Gillette value cut by P&G

CM was at Woolworths this morning and noted Gillette products still deeply discounted. Schick products still at the standard price. Of note it is interesting to see that parent P&G, in its 3Q 2019 earnings release overnight, wrote:

“The most significant assumptions utilized in the determination of the estimated fair values of Shave Care reporting unit and the Gillette indefinite-lived intangible asset are the net sales and earnings growth rates (including residual growth rates) and discount rate. The residual growth rate represents the expected rate at which the reporting unit and Gillette brand are expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit and brand operating plans, and approximates expected long term category market growth rates. The residual growth rate is dependent on overall market growth rates, the competitive environment, inflation, relative currency exchange rates and business activities that impact market share.

Is the last sentence related to ridiculous campaigns that attacked toxic masculinity? Did the YouGov poll conducted afterwards set off warning lights inside P&G headquarters? Before the campaign Gillette was ranked 7th out of 42 personal care brands. After it aired, it ranked dead last.

P&G went on to say, “While management can and has implemented strategies to address these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the reporting unit’s goodwill and indefinite-lived intangibles.

In either a positive or negative 25bp change scenario in the discount rate, an impairment cut of 6% has been factored.

A look under P&G’s “Grooming” division in these results and it becomes clear that revenues have plunged 8.1% and operating profits slashed 22%. For the 9 month period, it is 6.1% and 12.7% respectively. So it can be deduced that the Gillette toxic masculinity campaign has accelerated the demise. Only proves that customers don’t want politics attached to their products.

Noone needs ‘woke’ corporations. Why do corporations feel the need to become paragons of virtue? Just stick to the products and leave us to decide for ourselves on societal values. In Gillette’s case, attempts to correct customer behaviour have been a resounding failure. Oh, to imagine the excuse making inside the marketing department.

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