Estee Lauder Companies Reports Strong Third Quarter

The Estee Lauder Companies Inctoday reported net sales for the third fiscal quarter ended March 31, 2001 of $1.10 billion, a 6% increase from $1.04 billion in the prior-year period. Excluding the negative impact of foreign currency translation, net sales increased 9%, in line with the Company’s expectations.

The Company reported net earnings of $65.1 million for the quarter, up 8% from $60.4 million in the same period last year. Basic earnings per common share for the quarter rose 8% to $.25 from $.23 in the prior year, and diluted earnings per common share increased 9% to $.24 from $.22 reported in the prior year.

Fred H. Langhammer, president and chief executive officer, said, “We turned in a terrific third quarter, meeting all of our financial targets. This is a notable achievement considering the soft retail climate in the U.S. and the uncertain sentiment surrounding the economy. We view challenging environments as an opportunity to gain market share, which is an essential component of our future growth strategy. Our business in Europe and Asia remained strong owing to successful product introductions and the ability to effectively execute our strategies. We will continue to benefit from a combination of global distribution, superior marketing and a promising lineup of new products.”

Net sales of makeup products for the third quarter rose 10% to $464.1 million on a reported basis. The higher sales reflect the initial shipments of Moisture Surge Lipstick and the launch of Lash Doubling Mascara from Clinique along with recent product introductions such as Equalizer Smart Makeup by Estee Lauder, High Impact Eye Shadow from Clinique and Luxe Makeup by Prescriptives. Existing Estee Lauder products such as Go Pout Lipcolor and, in international markets, Pure Color Lipstick also contributed to the net sales increase, as did strong double-digit growth from MoAoC and new and existing products from our other brands.

Skin care sales increased 4% to $419.1 million, fueled by the introduction of Anti-Gravity Firming Eye Lift Cream by Clinique, as well as the recent successful launches of Idealist Skin Refinisher by Estee Lauder, Anti-Gravity Firming Lift Cream from Clinique and MoAoC Pro-Preferred Skincare. Skin care sales also benefited from the strong performances of Origins’ Ginger Bath and Body Collection and, in international markets, the recent launch of Renutriv Intensive Lift Serum and continued success of White Light Brightening System by Estee Lauder.

Fragrance sales decreased 4% on a reported basis from the prior-year quarter to $172.9 million. The success of Intuition by Estee Lauder in international markets and the rollout of DKNY for men contributed to the category. These positive contributions were more than offset by the continued weakness of Tommy Hilfiger fragrances and lower sales of Estee Lauder pleasures, Dazzling Gold and Dazzling Silver. Fragrance sales also faced a difficult comparison with the prior-year quarter due to the domestic rollout of DKNY for women last year. The decline in fragrance sales occurred in the United States, while fragrance sales increased in Europe due primarily to the success of Intuition.

Sales of hair care products increased 40% to $39.9 million. The increase is primarily attributable to the inclusion of sales from Bumble and bumble, a majority of which was acquired in June 2000, the current fiscal year introduction of Clinique’s Simple Hair Care System, as well as continued excellent growth at Aveda.

Third-quarter operating income in skin care and makeup increased, driven by sales growth in each of these categories. Fragrance posted an operating loss, reflecting lower sales and increased support spending. In hair care, operating income remained consistent with the prior-year quarter, reflecting increased sales and the inclusion of Bumble and bumble, partially offset by costs associated with refining Aveda salon distribution, opening new retail stores and investing in new product introductions.