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Lauder Q2 2010 Sales Climb 11%

Posted: January 28, 2010

The Estée Lauder Companies Inc. reported financial results for the 2010 fiscal second quarter, ended Dec. 31, 2009, that were sharply higher than the prior-year period and the company's original expectations. The company posted net sales of $2.26 billion, an 11% increase compared with $2.04 billion reported in the prior-year period. Excluding the impact of foreign currency translation, net sales increased 6% from the year-ago period. The company reported net earnings for the quarter of $256.2 million, compared with $158.0 million last year.

During the quarter, the company, according a release, continued to make progress on its strategic goals with significant improvements in cost of sales, reflecting the positive impact of SKU reductions and lower obsolescence. The company realized substantial savings in connection with its restructuring and resizing efforts, as well as from initiatives in indirect procurement. Further, the company's turnaround brands are experiencing success in their refocus and repositioning initiatives, collectively generating significantly improved results for the first six months of fiscal 2010, compared with the prior-year period. Additionally, the wholesale business of the Prescriptives brand will close on Jan. 31, 2010. The company has successfully directed consumers to similar products at other Estée Lauder Companies' brands and plans to leverage the assets, formulas and trademarks of Prescriptives within the company.

"The strong results we posted this quarter reflect the vitality of our brands, increased locally relevant innovation and the value consumers find in our product offerings," says Fabrizio Freda, president and CEO, The Estée Lauder Companies. "Our strong top-line growth indicates consumers have responded positively. I am very pleased with our performance in our travel retail business, the Asia region and a good holiday season, particularly in the United States and the United Kingdom, where we had the right mix of gift sets and basic products, supported by the integral personal service from beauty advisors. Many aspects of our business this quarter came together, as strong global sales growth, cost of sales reductions, restructuring savings and efficient cost management translated into significant operating margin improvement.

"While certain businesses have shown signs of improvement, and the economic challenges and some external uncertainties have abated, we remain mindful that they have not completely disappeared. We continue to examine our business to more closely align our cost structure with expected sales growth and plan to make targeted incremental investments throughout the balance of the fiscal year to support and grow our brands. Our strategic direction and long-term goals are supported by our entire organization, and step-by-step we have begun executing on each element of the strategy. The solid results for the first half and our confidence in our business for the balance of the fiscal year give us the ability to again raise our full-year sales and earnings per share estimates."

All product categories and geographic regions benefited from the company-wide efforts to eliminate non-value adding costs, as well as significant improvement in cost of sales from favorable product mix and enhanced inventory management, resulting in substantial improvements.