David Taylor appears to have a large task ahead before winning the top job at Procter & Gamble Co.: Fix the company’s flagging beauty business.
Last week, P&G promoted Taylor, currently group president of Global Health & Grooming, by widening his responsibilities to include beauty. It’s a move that many Wall Street analysts saw as a sign that Taylor would ultimately succeed A.G. Lafley, P&G’s chairman, president and chief executive officer.
When asked during the company’s second-quarter earnings call on Tuesday what Taylor will bring to the stalled beauty business, P&G’s chief financial officer, Jon Moeller, who led the call, said, “David brings a new set of eyes and has tremendous brand-building experience.”
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During the quarter, net income attributable to P&G declined by 31 percent to $2.37 billion, or 82 cents a diluted share, compared with $3.43 billion, or $1.18 a share, in the year-ago period.
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Earnings, adjusted to account for discontinued operations and non-recurring costs, were $1.22 a share.
Net sales for the period ended Dec. 31 decreased 4 percent to $20.2 billion, compared with $21.1 billion in the year-ago period. Organic sales gained 2 percent.
Beauty’s organic sales continued to decline — decreasing 2 percent — in the quarter, while the four remaining businesses showed gains.
Moeller acknowledged that during the quarter, the company did increase price promotions in beauty, particularly within its hair-care brands, Pantene and Head & Shoulders. Moeller said the promotions were designed to “give an opportunity for consumers to retry our brand” given the updates to Pantene in particular.
Moeller reiterated that P&G is making progress in hair care and has seen a small uptick of roughly 3 percent in the Olay brand in the quarter in the U.S.
“We are working to increase the salience of the brand. That work takes some time.…We are in the early days,” Moeller said.
A number of Wall Street analysts acknowledged that they are not all that familiar with Taylor, or his accomplishments, but see him as a “low-risk” bet for P&G. Several analysts lamented that they would have liked the company to recruit a successor from the outside.
Lafley continues to whittle down P&G’s portfolio as part of the firm’s strategy to eliminate 80 to 90 of the company’s 120 brands. Moeller said the company will reduce the number of stockkeeping units across those remaining brands by 15 to 20 percent. To date, P&G has divested or consolidated 35 brands, including Camay, and its pet care and Duracell battery businesses. P&G expects to complete the sale of Duracell to Warren Buffett’s Berkshire Hathaway in the second half of the year.
With Taylor seen as the heir apparent, analysts are now watching to see how long Lafley will remain in the ceo post.
“This thing is an aircraft carrier and he is doing his part to turn it around,” said Bill Schmitz, an analyst at Deutsche Bank. Were Lafley to hand over the reins this year, several analysts expect him to stay on as chairman or executive chairman.