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Brand Building Propels Lauder Net Up 23.1% in Second Quarter

NEW YORK — The Estée Lauder Cos. on Thursday reaped a 23.1 percent rise in profits as earlier investments in its brands paid a handsome...

NEW YORK — The Estée Lauder Cos. on Thursday reaped a 23.1 percent rise in profits as earlier investments in its brands paid a handsome second-quarter dividend.

Investors rewarded the beauty giant’s diligence about focusing on long-term growth by trading its shares up $3.47, or 13.1 percent, to close at $29.89 on the New York Stock Exchange on Thursday. Over the last 52 weeks, the shares have traded as high as $38.80 and as low as $25.20.

Assuming there are no major geopolitical disruptions, Lauder is looking for its growth to continue into the second half.

Earnings attributed to the firm’s common stock bounded up to $103.8 million, or 44 cents a diluted share, for the quarter ended Dec. 31. The improvement was attributed to modest gross margin improvements and operating expense reductions. Results compared with year-ago profits of $84.3 million, or 35 cents. In both the most-recent and year-ago quarters, the firm paid out preferred stock dividends worth $5.8 million.

Results beat Wall Street’s expectations of 40 cents a share by 4 cents and the upper end of the firm’s previous guidance by 3 cents.

Sales improved 8.8 percent to $1.41 billion from $1.3 billion a year ago. Without the impact of foreign currency translation, sales rose a more modest 6 percent.

Richard Kunes, senior vice president and chief financial officer, in a telephone interview, attributed the strength to "very solid" results from the international business, the recovery of the travel business as well as new programs and new brands, "all of these factors plus our ongoing focus on controlling costs."

The quarter benefited from nearly $10 million in pretax savings related to the globalization of the firm’s organization last year. Savings in each of the third and fourth quarters should reach $10 million under the program and eventually top out at $40 million in savings annually.

Lauder, he said, has also been focusing on creating efficiencies in the selling organization, with better hiring practices and training, as well as in the general and administrative areas.

On a morning conference call, Fred Langhammer, president and chief executive, noted: "Overall, we believe cosmetics performed better than the other categories in the department stores, particularly makeup and skin care," in the Americas.
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