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Alberto-Culver Company (ACV) |
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WIKI ANALYSIS
Alberto-Culver (NYSE: ACV) owns cosmetics brands such as Nexxus, TRESemme, Alberto VO5, and St. I'ves. Nexxus and TRESemme are responsible for the majority of the company's revenue.[1]
TRESemme and Nexxus were acquired by ACV, and are now the company's best-performing brands. [2] Though Alberto-Culver Company is significantly smaller in size and revenues than its competitors Procter & Gamble Company (PG), and L'oreal (LRLCY), it has recorded greater growth than the rest of the industry. [3]
The company's top 5 customers (the largest of which is Wal-Mart) represent 30% of sales. [4]
Company Overview
Business & Financial Metrics[5]
In 2009, ACV generated a net income of $117.8 million on revenues of $1.43 billion. This represents an 11.1% increase in net income and a 0.7% decrease in total revenues from 2008, when the company earned $106.0 million on $1.44 billion in revenue.
Business Segments[6]
ACV has two reportable geographic business segments: "United States" and "International." In 2009, 63.9% of the company's revenue came from the United States and 36.1% came from international customers.
Key Trends and Forces
Limited Number of Customers Represent Large Portion of Net Sales
A significant portion of the company's net sales comes from a small. concentrated number of large customers with Alberto-Culver's top 5 customers representing 30%. Its largest customer is Wal-Mart Stores (WMT) and the product decisions of the mass merchandiser directly affect Alberto-Culver and its sales. Particularly because long-term contracts are not used and sales are made on a store-to-store basis, the relationships and shelving decisions of Wal-Mart and other mass retailers that represent a significant portion of Alberto-Culver's sales has a powerful impact on the success and future growth of the company,[7]
Growth has been Primarily Driven by Acquisitions but may be Risky for Long Term
Alberto-Culver has made acquisitions of small companies with a high capacity for growth such as Nexxus and TRESemme and re-released them with improved marketing and brand image. Alberto-Culver's acquisitions, particularly TRESemme and Nexxus have boosted the company's sales. Nexxus has also helped fuel increased sales figures. Alberto-Culver's original products of Alberto VO5 had a decrease in sales which offset some of the increases made by their acquisitions.[8] With acquisitions of companies being an integral part of Alberto-Culver's growth, the company runs risks of failing to continue to successfully choose and acquire companies with high growth, or the inability to effectively assimilate those companies.[9]
Resilient Brands Amidst Looming Recession
The unsteady economy has dramatically decreased consumer confidence, with Consumer Price Index (CPI) hitting its lowest since 1992. [10] Still, Alberto-Culver has managed its restructuring and growth to maintain a strong balance sheet and record-high earnings in their third quarter, even after spending over $220 million in cash to repurchase shares and retire debt.[11] In order to ensure continued growth, the company is consolidating its North-American supply chain and has closed their Puerto Rico manufacturing plant. The company is continuing growth of TRESemme by expanding internationally with a launch of TRESemme in Spain, which has had promising initial sales. Growth of the St. Ive's brand in latin America has also driven international sales.[12] Nexxus and Alberto VO5 had constant, if not dramatic sales in the single digits. All brands contributed to Alberto-Culver's strong numbers in the third quarter.
Competition
Some of ACV's competitors include Procter & Gamble Company (PG), Unilever (UL), L'oreal (LRLCY), and JOHNSON & JOHNSON (JNJ).
- Procter & Gamble Company (PG) is the world's leader in production of household and personal products with 23 brands. They have continued to grow and maintain their leadership position through aggressive R&D spending that overshadows all of their smaller competitors.[13]
- Unilever (UL) sells household and food products such as tea through their prominent brand [Lipton]. Their skincare and hair care brands include Suave, Dove, Thermasilk, and Sunsilk. This European-based company makes most of its sales in the Americas, Africa, and Asia. They have been struggling with increasing commodity prices as well as stiff competition from competitor Procter & Gamble Company (PG), which continues to record increasing sales despite high production costs.[14]
- L'oreal (LRLCY) holds the top position as the largest beauty and health care products producer in the world. The largest driver of their sales is hair and skin care products and the company has acquired The Body Shop, Beauty Alliance, and YSL Beaute. L'Oreal's cosmetic branch, consisting of hair care, make up, colorants, skin care, and perfume products made up the large majority of its revenues.[15] Effectively expanding into emerging markets, targeting aging populations that demand more cosmetics products and exploring the male cosmetics market, L'Oreal has maintained their industry market share leadership through continuous R&D and specialization.[16]
- Johnson & Johnson (JNJ) is the second largest health care products manufacturer based in the United States. JNJ owns successful brands such as Tylenol, Band-Aid, and Neutrogena and acquired Pfizer's Consumer Healthcare Division in 2006, making Johnson & Johnson a dominant player in the consumer healthcare products industry.[17]
References
- ↑ 2007 Annual Report, "Description of Business"
- ↑ Reuters, “Citi Analyst Ups Alberto-Culver rating; shares rise” Jan. 17, 2008
- ↑ | Reuters Thomson ACV Company Profile Jul. 2008
- ↑ Company 2007 Annual Report, "Risk Factors", p. 6
- ↑ ACV 2009 10-K pg. 18
- ↑ ACV 2009 10-K pg. 63
- ↑ 2007 Annual Report, "Risk Factors", p. 6
- ↑ ACV Alberto-Culver Company 2007 Annual Report, "Results of Operations", p. 22
- ↑ Company 2007 Annual Report, "Risk Factors", p. 7
- ↑ | Bureau of Economic Analysis: National Economic Accounts, "Personal Income and Outlays"
- ↑ | Alberto-Culver Co. F3Q08 (Qtr. End 6/30/08) Earnings Call Transcript
- ↑ | Alberto-Culver Co. F3Q08 (Qtr. End 6/30/08) Earnings Call Transcript
- ↑ Proctor & Gamble 2007 Annual Report
- ↑ | Unilver 2007 Annual Report
- ↑ | L'Oreal 2007 Annual Report, "Consolidated Financial Results", pg. 20-21
- ↑ | L'Oreal 2007 Annual Report, "Research and Development", pg. 55
- ↑ | JOHNSON & JOHNSON Q2 2008 Earnings Call Transcript
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