"Our strong top line growth reflected gains in all major product categories within each geographic region, as well as favorable foreign currency movement," said William P. Lauder, president and CEO, The Estée Lauder Companies. "At the same time, the company's cost savings initiatives and disciplined expense control aided the bottom line. As a result, we generated a 260 basis point increase in operating margin this quarter and better than expected earnings per share growth.
According to the company, the skin care, makeup and fragrance categories were adversely impacted by fewer department store doors during the current-year quarter as compared to the prior-year quarter, resulting from the merger of Federated Department Stores, Inc. and The May Department Stores Company.
Makeup sales and operating income for the quarter increased, primarily reflecting solid growth from the company's makeup artist brands. The recent launches of Resilience Lift Extreme Ultra Firming Makeup SPF15 and High Gloss Lip Gloss from Estée Lauder along with High Definition Lashes from Clinique contributed solid incremental sales.
Sales of hair care products and services increased, primarily due to higher sales at Aveda and Bumble and bumble. Higher sales at Bumble and bumble were primarily due to strong like-door growth and new points of distribution. Aveda net sales growth was due to the recent shipments of Be Curly Shampoo and Conditioner, the international launch of Damage Remedy hair care products, and the recent acquisition of a distributor. Net sales are expected to grow between 6% and 7% in constant currency for the current fiscal year. Diluted earnings per share from continuing operations is now projected to be between $2.10 and $2.20. The company continues to expect to deliver approximately $30 million in incremental savings in the current fiscal year ending June 30, 2007, under its cost savings initiative implemented in fiscal 2006.
On a product category basis, in constant currency, sales in hair care and makeup are expected to be the leading sales growth categories, followed by skin care and fragrance. Geographic region net sales growth in constant currency is expected to be led by Asia/Pacific and Europe, the Middle East & Africa, followed by the Americas.