Wednesday, April 28, 2010

Estée Lauder 3Q Earnings Double Driven By 10% Sales Jump

Strong sales growth overseas and in the U.S., coupled with a stringent cost cutting plan, helped to double Estée Lauder Companies' third quarter profits, according to an article in Crain's New York Business.

Third quarter earnings rose more than 50% to $57.5 million vs. $27.2 million from the previous year. E.P.S. doubled to $.28 compared to $.14 E.P.S. last year. Excluding one-time costs, profit was $.34 per share, beating Wall St. estimates of $.32 per share.

Net revenue jumped 10% to $1.86 billion from $1.70 billion a year earlier, coming under analysts' prediction of $188 million in sales.

Skin care was the best performing product category, with 15.6% growth at $819.8 million, bolstered by strong sales of EL's Advanced Night Repair Synchronized Recovery Complex. Particularly encouraging are the sales numbers for the La Mer skin care line, one of the company's Prestige lines with prices starting at $100, which posted double-digit sales with strength in North America.

President and CEO Fabrizio Freda said in a conference call with analysts, "We believe that consumers are beginning to reconsider luxury products. It certainly bodes well for our entire Prestige portfolio".
The international launch of Pure DKNY and the rollout of Coach Signature fragrances to the U.S. bolstered EL's Fragrance category to an 18.7% sales increase of $222.8 million. Makeup sales rose 2.3%  to $710.8 million on the strength of M*A*C and Bobbi Brown cosmetic brands.

Regionally, the biggest rise was in Asia/Pacific to $371.1 million in sales, an increase of 20.3%. In Europe, the Middle East, and Africa, sales jumped 13.5 to $662 million. Sales in the Americas rose 3.1% to $829.1 million.

In an interview with WWD, Mr. Freda, says the company will continue to invest in marketing spending, and concentrate on brands, opportunites, regions and beauty concerns that are most important to the company,  Mr. Freda also said growth through acquisition isn't off the table:

“We’ve always said [mergers and acquisitions] are part of our strategy,” Freda told WWD, adding the company will pursue opportunities that widen its reach by category, distribution channel and in geographic scope. “Skin care and Asia are our priorities, but we also will look more broadly,” said Freda. (SOURCE: WWD)
For FY2010, EL forecasted sales to grow between 4% and 5% in constant currency. Earnings, excluding one-time items, are projected to be between $2.65 and $2.75 per share.


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