William Lauder Defends Dept. Stores as Group Net Soars 26%

Estée Lauder Cos. saw earnings rise 26.2 percent to $98.3 million in the third quarter, while sales rose 15.2 percent to $1.42 billion.

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NEW YORK — For William Lauder, Wednesday was a day filled with drama.

The ceo-in-waiting reminisced about his grandmother, who died last Saturday, as the company reported stellar sales and earnings. In addition, the future chief executive officer had to defend to analysts the future of the group’s key channel: department stores. And he did so vigorously.

For the third quarter ended March 31, the New York-based beauty products giant realized a 26.2 percent rise in earnings to $98.3 Continued from page one

million, or 42 cents a diluted share. Excluding an extraordinary $1.8 million charge related to its discontinued Jane brands business, earnings were 43 cents a share, shattering Wall Street’s consensus estimate of 35 cents a share. Comparatively, the company reported earnings of $77.9 million, or 33 cents a share, in the year-ago period, or 34 cents excluding onetime charges.

It was an emotional day for Lauder, chief operating officer, as the company, family, friends and the industry mourned the death of the namesake and founder of the Estée Lauder Cos. Inc.

The conference call Wednesday revealed Lauder’s executive mettle. It’s clear that the ceo-in-waiting is passionate about the business. And Lauder, who becomes ceo on July 1, is particularly vocal about the department store channel, a topic he tackled during the call’s question-and-answer session, and later in an interview.

Regarding the death of Estée Lauder, it will have little impact on material results. “Obviously it’s an emotional thing for many people in the company,” Lauder said after the call. “Her name is on millions of products. There are thousands of very dedicated Estée Lauder beauty advisers around the world who speak about her or refer to her in one way, shape or form on a daily basis. It’s hard to measure that impact in such a short period of time.”

During the call, Lauder parried questions from Goldman Sachs analyst Amy Low Chasen concerning the company’s dependence on the U.S. department store channel for growth.

Smith Barney analyst Wendy Nicholson ran with the subject in a report immediately following the call, questioning the company’s valuation and its dependence on the high-end market.
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