Double Digit Growth at Estée Lauder

The Estée Lauder Companies Inc. reported an “outstanding” financial performance for its first quarter ended Sept. 30, 2011, according to the company. Net sales increased 18% to $2.48 billion, while net earnings jumped 46% to $278.6 million.

Fabrizio Freda, president and chief executive officer, said, “Our very strong company performance continued to be broad based, highlighted by healthy top line growth across all categories and regions, strong bottom line growth and continued margin expansion. These results reflect the strength of our brands, the appeal of our superior product innovations and the effectiveness of our focused advertising and marketing spending. The recent economic uncertainty and financial market volatility have not significantly impacted our business. The strength of our underlying fundamentals, our winning strategy and the increasing efficiency of our business model enabled us to significantly outperform the beauty industry and continue to report exceptional results.

“As we move forward in this environment, we believe the strategies we have implemented better position us for sustained growth and increased profitability. Based upon our experience to date and our confidence in our business and its potential, we are raising our full year local currency sales forecast to between 8% and 10% and increasing our earnings per share estimate, before restructuring charges, to $4.25 to $4.45. At the same time, we plan to leverage the strength of our brand portfolio and formidable creativity to capture share and maximize growth for the long term. As we announced earlier today, our Board’s decision to increase our dividend and declare a two-for-one stock split reflects our belief in our long-term potential.”

The Company’s strong performance was due to solid overall business, particularly from its largest brands, helped by a weaker US dollar. The Company grew double-digits in every region, including the US, its home market. Sales also increased in virtually all product categories within each region. Sales growth was particularly strong in travel retail and emerging markets, along with solid gains in many developed countries.

The skin care category, a strategic priority for the company, gained share during the quarter in certain countries in the stores where its products are sold. The Estée Lauder brand had strong sales from the recent launches of Idealist Even Skintone Illuminator and Idealist Cooling Eye Illuminator. The launch of the reformulated Nutritious Vita-Mineral and Resilience Lift lines of products also contributed incremental sales. In Clinique, the successful recent launch of Turnaround Overnight Radiance Moisturizer, as well as higher sales of Repairwear Laser Focus Wrinkle & UV Damage Corrector, contributed to the category’s growth. La Mer generated strong sales growth for the quarter, reflecting the continued success of The Radiant Serum, while the Plantscription line of products by Origins also contributed incremental sales.

Makeup net sales growth reflected strong increases, primarily from the company’s makeup artist brands and certain heritage brands. The higher makeup sales reflected increases across a broad range of products, such as the recent launches of new Pure Color eye and lip products and Doublewear Stay-In-Place Makeup SPF 10 from Estée Lauder. Repairwear Laser Focus Makeup and Lid Smoothie Antioxidant 8-Hour Eye Colour from Clinique generated solid sales gains.

Incremental fragrance sales were generated from the recent launches of DKNY Golden Delicious, Estée Lauder Sensuous Nude and Coach Poppy Flower. Higher fragrance sales from the Tom Ford and Jo Malone luxury brands, contributed to the category’s growth. Partially offsetting these increases were lower sales of Estée Lauder pleasures bloom, pureDKNY and Coach Poppy.

Hair care net sales increased, reflecting an improved retail environment. The increase was primarily due to higher sales from Aveda, which included the recent launch of Be Curly Style-Prep. Bumble and bumble also posted sales growth, reflecting the launch of the Sleek & Straight line of products.

Net sales growth in the region was primarily attributable to higher sales in the US, which benefited from a solid retail environment in the prestige area and winning new product offerings from the company. The improvement reflects strong growth from the company’s heritage brands and makeup artist brands. Sales also increased in Canada.
The higher sales also reflect strong double-digit gains in Latin America, which benefited from growth in emerging markets, such as Brazil.

Double-digit net sales growth was also recorded in a number of other countries, led by the United Kingdom, the Middle East, Germany, France and Italy. These increases reflect strong sales for the company’s products, even in relatively soft retail environments, successful launches of skin care and makeup products from certain heritage brands and higher combined sales from Estée Lauder makeup artist brands. The company also generated solid local currency sales growth in this region, with all countries posting increases, except Japan and Australia. The strongest gains were generated in China, Hong Kong, Korea, Taiwan and Thailand, primarily reflecting strong sales of skin care and makeup products.

For the full year, net sales are forecasted to grow between 8% and 10% at Estée Lauder.