Estée Lauder To Cut Its Workforce by 6%
Stung by a 6% decline in fiscal second quarter sales, Estée Lauder will cut 2000 jobs (6% of its workforce) over the next two years as part of a four-year restructuring program. Net sales for Estée Lauder’s fiscal second quarter ended Dec. 31, 2008 dropped 6% to $2.04 billion, while net earnings slipped 42% to $158.0 million, as compared with $224.4 million last year.
The company highlighted elements of its new, four-year strategic plan and set performance goals for fiscal year 2010 through fiscal year 2013 that include:
• Grow share by increasing sales at least one percentage point higher than global prestige beauty every year. The first building block of growth is market assumptions, which for fiscal 2010 are particularly unpredictable given the current economic conditions.
• Generate more than 60% of sales outside the U.S., with the Asia/Pacific region expected to lead growth, followed by Europe, the Middle East and Africa.
• Achieve operating margin of 12% to 13% by fiscal 2013, showing step-change improvement annually, starting from a lower fiscal 2009 base.
• Reduce days of inventory 15% to 20% by fiscal 2013.
• Focus resources on core brands, geographies and consumer segments.
• Address underperforming brands by changing their business models to improve profitability within 18 to 24 months.
• Realign and optimize the structure of the company’s geographic regions to better leverage scale, improve productivity and reduce complexity.
• Cut costs by $450 million to $550 million, including improvements in cost of goods, organizational resizing and regional realignments, benefits from its Strategic Modernization Initiative, reduction and management of SKUs, logistic optimization, indirect procurement savings and selective outsourcing opportunities.
• Reduce headcount over the next two years by approximately 2,000 employees, or 6% of the workforce, institute an immediate company-wide freeze on merit raises and a continuation of its current hiring freeze. Reductions would occur through a combination of normal attrition, reorganizations and job eliminations. This should strongly realign productivity.
• Take potential restructuring and other one-time charges of between $350-450 million during the next few years.
• Reinvest approximately $50 million to fuel growth and gain global share, including strengthening competency in consumer insights; accelerating presence in fast growing markets and channels; intensifying research and development and brand creation capabilities, particularly internationally; and additional funding for the company’s equity-based rewards program.
At press time, Standard & Poor’s Ratings Services also revised its outlook on Estée Lauder to “negative” from “stable” amid a tough economy that has dampened demand for cosmetics.
Growth Slips at L’Oréal
L’Oréal’s global sales rose in 2008, but the heady days of double-digit gains are long gone. The company reported sales rose 2.8% last year to $22.5 bilion, while net earnings increased 3.8% to $2.51 billion.
Sales rose in Eastern Europe and Asia, but were flat in Europe and declined in the U.S., according to the company in its financial report.
Net Income Jumps 20% at Colgate-Palmolive
Colgate-Palmolive Company reported a 20% increase in net income to $497 million in fourth quarter 2008, as compared to the prior year. According to the company, fourth quarter 2008 results include $30.5 million of aftertax charges for the company related to the 2004 Restructuring Program. The year ago quarter included restructuring charges of $75.8 million.
Worldwide sales grew 0.5% during the fourth quarter to a record $3.7 billion. Operating profit as reported increased 13% to $761.6 million.
For the full year 2008, worldwide sales as reported increased 11% to $15.3 billion. In North America (19% of company sales) business grew 1.5% to a record level in the fourth quarter, while operating profit increased 5%, stated the report. In the U.S., new product launches are contributing to market share gains across categories.
In Latin America (27% of sales), sales grew 5.5% in the fourth quarter; while in Europe/South Pacific (23% of sales), sales declined 13%. Volume gains in Denmark, Germany, Czech Republic, Romania and Australia were more than offset by volume declines in France, Italy and Spain. Greater Asia/Africa sales (17% of sales) increased 1%. Volume gains in India, Russia and the rest of the CIS countries, Philippines, Vietnam, South Africa, the Gulf States/Saudi Arabia region, Morocco and Kenya more than offset volume declines in the Greater China region.
CPL Aromas To Purchase Hagelin’s Fragrance Business
A deal has been agreed in principle in which CPL Aromas Inc. of Somerset, NJ, a subsidiary of the British multi-national fragrance house CPL Aromas, acquire the fragrance business of Hagelin and Company Inc.
CPL Aromas plans to transfer production of the Hagelin fragrance business to its facility in Somerset when the transaction is completed.
Sales Drop at Elizabeth Arden
The current state of economic affairs is showing its impact on the global prestige market, according to a recent report from NPD. Furthermore, financial standings for industry leaders such Elizabeth Arden are showing signs of slowing down, as seen in company financial reports. For the second fiscal quarter ended Dec. 31, 2008, Elizabeth Arden reported net sales of $370 million, a decrease of 12.4%. For the six months ended Dec. 31, the company reported a 6% slip in net sales to $654.2 million.
E. Scott Beattie, chairman, president and chief executive officer of Elizabeth Arden, commented, “Our results were at the high end of the revised guidance announced in January, and we are maintaining our outlook for the second half of our fiscal year and our original full fiscal year cash flow targets.
“While continuing to operate in a difficult economic environment, we are encouraged by the performance of our North American mass retail fragrance business, our new launches and the recently licensed Liz Claiborne fragrance brands,” he continued.
The company is maintaining its outlook and currently expects net sales to decrease by 1-3% for the second half of its fiscal year ending June 30, 2009, or to increase by 1.5-3.5% excluding an expected unfavorable impact of foreign currency, as compared to the second half of the prior fiscal year.
This guidance assumes the anticipated contribution from the continued rollout of the Liz Claiborne fragrances and the second half global launch of the new Elizabeth Arden fragrance, Pretty, and the comparatively weak third and fourth fiscal quarter performance in the prior year.
For the full fiscal year ending June 30, 2009, Elizabeth Arden’s guidance is for net sales to decline by 4% to 5%, or 1% to 2% excluding an expected unfavorable impact from foreign currency, as compared to the prior year period.
Divestitures Boost Unilever’s Results
Unilever has reaped the rewards from its divestitures during the past year but going forward, results may be somewhat more sobering.
The company reported its fourth quarter profits rose 51% to $1.57 billion (at average exchange rates). For the year, profit rose 28% to $7.78 billion.
Fourth quarter sales rose 3% to nearly $13.4 billion, and 1% to $59.6 billion for the full year.
Sales of personal care products, which includes Dove, Sunsilk and Axe/Lynx, rose 6.6% to more than $16.7 billion, in 2008.
But Paul Polman, Unilever’s CEO, warned: “Given the economic uncertainty I believe it would be inappropriate at this stage to provide an outlook specifically for 2009 or to reaffirm 2010 targets.”
Unilever’s long-term target previously called for annual underlying sales growth of 3% to 5%. By 2010, the group’s goal was to reach an operating margin of 15%.
Quarterly Drop at Avon, but Full Year Is Positive
Avon Products’ fourth-quarter sales fell 9% to $2.8 billion due to a substantial shift in many foreign-currency exchange rates.
For full-year 2008, the company reported that total revenue grew 8% to a record $10.7 billion.
Fourth-quarter 2008 operating profit was $372 million, up 66% from last year, while full-year 2008 operating profit jumped 53% to $1.3 billion.
Active representatives grew 4% and 7% in the fourth quarter and full year 2008, respectively.
Beauty sales in the fourth quarter 2008 were 7% lower versus the prior-year period as the impact of foreign exchange more than offset a local-currency increase of 4%, which was driven by growth in all categories, particularly fragrance and skin care. For the full year, beauty sales rose 10%.
Advertising expense decreased 7% in the fourth quarter to $100 million. On a full-year basis, advertising increased 6% to $391 million.
Clorox Posts 2Q Results, Updates Fiscal 2009 Outlook
Clorox reported second-quarter net earnings of $86 million—a 7% drop from the prior year. However, second-quarter sales grew 3% to $1.22 billion. Products from the Burt’s Bees business, which Clorox acquired on Nov. 30, 2007, contributed three percentage points of sales growth.
“We delivered solid second-quarter results in a challenging environment,” said chairman and chief executive officer Don Knauss. “Shipments were lower than our projections due to retailer inventory reductions and soft consumer demand in some categories. That said, the impact of price increases earlier in the fiscal year was in line with pricing models.
“We continue to be cautiously optimistic about the remaining six months of our fiscal year,” he added.
For fiscal year 2009, Clorox now anticipates total sales growth in the range of 3-5%, rather than the previously communicated range of 4-6% due to retailer inventory reductions and consumer reaction to the economy.
Hair Care Strong at Alberto Culver
Alberto Culver Company posted a 2.8% rise in its first fiscal 2009 quarter sales. Net sales for the quarter were $352.8 million. According to the company, the boost was driven mainly by growth in Tresemme and Nexxus.