Estee Lauder Lowers Outlook for 2002

The Estee Lauder Companies Inc. today announced it is lowering its net sales and net earnings expectations for its fiscal 2002 first quarter and full year.

The lower expectations, due in large part to recent events, reflect further uncertainty about consumer confidence and spending, inventory contraction by U.S. retailers, and a significant reduction in worldwide travel, directly affecting the company’s travel retail business. The Company cannot predict with certainty the extent or duration of these conditions and remains cautious that the current economic climate may affect the overall holiday season and the Company’s results for the first half of the fiscal year.

Fred H. Langhammer, president and chief executive officer, said, “Every company is facing unexpected challenges brought about by the recent dramatic events, which have further compounded an already soft economy. Despite these challenges, we will grow our company this year. We have encountered difficult periods before, driven by external events, and have responded with determination and achieved growth. This year will be no exception.”

Mr. Langhammer added, “We are continuing to focus on our strategies to grow through product innovation, distribution enhancements and program execution. Our business fundamentals are solid, our company is strong and we will stay on the course of action that has made us successful.”

The company currently expects a net sales increase for the fiscal 2002 full year of between 5% and 6% on a constant currency basis versus the prior fiscal year, compared with its previous expectations of 7% to 9% sales growth. As a result, the company expects diluted earnings per share for fiscal 2002 to be between $1.45 and $1.50. Estee Lauder said it continues to anticipate that its business performance will accelerate during the fiscal year, with stronger growth in the second half than in the first half. The adverse effect of exchange rates could temper reported sales growth for the full fiscal year by approximately one percentage point.

Net sales for the fiscal 2002 first quarter are expected to be flat to up 1% on a constant currency basis versus last fiscal year’s first quarter, compared with previous expectations of sales growth of between 4% and 5%. Given the revised sales expectations, the company anticipates that diluted earnings per share for the first quarter will be approximately $.38. In addition to the cautious retail outlook and the importance of the last two weeks of September for shipments in the Americas region, the fiscal 2002 first quarter will face a very difficult comparison with the same prior-year quarter. Last year, the company reported an overall 10% sales increase in local currency and strong growth in each region and most product categories. The first quarter net sales in constant currency are expected to be led by low double-digit growth in Asia/Pacific and mid-single-digit growth in Europe, the Middle East & Africa, while the Americas is expected to report a low single-digit sales decline. On a product category basis, in constant currency, the company expects its strongest sales growth from hair care, off of a smaller base, followed by a solid increase in makeup and modest growth in skin care, while fragrance sales are expected to post a small decline. The adverse effect of exchange rates in Europe and Asia could temper reported sales growth by one to two percentage points.