Estee Lauder Buys Smashbox Cosmetics

The Estée Lauder Companies adds another prestige cosmetics brand to its portfolio with the acquisition of Smashbox Cosmetics Beauty, Inc., the makeup company founded in 1996 by Dean and Davis Factor (left), great-grandsons of the legendary makeup artist, Max Factor, in an effort to provide products for makeup artists on professional photo shoots.

EL Cos. announced their definitive agreement with the L.A. based company on Monday, saying that the deal will close in July and will add to earnings in 2011, minus transaction and integration costs. The purchase price is unknown, however sources told WWD that the price tag was between $200M and $300M. The deal also includes a minority stake in Smashbox Studios, the Los Angeles facility started by the Factors in 1991.

With EL's strategic priorities focused on skin care and Asia, Smashbox doesn't fit the bill of a desirable acquisition. However, the makeup brand has a strong presence in open-sell environments and is a well known brand in specialty channels, such as QVC and Sephora, allowing EL to have a stronger presence in alternative retail channels. Smashbox also has expertise in digital and social media, which will help Estee Lauder to expand and reach new and younger customers. In exchange, Smashbox will be able to expand globally via EL's international experience.

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.

(Photo: EsteeLauder.com)

Bye, Bye Prescriptives

It's only been six months since Fabrizio Freda took over as CEO of Estée Lauder, and already he has sent shockwaves throughout the cosmetics industry.

Last week, Estée Lauder announced that it will shut down its 30 year-old Prescriptives cosmetic line by Jan. 31, 2010.

"A core component of The Estée Lauder Companies' corporate strategy is to evaluate, and where possible, turn around underperforming brands with the goal of improving return on investment. After a thorough analysis of the Prescriptives brand, management concluded that the brand's long term business model is no longer viable given the current market environment. The Company is committed to placing as many impacted employees as possible in open positions within the Company"

Prescriptives products will continue to be sold online at www.prescriptives.com to U.S. customers only while supplies last.
 
Eliminating brands from their portfolio is nothing new for EL, but Prescriptives is a homegrown brand launched by Ronald Lauder in 1979, and one of the largest in retail volume in EL's arsenal. Its closure shows that Mr. Freda is serious about dramatically restructuring the company.

"We believe that the difficult decision relating to Prescriptives will allow us to redirect our resources to key strategic imperatives where we see the highest growth potential," said Fabrizio Freda, President and Chief Executive Officer, The Estée Lauder Companies. "Ultimately this action allows us to focus on those areas which we expect to benefit the Company, our shareholders and business partners. We intend to work closely with our retail partners and continue to communicate with our consumers to ensure a seamless transition."

In the May issue of WWD Beauty Biz, Mr. Freda gave a hint to the possible elimination of Prescriptives:

“We are really focused on fixing the underperforming brands,” Freda said in May. “We have finished a review of the brands and have identified which are the brands where we want to invest and which are the brands that today are underperforming by our standards. For the underperforming brands, we have put a specific plan [in place] for the next 18 to 24 months. In the case we are not successful in turning around the brands, we will make different decisions.”


When asked, he declined to identify which brands comprised that list, but emphasized that “small” and “underperforming” were not synonymous in the Lauder portfolio. “Smaller brands, if they have the right productivity per door, are very interesting businesses,” he said in May. (SOURCE: WWD.com)

Prescriptives was one of the top prestige brands in the mid-80s, enjoying prime cosmetic counter real estate in upscale department stores such as Neiman Marcus. But with the emergence of makeup artist cosmetics lines such as M.A.C. and Bobbi Brown in the mid-90s cut into Prescriptives' niche and thus began the brand's decline.

EL maintains ownership of the Prescriptives name as well as all its trademarks and assets. A company spokeswoman says that the Calyx fragrance will be merchandised by the Aramis and Designer Fragrances division.

For Prescriptives consumer support, toll free numbers have been set up in North America (1-877-819-2968, English, Spanish and French speaking), the United Kingdom (0800 088 4168) and the Republic of Ireland (1800 936 080).

(SOURCES: WWD.com, Estée LauderCompanies Inc.)

(Photo Credit: WWD.com)

Estee Lauder Shares Decline Following 4th-Quarter Loss

Estee Lauder declines following 4th-quarter loss

(AP) – Aug 14, 2009

NEW YORK — Shares of Estee Lauder Cos. followed the broader markets lower Friday after the cosmetics company posted a fiscal fourth-quarter loss because of hefty restructuring charges and unfavorable exchange rates.

On Thursday, Estee Lauder, which is currently restructuring its business, said it swung to a loss of $17.9 million because of big restructuring charges.

Estee Lauder's restructuring plan includes cutting 2,000 jobs, or 6 percent of the work force, and maintaining a hiring freeze. The company has been hurt by softening consumer spending and deterioration in airline travel because the company sells its products in airports.

Revenue declined 16 percent to $1.68 billion because of unfavorable foreign currency translation and waning consumer discretionary spending.

Deutsche Bank analyst Bill Schmitz Jr., who rates the stock "Hold," said the company is doing what it can to manage expectations.

"The problem with the stock is that much of this is already priced in and newly named Chief Executive Fabrizio Freda has, in short-time, attained rock star status with investors," Schmitz said.

Shares of the company are up 22.1 percent so far this year. In afternoon trading, shares declined $1.73, or 4.6 percent, to $36.08.

Elsewhere on Friday, stocks fell sharply Friday, following news that the Reuters/University of Michigan index of consumer sentiment fell short of expectations for the first part of August. That may indicate consumer spending — which accounts for two-thirds of all U.S. economic activity — will remain tough amid layoffs.

(SOURCE: AP)

Elizabeth Arden Posts Narrow Loss, Stock Down on View

Elizabeth Arden posts loss, stock down on view

LOS ANGELES, Aug 13 (Reuters) - Elizabeth Arden (RDEN.O) reported a narrower quarterly loss on Thursday as shoppers continued to spend conservatively on perfume and face creams, but shares fell 4.1 percent after its 2010 profit forecast missed expectations.

Net loss at Arden was $3.6 million, or 13 cents per share, for the fiscal fourth quarter ended June, 30, narrowing from its year-earlier net loss of $10.4 million, or 38 cents per share.

Excluding restructuring and other expenses, its net loss was 7 cents per share. That just beat the 8-cent loss expected by analysts, according to Reuters Estimates.

Net sales at Arden, which sells Prevage anti-aging cream and perfumes by celebrities such as Britney Spears and Mariah Carey, fell 10 percent to $212.6 million. Excluding the unfavorable impact of foreign currency translation, net sales declined 5.8 percent.

For its fiscal year ended June 2010, the company forecast a 2 percent to 3.5 percent increase in sales and earnings per share in the range of 50 cents to 65 cents per share.

Analysts, on average were looking for a 2010 profit of 72 cents per share, according to Reuters Estimates.

Shares in Arden, which closed at $10.45, fell to $10.02 in extended trade on the Nasdaq.

(Reporting by Lisa Baertlein and Aarthi Sivaraman in Seattle; Editing Bernard Orr) 

(SOURCE: Reuters.com)

Executive Shuffle Complete at Estée Lauder

Estée Lauder Companies Inc. has announced the completion of its senior management succession plan, which will put into motion the company's four-year makeover strategy.

Chief Operating Officer, Fabrizio Freda, 51, will take over as Chief Executive Officer, while current CEO, William P. Lauder, 48, will become Executive Chairman and serve as Chairman of The Estée Lauder Companies’ Board of Directors. Leonard Lauder, the current Chairman of the Board will remain on the board and serve as Chairman Emeritus. Mr. Freda will also join the board.

The appointments will take effect on July 1, 2009 at the start of the company's fiscal year 2010.

It'll be interesting to see how Mr. Freda will maneuver throughout the EL corporate culture. He's a non-Lauder, only the second to take the helm of the ship, and surrounded by Lauder family members either on the board or employed in the company. Will they allow Mr. Freda the freedom to implement new strategies, such as implementing market research strategies he learned during his tenure at Proctor & Gamble? Stay Tuned....

Welcome!

Hello and Welcome!

Like any fashionista, I LOVE talking about fashion and beauty: the latest "It" bag, the hottest up and coming designers, the new must-have lip gloss.....etc.

However, I'm also interested in the business side of the industry, so I decided to create Haute Retail, a blog that waxes financial on the fashion and beauty world.

At Haute Retail, we'll discuss the business trends and financial aspects of the industry, as well as learn about the movers and shakers that help shape the beauty and fashion biz.

Enjoy!