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As Estee Lauder Net Rises 6%, Firm Cuts Outlook for Year

Estee Lauder delivered higher quarterly sales and earnings, but results were below forecasts.

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William Lauder

William Lauder

Photo By WWD Staff

NEW YORK — Disappointments in fragrances and seasonal items hit the Estée Lauder Cos. Inc.’s third-quarter results, but the beauty giant remains optimistic, thanks to Tom Ford and China.

For the three months ended March 31, Estée Lauder’s net earnings rose 6 percent to $106.2 million, or 46 cents a diluted share, from $98.3 million, or 42 cents, in the prior year. Sales climbed 8 percent to $1.54 billion from $1.42 billion.

Excluding the benefits of currency exchange, net sales rose 6 percent.

The results were well below analysts’ estimates for earnings of 51 cents a share. The company also revised its full-year earnings per share estimate downward to a range of $1.87 to $1.90 from a range of $1.88 to $1.93. Wall Street reacted negatively to the first-quarter numbers and earnings revision, sending Lauder’s shares down by 8.8 percent to $37.76 on Thursday.

“I am pleased with our continued strong sales performance this quarter, but at the same time, I’m disappointed that our sales growth came in lower than we expected,” said William Lauder, president and chief executive officer of the company, in a conference call to investors.

During the third quarter, makeup was the star. The segment generated $628.2 million in net sales, an increase of 5 percent in local currencies. Product launches included Estée Lauder’s Tender Blush, Pure Pops Brush-on Color, Ideal Matte Refinishing Makeup and AeroMatte Ultralucent Pressed Powder. Clinique’s Superbalanced Compact Makeup SPF 20 and Colour Surge Eye Shadow also contributed to sales growth.

Sales of skin care products rose 6 percent in local currencies to $608.2 million in the quarter. Again, new products drove sales, especially Estée Lauder’s Re-Nutriv and Perfectionist lines.

Fragrance, though it still made significant sales gains, was one of the problem areas of the quarter, the company said. Sales rose 11 percent in local currencies, to $228.7 million. DKNY Be Delicious and Be Delicious Men, True Star from Tommy Hilfiger, Happy To Be from Clinique and Lauder Beyond Paradise Men performed especially well; however, Beyond Paradise did not attract the return customers the company expected.

“There is a weakness in the entire category,” said William Lauder. “There are three primary regions for which the fragrance business is significant: Europe, travel retail and North America. It’s not insignificant to see the channel shift in existing distribution and prestige fragrance in Europe and North America.
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