Procter & Gamble said it was booking a $1.3 billion charge on its Gillette business, adjusting the value of a shaving giant that it took over nearly two decades ago.
P&G bought Gillette for stock initially valued at $54 billion in 2005, making it a dominant player in the global razor business.
The unit has struggled in recent years as upstarts, such as Dollar Shave Club and Harry’s, have entered the market with lower prices. As of June 2023, P&G estimated its grooming business was worth about $14.1 billion.
It isn’t the first time that P&G has had to write down the value of its shaving business. In 2019, it took an $8 billion charge on Gillette, citing currency devaluations and a contraction in the blades business in more developed markets.
P&G recently said in a securities filing that the underlying performance of the Gillette business remains strong and the latest adjustment is a noncash accounting charge. The company and its auditors at Deloitte re-evaluate the value of the Gillette brand and expected future earnings each year as they adjust their forecasts of inflation and impact of events such as the Russian-Ukrainian war.
It isn’t the first time that P&G has had to write down the value of its shaving business. In 2019, it took an $8 billion charge on Gillette, citing currency devaluations and a contraction in the blades business in more developed markets.
P&G recently said in a securities filing that the underlying performance of the Gillette business remains strong and the latest adjustment is a noncash accounting charge.
“The company and its auditors at Deloitte re-evaluate the value of the Gillette brand and expected future earnings each year as they adjust their forecasts of inflation and impact of events such as the Russian-Ukrainian war.
When P&G acquired Gillette, the razor company had roughly $10 billion in sales and largely sold to men. At the time P&G’s products, such as Tide and Pampers, were mostly marketed to women. Warren Buffett, one of Gillette’s longtime and largest investors, called it a “dream deal.”
For years the combination paid handsomely and boosted P&G’s profit as Gillette rolled out more sophisticated designs and higher-priced blades.
For years the combination paid handsomely and boosted P&G’s profit as Gillette rolled out more sophisticated designs and higher-priced blades.
That strategy was disrupted by online brands such as Dollar Shave Club, which was acquired for $1 billion by Unilever in 2016, as well as a shift by some men to grow beards and shave less frequently.
Gillette responded in part by reversing its strategy, introducing lower-cost blades and its own subscription delivery plan. Then-CEO David Taylor said in 2017 that the risk with focusing on the premium market “is you can still grow, but you have a smaller group of users who are willing to pay ever higher prices for better performance.”
In the latest fiscal year, sales in P&G’s grooming segment fell about 3% to $6.42 billion while profit slipped 2% to $1.46 billion.
The segment includes Gillette razors for men, Venus razors for women and Braun electric shavers.
It is the smallest of P&G’s segments, accounting for about 8% of its annual sales.
In addition to the write-down for Gillette, P&G said it would restructure operations in several units, including in Argentina and Nigeria where inflation has been high.
Schulten said Nigeria would revert to being an import-only market for P&G and that the company plans to divest its fabric and home-care businesses in Argentina.
Together, P&G said it expects total charges of about $2 billion to $2.5 billion after tax.
