05.04.12
The Estée Lauder Companies Inc. reported a solid financial performance for its third quarter ended March 31, 2012. Net sales rose 4% to $2.25 billion, while net earnings increased 5% to $130.4 million. However, the only category that really showed gains was skin care.
For the quarter, skin care sales rose 14% to $1.01 billion. The Estée Lauder brand had strong sales from the recent launches of Revitalizing Supreme Global Anti-Aging Creme, Idealist Even Skintone Illuminator and Idealist Cooling Eye Illuminator. Continued growth of Advanced Night Repair Synchronized Recovery Complex and the launch of the reformulated Resilience Lift and Nutritious Vita-Mineral lines of products also contributed incremental sales.
However, makeup, fragrance and hair care all showed declines or remained flat at $877 million and $231.3 million, respectively. Makeup sales decreased less than 1% as well as fragrance; hair care net sales increased less than 1% to $110.1 million.
According to the company, makeup sales were up against a tough comparison to the prior-year period when the category grew 24% (3% of which related to the shift in sales orders). Strong growth was generated from M•A•C, primarily reflecting new product offerings. Higher makeup sales also reflected the recent launches of Invisible Fluid Makeup from Estée Lauder and Quickliner For Eyes Intense from Clinique. Lower sales from certain existing products partially offset these sales gains. Higher sales from Smashbox and the introduction of the Tom Ford Beauty line of cosmetics contributed to the category’s growth.
In fragrance, notable increases were generated from the recent launches of pureDKNY Verbena, DKNY Golden Delicious and Estée Lauder Sensuous Nude. Higher fragrance sales from the Tom Ford and Jo Malone luxury brands also contributed incremental sales. These increases were offset by lower sales of certain Estée Lauder and designer fragrances.Fragrance operating loss widened, primarily reflecting lower profitability from Estée Lauder fragrances, partially offset by higher results from the Company’s designer fragrances, particularly in Western Europe.
In hair care, sales were up against a tough comparison to the prior-year period when the category grew 14% (2% of which related to the shift in sales orders). Higher sales from Aveda reflected new product introductions, including the recent successful launch of its Invati line of products, as well as from expanded distribution. Bumble and bumble sales declined, primarily due to the anniversary of the rollout of its expanded retail and salon distribution in the prior-year period. Sales declines at Ojon were due, in part, to softness of its business in the direct response television channel.
Overall, the company’s performance was due to solid overall business, particularly from its largest brands. It reported sales gains in every region, including strong skin care growth within each region. Sales growth in other product categories in each region was mixed. Sales growth was particularly strong in travel retail and emerging markets, along with solid gains in several developed countries. Also, in the second quarter of fiscal 2012, some retailers, primarily in Asia/Pacific, accelerated their orders, according to the company.
Fabrizio Freda, president and chief executive officer, said, “Our third quarter sales came in slightly ahead of our forecast and, importantly, we were able to leverage part of that growth into an overachievement of earnings per share. Driving our performance are focused investments on our distinctive product innovations, supported by strong creative capabilities and elevated high-touch services. These elements provide a foundation for continuous growth and, coupled with cost savings and productivity improvements, increased and sustainable profitability. On the strength of our brands, we posted across-the-board sales gains in our regions, strong skin care growth and increases in most channels, while further generating substantial gross margin improvements.”