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Estee Lauder Results Reveal Strength in Key Brands

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The Estée Lauder Companies reported that it expects annual net benefits of as much as $300 million from ongoing cost-cutting measures. News comes as the company has reported net sales for the third quarter ended March 31, 2016, of $2.66 billion, a 3% increase compared with $2.58 billion in the prior-year quarter.

The company has revealed that it will cut about 2.5% of its workforce, resulting in the loss of 900 to 1,200 positions. Its restructuring costs will be between $600 million to $700 million before taxes.

“On the strength of our unique brands and agile execution, we posted constant currency sales gains in all our regions and most of our product categories and channels."

Net earnings were $265.6 million, compared with $272.1 million last year. Excluding the impact of foreign currency translation, net sales increased 6%.

Total operating income in constant currency, before charges, increased 4%.

Skin care net sales decreased, due to the unfavorable impact of foreign currency translation. Strength in the segment was seen from La Mer and Origins. Lower skin care sales were seen from Estée Lauder and Clinique.

Higher makeup sales were primarily driven by strong double-digit growth from M•A•C, Smashbox and Tom Ford, as well as gains from Bobbi Brown. Total makeup sales increased in the Estée Lauder and Clinique brands.

Fragrance sales increased primarily due to strong double-digit gains from luxury brands Jo Malone London and Tom Ford and incremental sales from recent acquisitions. Partially offsetting these increases were lower sales of certain Estée Lauder and designer fragrances.

Hair care sales growth benefited from expanded global distribution, primarily in salons, freestanding stores and travel retail for Aveda and from specialty-multi brand retailers and salons for Bumble and bumble.

“On the strength of our unique brands and agile execution, we posted constant currency sales gains in all our regions and most of our product categories and channels," said Fabrizio Freda, president and CEO. "Our results this quarter were again highlighted by strong top line growth in our international business, driven by higher sales in virtually every market we serve. We are particularly pleased with the acceleration of both our e-commerce business and social media initiatives, which are helping to drive brand engagement around the world."

Freda added, “Our flexible business model, reflecting disciplined resource allocation and improved expense leverage, helped achieve bottom line results ahead of our forecast. We are committed to continuing to target investment spending behind our brands and our greatest opportunities to foster global growth. In view of our performance to date and our positive outlook for the balance of the year, we are reiterating our expectation for adjusted constant currency sales growth of 7% to 8% and earnings per share growth of 10% to 12%, before charges, for the 2016 fiscal year.”

 

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