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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...

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At the end of the quarter, Lauder carried cash and cash equivalents of $694.8 million, a 4.7 percent year-over-year rise.

Langhammer was noncommittal on the call, but said the options created by the abundance of cash would certainly come up during the next board meeting: "Suffice to say, we feel pretty good about the position we’re in and we’re going to take some action in one direction or another."

As reported, the firm earlier this month notified the Securities and Exchange Commission that it had signed an agreement to purchase French skin care company Darphin Laboratoires, a deal expected to be completed this year. Lauder’s last acquisition was in June of 2000 when it acquired a majority share in the hair care firm Bumble and bumble.

The company saw sales gains in all of its product categories during the quarter.

Makeup sales rose 11 percent to $476.8 million, or 9 percent before the impact of foreign currency translation. Reflecting a 50 percent uptick in the travel business, fragrance sales were up 7 percent to $386.3 million, or 3 percent before currency translation. Hair care sales rose 3 percent to $60.2 million, an increase primarily attributable to growth at Aveda and Bumble and bumble.

Sales were also up in each of the firm’s geographic regions.

Net sales strengthened 4 percent to $783.5 million in the Americas. Operating profits rose 16 percent to $70.9 million.

In Europe, the Mideast and Africa, sales swelled 19 percent to $438 million, or 10 percent before currency conversion. Operating profits shot up 36.4 percent to $73.4 million.

The increased operating profits were primarily a result of the turnaround in the travel business from last year’s depressed levels, and, to a lesser extent, improved results in several other markets led by the U.K. and France.

In the first half, profits attributable to Lauder’s common shares grew by 10.6 percent to $171.3 million, or 73 cents a diluted share, from $154.9 million, or 64 cents, a year ago.

Both periods included $11.7 million in preferred stock dividends. The year-ago period included a one-time aftertax charge of $20.6 million related to an accounting change.
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