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"The unprecedented global economic crisis produced one of the worst holiday seasons in decades, with many U.S. retailers experiencing double-digit sales declines in nearly all categories," said William P. Lauder, CEO. "Our business was no exception to the downturn in consumer spending, and our second quarter results will come in lower than we expected. Nevertheless, we believe we are growing global market share, even in the exceptionally challenging United States, with some of our brands generating share improvements during the quarter. We believe the current economic conditions, coupled with significant retailer destocking, will continue to negatively affect our sales for the balance of our fiscal year."
Net sales for the fiscal 2009 second quarter are now expected to decrease approximately 6% on a constant currency basis versus last fiscal year's second quarter, compared with previous expectations of sales growth of between 2% and 3%. In addition, the adverse effect of exchange rates is forecasted to lower reported sales for the second quarter by approximately 6.5%. Given the revised sales expectations, the company anticipates that diluted net earnings per share for the second quarter will range from $.75 to $.82.
"We have encountered difficult periods driven by external events before, and have emerged stronger," said Lauder. "Overall, our business fundamentals are sound, our balance sheet remains solid and we expect to generate relatively strong cash flow for fiscal 2009. We will protect our business in the near term and stay the course for the long term. We are continuing to focus on our strategies, including making prudent investments to support our brands, while diligently controlling expenses. I am confident that employing these disciplines will drive our future growth and create greater value for our stockholders."
The company further noted that the high degree of global economic uncertainty is expected to continue to have a negative effect on consumer confidence, demand and spending. These conditions make definitive forecasting difficult. The company expects the current retail trends in North America to continue for the remainder of the fiscal year. In Europe, the Middle East and Africa, sales rates are anticipated to slow in certain key countries. The company's outlook for Asia/Pacific is cautiously positive, but anticipates some softening of certain retail environments in this region. With that and other factors set forth below, the company currently expects net sales for the fiscal 2009 full year to be flat to down 3% on a constant currency basis versus the prior fiscal year, compared with its previous expectations of 3% to 5% sales growth. Foreign currency translation is expected to negatively impact net sales by 5% to 7% versus the prior year. As a result, the company expects diluted net earnings per share for fiscal 2009 to be between $1.30 and $1.60. These expectations exclude potential restructuring charges that the company may record by the end of the fiscal year.