pricing and positive product mix, partially offset by market volume softness.

Meanwhile, the group’s Baby, Feminine and Family Care segment organic sales increased 9%, versus a year ago. Baby Care organic sales increased high single digits due to increased pricing and positive product mix, partially offset by lower volumes from increased pricing. 

Feminine Care organic sales increased double digits led by increased net pricing and positive product mix, partially offset by a volume decline. Family Care organic sales increased double digits due to volume growth and increased pricing.

Colgate-Palmolive Company Q2
Colgate-Palmolive Company reported results for second quarter 2023. Net sales increased 7.5% and organic sales grew 8%.

“We are pleased to have delivered another quarter of strong top-line momentum along with an increase in profitability,” comments Noel Wallace, chairman, president and CEO.

“Gross profit margin, operating profit margin, operating profit, net income, earnings per share and free cash flow all increased versus the year ago quarter.”

E.L.F. Beauty net sales in its first quarter of fiscal 2024 increased 76% to US$216.3 million, primarily driven by strength in both retailer and e-commerce channels (Image credit: E.L.F. Beauty).Colgate-Palmolive’s organic sales in Home Care and Personal Care in North America (20% of the company’s sales) was partially offset by organic sales declines in Oral Care.

In the Latin America region – accounting for 24% of company sales – organic sales growth was led by Argentina, Mexico, Brazil and Colombia. An increase in operating profit was partially offset by higher raw and packaging material costs and a value-added tax refund in the second quarter of 2022.

In Europe – making up 14% of company sales – organic sales growth was led by the UK and Germany. The decrease in operating profit as a percentage of net sales was primarily due to significantly higher raw and packaging material costs and increased advertising investment, partially offset by higher pricing, cost savings from the company’s funding-the-growth initiatives, favorable mix and lower amortization expenses.

In the Asia-Pacific region – 14% of company sales – organic sales growth was led by India, the Philippines and Australia. This was partially offset by organic sales declines in the Greater China region.

For the Africa/Eurasia market (6% of company sales), Colgate-Palmolive’s organic sales growth was led by the Eurasia region, Turkey and South Africa. An increase in operating profit was partially offset by “significantly higher” raw and packaging material costs, which included foreign exchange transaction costs and increased advertising investment.

E.L.F. Beauty
E.L.F. Beauty has raised its fiscal 2024 outlook in its reporting of financial results for the first quarter of fiscal 2024, ended June 30, 2023. The updated outlook for fiscal 2024 reflects an expected 37-39% year-over-year increase in net sales, as compared to an expected 22-24% increase previously.

Net sales increased 76% to US$216.3 million, primarily driven by strength in both retailer and e-commerce channels. Meanwhile, net income was US$53 million.

“We are off to a terrific start in our new fiscal year with net sales growth of 76% and market share gains of 260 basis points in Q1. This marks our 18th consecutive quarter of delivering both net sales growth and market share gains,” says Tarang Amin, E.L.F. Beauty’s chairman and CEO.

“We are one of only five publicly traded consumer companies out of 274 that has grown for 18 straight quarters and averaged at least 20% sales growth per quarter over that period.”

Edgewell Personal Care
Edgewell Personal Care’s net sales were US$650 million in the third fiscal quarter 2023 (ended June 30, 2023), an increase of 4.2%, including a US$1.7 million unfavorable impact from currency movements. 

Edgewell Personal Care net sales were US$650 million in the third fiscal quarter for 2023, an increase of 4.2% (Image credit: Bulldog).Organic net sales increased by 4.5%, as international markets increased 8.7%, driven by strong Wet Shave, Sun Care and Grooming performance and North America markets increased 2.3%, driven by Sun Care and Grooming growth. 

In aggregate, the company’s growth in organic net sales was driven by increased pricing. Gross profit was US$279.7 million, inclusive of a US$7.2 million unfavorable impact from currency movements, as compared to US$240.6 million in the prior year quarter.

“While the macro environment remains uncertain, and our Sun Care business has been impacted by unfavorable weather, we are on track to deliver our third consecutive year of 4% organic net sales growth, and Adjusted EPS and Adjusted EBITDA at or above the high end of our previously provided outlook ranges,” says Rod Little, Edgewell’s president and CEO.

“Notably, we remain focused on executing against our strategic priorities which position us to deliver sustained growth and value creation." 

Net sales in Edgewell’s Wet Shave segment decreased US$2.2 million, or 0.7%. Growth in Men’s Systems and Disposables was offset by declines in Shave Preps and Women’s Systems. Wet Shave segment profit decreased US$5.4 million, or 14.4%. Organic segment profit – excluding the unfavorable impact from currency - increased US$1.2 million (3.2%) reflecting higher gross profit, partly offset by higher marketing expense.

Net sales in Sun and Skin Care increased US$28.7 million, or 13.3%. Organic net sales increased US$28.1 million, or 13%, driven by strong growth across Sun Care, Men's Grooming and Wet One’s. Organic net sales in International markets increased 21%, led by strong Sun Care demand in Latin America and Europe and higher pricing, while in North America, organic net sales increased 11.3%, driven by price and volume gains. Segment profit increased US$14.5 million, or 31.1%.

Net sales in Feminine Care (tampons, pads and liners) decreased US$300,000, or 0.4%. Organic net sales were in-line with the prior year, reflecting lower volumes, offset by higher pricing. Segment profit increased by US$5.1 million. Organic segment profit increased by US$5.2 million, or 59.1%, primarily driven by higher gross margin.

By Benjamin Ferrer