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Lauder Reports Q2 2009

Posted: February 5, 2009

The Estée Lauder Companies Inc. reported that net sales for its fiscal 2009 second quarter, ended Dec. 31, 2008, were $2.04 billion—compared to the $2.31 billion reported in the prior-year quarter. Excluding the impact of foreign currency translation, net sales declined 6%. The company reported net earnings of $158 million compared with $224.4 million last year.

“The factors that impacted our second quarter results were challenging on multiple levels, and not different from what many other companies have experienced, especially those companies dependent on consumer spending," said William P. Lauder, CEO. "The current difficult environment, which is global in scale, is not expected to improve in the near term. This underscores how vital it is for us to execute on our long-term strategy, even as we address the short-term challenges. We are a profitable company with strong financial underpinnings. In this environment, we are more committed than ever to contain costs and protect our profits, while continuing to invest judiciously to achieve our long-term growth objectives.” Sales for skin care in constant currency were flat for the quarter. While several new and existing products aided net sales in the skin care category, according to the company, they were not enough to offset the impact of the economic downturn as noted above. The company believes it gained global share in this category during the quarter in stores that carry its products. Sales increased double-digits in Asia/Pacific, reflecting that region’s focus on skin care products.

Makeup sales increased mid-single digits in Asia/Pacific, while posting declines in the company’s other regions. The company’s core brands, as well as its makeup artist brands, reported an overall global sales decline during the quarter. Core brands posted higher declines in international markets than domestically, while makeup artist brands experienced a larger portion of their sales shortfall in the Americas. The company believes its makeup artist brands gained share internationally within their distribution. The lower makeup sales reflected declines across a broad range of products.

Fragrance sales saw the sharpest decrease. During the quarter, the company was heavily challenged by economic and competitive pressures in this product category. The decrease was largely due to lower sales of designer fragrances. Also contributing to the decline were lower sales of certain Estée Lauder and Clinique fragrances. The recent successful launches of Sensuous by Estée Lauder and Hilfiger Men from Tommy Hilfiger, as well as the recent international introduction of DKNY Delicious Night, partially offset these declines. Fragrance operating results declined, primarily reflecting the lower sales noted above, partially offset by a reduction in selling, advertising, merchandising and sampling spending.

Sales in constant currency for hair care increased, benefiting from incremental sales of new products, such as Dry Remedy Shampoo and Conditioner from Aveda, an increase in points of distribution and the acquisition of an independent distributor. Partially offsetting these positives were the conclusion of a hotel amenities program and, to a lesser extent, a softer salon retail environment in the United States. Additionally, reported sales declined due to the impact of foreign currency translation. Hair care operating results increased sharply, primarily reflecting a favorable comparison to the prior-year period when the company made investments in new points of distribution and recorded higher intangible asset amortization resulting from the acquisition of the Ojon brand. These gains were partially offset by the current period decline in sales noted above.

Charts and additional data is available.