Estee Lauder Companies Refines Outlook for Fiscal Third Quarter and Full Year

The Estee Lauder Companies Inc. today refined its outlook for its fiscal third quarter and reconfirmed full year results. Net sales for the fiscal 2001 third quarter are expected to grow between 8% and 9% on a constant currency basis versus last fiscal year’s third quarter. The increase in third quarter net sales in constant currency is expected to be led by double-digit growth in Europe, the Middle East & Africa and Asia/Pacific regions, while sales growth in the Americas is expected to be in the low to mid-single digits. The company continues to be cautious that current U.S. economic conditions are creating softer retail sell-through and may affect its results for the second half of the fiscal year. In product categories, the Lauder expects double-digit growth in hair care sales, off of a smaller base, followed by strong growth in makeup and skin care, while fragrance sales will likely be consistent with the prior-year period. The adverse effect of exchange rates in Europe and Asia could temper reported sales growth by two and a half to three and a half percentage points. The Company expects to achieve diluted earnings per share for the third quarter of between $.23 and $.25.

For the full fiscal year, net sales are expected to increase along the company’s historical growth pattern of 8% to 10% in constant currency, although the company may invest more aggressively to maintain sales momentum. Given the continued cautious outlook for the remainder of the fiscal year, the company reconfirmed a full fiscal year diluted earnings per share estimate, before the cumulative effect of a change in accounting principle, of between $1.32 and $1.35.

Separately, Lauder provided an update on the progress of its comprehensive three-tier Internet strategy. The first priority of the strategy is the development of individual brand websites, which the company said has moved along very well. These individual brand websites continue to increase their customer databases, creating attractive marketing opportunities. Five of the existing nine sites have e-commerce capabilities, experiencing very positive consumer reception and performing to the company’s expectations. The second tier of the strategy, the development and coordination of specially designed retailers’ e-commerce microsites, or “stores-within-stores,” is progressing well. The sites are scheduled to begin launching in fall 2001.

The third tier of the strategy is the development of the gloss.com multi-brand site. Due to the complexity of the multi-brand site concept, development will require additional time to complete. The company will pretest the site during this summer and relaunch in fall 2001, in time to capture the peak Christmas period. The Company further stated that efforts to launch the site within its original time frame would have required substantial resources above those initially projected. In light of the softness in the U.S. retail market, coupled with one of the company’s internet objectives, to spend in line with the opportunity, the company believes its current approach is the most prudent, both financially and strategically. The deferred launch will not have a material impact on either the company’s net sales or net earnings for fiscal 2001.