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)

Macy's Profits Down, Outlook Up

Despite being bogged down with reorganization costs, Macy's, Inc. reported profits that were better-than-expected, and raised their outlook for fiscal year 2009.

The company's second quarter earnings were down to $7M, or $.02 per share, vs. $73M, or $.17 per share, from 2008. However, excluding restructing costs, earnings per share were $.20, still down from the previous year's E.P.S of $.29, but exceeding analysts' estimates of $.17 per share.

"We were able to exceed our expectations with strong earnings and cash flow in the second quarter, despite lower sales in an economic environment that continues to be very difficult," said Terry J. Lundgren, Macy's, Inc. chairman, president and chief executive officer. "In particular, we successfully lowered inventories and managed expenses to align more closely with current levels of business. Our second quarter same-store sales performed as well as or better than most department store retailers even while we were completing the largest organizational transition in Macy's recent history. Most of that transition work is behind us now.

The results from the company's "My Macy's" initiative continue to show promise:

"We continue to be very pleased with results from the My Macy's initiative, which began to roll out to 49 new districts nationwide in the second quarter. Same-store sales performance in the 20 pilot districts launched in 2008 continued to outpace the remainder of the company, and the gap continued to widen in the second quarter. Going forward, we expect the gap to become less meaningful as the 49 new districts launched in 2009 come up to speed and begin producing results that parallel the pilot districts. As previously stated, we expect to see some improvement in these new districts in the fourth quarter of 2009 and especially in spring 2010," Lundgren said.

The first half saw a loss of $.19 per share vs. earnings of $.03 per share in 2008. Minus restructuring costs, EPS was $.04 per share vs. $.28 in the first half of '08.

Sales for the 2nd quarter were down 9.7% to $5.164B from $5.718 in '08. Macy's same-store sales for the quarter dropped 9.5%. Online sales helped the company's 2nd quarter and first half '09 comp sales by 0.5%. Online sales, which count towards same-store sales, rose 9.4% in the 2nd quarter and 12.7% in the first half of fiscal 2009.

The company raise it's guidance on fiscal year 2009 earnings, projecting EPS will be $.70 to $.80 per share, excluding restructuring costs.

Macy's shares closed at $16.40, up 6%.

Tiffany Stock Surges Despite 4Q Loss

Photo: Reuters/Fred Prouser

Tiffany & Co. shares rose 15.52%, or $3.14, to close at $23.37 after the company reported fourth-quarter profit that beat Wall St. estimates. This was the company's biggest gain in five months.

Excluding one-time charges, such as staffing reductions, earnings per share (EPS) was $0.85, beating average analysts' estimates of 78 cents per share according to Reuters Estimates.

Taking aggressive steps to lower costs was a contributing factor to the company beating expectations. Tiffany announced that it will close all 16 Iridesse pearl jewelry stores, which have operated at a loss since opening in 2004. They have offered early-retirement packages to 800 U.S. of its employees, with 600 accepting the package. The company says both actions will reduce it's workforce by 10%, creating a savings of $60 million for the year. In other cost saving measures, the retailer has suspended its share repurchase program, and lowered management incentive compensation.

However, the company is quick to say that the outlook is dim.

"We have not yet seen signs of an upturn in our business with worldwide sales in the quarter-to-date declining more than 20%, which is in-line with our expectation", says Michael J. Kowalski, chairman and chief executive officer.

Tiffany forecasts a decline in worldwide sales of 11%, and earnings of $1.50 - $1.60 per share for the fiscal year ending in January 2010.

For the fiscal fourth-quarter, which ended January 31, net income dropped a little over 75% to $31.1 million, or $0.25 per share compared to the previous year's $127.4 million, or $0.96 per share. Earnings for the full year were down 32%, $220.0 million, or $1.74 per share, vs. $323.5 million, or $2.34 per share from the previous year. Sales were in line with company expectations.

Fourth-quarter worldwide net sales plummeted 20% to $841.2 million, with sales declines in the Americas region having the biggest impact.

Sales in the Americas took the biggest hit out of the company's three regions. Fourth-quarter sales of $458.9 million were down 29%, and fiscal year sales were down 10% at $1.59 billion. U.S. same-store sales dropped 33% in the fourth quarter and 16% for the year. Despite being a major tourist attraction, sales at the New York flagship store were down 34% and 9%.

In the U.S., there were declines in every price range, however the declines were "somewhat smaller" in sales below $500 and larger in sales about $50,000, said Mark Aron, Tiffany's vice-president of investor relations.

In the Asia-Pacific region, sales declined 3% to $279.7 million in the fourth quarter, while sales increased 8% to $922 million for the year. In Europe, fourth quarter sales where down 2% at $95.3 million and up 17% to $284.6 million for the year.

Net inventories increased 17% to $1.6 billion due to lower than expect sales towards the end of the year, particularly the holiday season, the opening of new stores and an increase in raw material inventories.

Despite low sales, the company has no plans to follow the current trend of discounting prices that their competitors have embraced. "We did and will continue with our full price philosophy in order to maintain appropriate margins and very importantly to maintain the integrity of the Tiffany and Company brand", said Tiffany CFO, Jim Fernandez.

I agree with this strategy. Tiffany & Co. isn't just a company, it's a strong, iconic brand that people will always be willing to pay full price for. Everyone wants the "blue box".

Even though the luxury sector is going through turbulent times, people still want high quality clothing and jewelry that is timeless. In this morning's conference call, the company noted that they experienced "strong sales" of Tiffany Charms and their Atlas 1837 and Somerset Collections. The new Tiffany Metro and Tiffany Keys collections have also shown promise, according to Mr. Aron. What do all of these collections have in common? Understated, classic and timeless luxury. If they stick with promoting these lines, they just might beat expectations in the first quarter.