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Estée Lauder Reports Drop in Profit

October 21, 2005

Estée Lauder Cos. reported its fiscal fourth-quarter profit fell 6%, weighed by a large tax charge for repatriating dividends and increased expenses.
Estée Lauder, whose brands include Clinique, Origins, Bobbi Brown and Aramis, said strong sales of makeup and skin and hair care products drove the improved results, helping offset slowing fragrance sales. Going forward, the company said it would devote more advertising and promotion on skin care and makeup, instead of fragrance.
“Our focus is on substantially improving profitability” in fragrance, chief executive William Lauder said. “Newness and excitement has always been a mainstay in fragrances and we need to be relevant in this category, but not at the expense of profitability.”
Estée Lauder reported earnings of $66.6 million, compared with $71.1 million in the prior-year period. Sales rose 10 percent to $1.5 billion from $1.4 billion. Excluding the special tax charge of $27.5 million, the company reported earnings from continuing operations of $94.1 million. The tax charge stems from a plan to repatriate $500 million of extraordinary intercompany dividends under the American Jobs Creation Act of 2004.
For fiscal 2005, Estée Lauder reported earnings of $406.1 million, up from $342.1 million a year ago.
The company also said it planned to increase its presence in China, India, Russia, Brazil, Vietnam, Turkey and certain central European countries it considers long-term, strategic markets with great potential.
Estée Lauder also said its business nearly doubled this year in China, where it was seeing “exceptional” growth.”
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