Alberto Culver profits increase on cost cutting

By Simon Pitman

- Last updated on GMT

Related tags Hair care Generally accepted accounting principles Revenue

Global hair care leader Alberto Culver has announced a big rise in profits on account of significant cost cutting measures.

The company’s net profits for the third quarter beat analysts’ expectations, rising 32 percent to $28m and says that it is standing by full year forecasts, despite a tough second quarter.

The encouraging bottom line result comes despite particularly harsh conditions in the hair care segment, underlined by the fact that the company’s turnover declined by 4 percent during the quarter to reach $351.6m, compared to $364.9m for the same period last year.

Turnover hit by strength of US dollar

The company which makes hair care lines including VO5 and TRESemme, together with hair and skin care line St. Ives, said the turnover was hit by unfavorable currency exchange, which reduced the figure by 7.9 percent.

Organic sales for the quarter were up 2.0 percent, which the company said was mainly driven by growth of the TRESemme brand worldwide, together with growth of the St. Ives and VO5 brands in international markets.

For the full nine months of the financial year net sales were down 0.8 percent to $1.04bn, while net earnings up 8.1 percent to $87.7m.

Gross profit hit by materials costs, but trned is down

The company’s gross profit margin decreased due to higher raw material costs, down from 53.0 percent last year, to 50.8 percent for the third quarter this year – although this figure was down compared to the previous quarter on account of falling oil prices.

“While other non-oil based costs including tin plate and certain chemicals remain elevated, we expect cost trends to continue to become more favorable into the September quarter and believe we are positioned to continue to improve our gross margin,”​ said CEO James Marino.

The company is also spending less on advertising and marketing, with spend down 20.3 percent compared to the same quarter last year, at $56.3m, as it shifted from media to store promotion.

Expenses for resturcturing nearly doubled for the quarter, rising from $2.72m to $5.04m, reflecting the company's restructuring program and its aim to cut costs.

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