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Estée Lauder Reports Q1 Performance

January 23, 2013

The Estée Lauder Companies Inc. reported a solid financial performance for its first quarter ended Sept. 30, 2012, with net sales rising 3% to $2.5 billion. “In this new fiscal year, we continue to be guided by our winning strategy and commitment to profitable growth,” said Fabrizio Freda, president and CEO. “Our first quarter results demonstrate the solid fundamentals underlying our business and I am pleased and encouraged with our performance even in softer markets. Organic sales growth for the quarter was in line with our expectations, while earnings per share were better than planned. In particular, strong growth in North America and China drove our sales gains and, when coupled with cost of sales improvements and effective expense management, we generated a significant operating margin increase. Freda said that the company will continue to focus “our resources on the most attractive areas of growth and on drawing new consumers into our business via successful product and service innovation and effective investment spending. We are very mindful of the uncertain market dynamics in several countries and of the solid growth in others, but we are judicious in our resource allocation to maximize our results in this dynamic market situation. “We are confident that we have developed the necessary agility to manage our business effectively. We expect that we will grow our sales 6 to 7% in local currency this fiscal year, or double the rate of global prestige beauty, while raising the lower end of our earnings per share range.”

The company’s performance was due to solid overall business, particularly from its largest brands. The company generated local currency sales gains in each of its product categories and geographic regions.

Sales growth was particularly strong in the US and overall in emerging markets, along with solid gains in certain developed countries.

During the quarter, the company said it made substantial progress on its previously stated strategic goals, with a strong improvement in cost of sales and operating expenses as a percentage of net sales.

All product categories and geographic regions benefited from company-wide efforts to reduce or eliminate non-value-added costs.

In connection with the long-term strategic plan and certain ongoing initiatives, the company realized savings of $17 million during the quarter.
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