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Prestige Products Help Estée Lauder See Solid Growth

Posted: May 7, 2012

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By product category, net sales and operating income for the quarter were unfavorably impacted by the shifts in orders from certain retailers due to the company’s implementation of SAP, as previously mentioned. For skin care, the company reported net sales of approximately $32 million; makeup, approximately $26 million; fragrance, approximately $8 million; hair care, approximately $5 million; other, approximately $1 million. For operating income, skin care clocked in at approximately $24 million; makeup, approximately $19 million; fragrance, approximately $6 million; hair care, approximately $4 million; other, approximately $1 million. Excluding the impact of the shifts in orders, reported net sales in skin care, makeup, fragrance and hair care would have increased 13%, 3%, 3% and 5%, respectively, and operating results in skin care, makeup, fragrance and hair care would have increased/(decreased) 35%, (16%), 43% and over 100%, respectively.

In the quarter, net sales and operating income in the company’s geographic regions were unfavorably impacted by the shifts in orders from certain retailers due to the company’s implementation of SAP, as previously mentioned. Net sales for the Americas were at approximately $2 million; Europe, the Middle East & Africa, approximately $39 million; and Asia-Pacific, approximately $31 million. Operating income for the Americas was approximately $1 million; Europe, the Middle East & Africa, approximately $29 million; and Asia-Pacific, approximately $24 million. Excluding the impact of the shifts in orders, reported net sales in the Americas, Europe, the Middle East & Africa and Asia-Pacific would have increased 5%, 9% and 9%, respectively, and operating income in the Americas, Europe, the Middle East & Africa and Asia-Pacific would have increased 60%, 15% and 26%, respectively.

Regarding the company’s outlook for the fiscal 2012 fourth quarter and full year, the company has benefitted from the strength in global prestige beauty, particularly in North America, China and travel retail and expects this positive industry trend to continue. The company’s growth has outpaced prestige beauty and should continue to grow faster than the industry. Certain European countries, Japan and Australia are soft due to ongoing economic uncertainties and volatility in financial markets. The company has been able to offset to some extent the impact of these factors, demonstrating its ability to grow ahead of global prestige beauty in both soft and strong environments. During the remainder of fiscal 2012, the company will continue to execute its winning strategy and expects continued solid results.

Specifically, in the context of its strategy, during the remainder of fiscal 2012, the company expects to further increase global advertising spending on winning brands, new initiatives, impactful product launches and successful existing products. The company’s strong performance has enabled it to substantially increase year-over-year global advertising, while still significantly improving its operating margin. The increased advertising spend is financed by fewer promotions, non-value added cost reductions, as well as mix improvements. The Company believes its successful advertising pull strategy will continue to stimulate and sustain its growth.

Additionally, the company will continue its planned investment behind its strategic modernization initiative, including the rollout of SAP and upgraded capabilities to support its human resources and retail operations, which is part of a broader plan to modernize the company’s systems and infrastructure.