The Procter Conundrum.
Tuesday, October 30th, 2007As P&G’s Gillette razors are locked away from consumers in New York drug stores, its Dolce & Gabbana fragrances are being sold on folding tables on the street here. In its quarterly announcement, we learn that D&G and Hugo Boss fragrances had double digit sales gains as did Gillette Fusion and Tide among its leading brands.
Beauty sales at P&G were up 6 percent to $4.6 billion with earnings up 9 percent to $689 million. Overall P&G’s sales were up 8 percent to $20.2 billion and earnings were up 14 percent to $3.1 billion. Those were blow-out numbers, but Wall Street didn’t like guidance. Analysts are as fickle as customers today.
The press release said beauty sales were positively affected by “disproportionate growth of prestige fragrances.” Olay’s sales were up mid-single digit, while SK II sales were still doing poorly in Asia following recalls in China.
No mention was made of mass makeup and hair coloring. Those two categories do not appear to be doing well, particularly as P&G has run smack into Jean-Paul Agon’s L’Oreal marketing machine.
Okay, SK II has added Bloomingdale’s flagship store to its account list, and its counters, which on several visits, appeared more like a mausoleum than a skincare mecca. The product has been identified with Buddha icons, not necessarily an aspirational thing for American females. However, the company signed actress Cate Blanchett as the brand’s spokesperson, which could give it a more pronounced feminine appeal.
What is strange though is how many fragrances are ending up in the States in diversion. With a weak dollar, the merchandise should not be discounted as much as it is here in the U.S., unless worldwide demand for the high-end fragrance segment has taken a dramatic downturn. That may be the case as European economies slow.
With the amounts of merchandise being sold at wholesale/retail stores, street peddlers and others in the U.S., the department store fragrance category has been slipping overall. Discounting is prevalent. Worse yet, department stores were not promoting many launch brands in September.
In the upcoming The Informationist, we explore how niche brands have allowed Saks Fifth Avenue to buck the trend. It certainly will be an interesting holiday sales period for the industry.