Estee Lauder Companies Inc.
) posted third-quarter fiscal 2014 earnings of 54 cents per share
(excluding restructuring charges) which was within management's
guidance range of 52 to 55 cents. Earnings surpassed prior-year
results by 20%. Earnings, however, missed the Zacks Consensus
Estimate by a penny.
Results included impact of charges, principally related to the
Venezuela remeasurement of exchange rate. Excluding the effect of
the remeasurement, Estee Lauder reported earnings per share of 64
cents, up 42.2% from prior-year quarter's results.
Quarter in Detail
Excluding the impact of one-time restructuring activities, the
Venezuela remeasurement charge and shift of sales orders from the
third quarter of fiscal 2013 to the second, net sales went up 8%
to $2.5 billion on the back of higher sales in most of the
geographic regions and major product categories. However,
quarterly sales were in line with the Zacks Consensus
In the quarter under review, the Skincare category was
strongest with 13% growth benefiting from strong growth from the
company's makeup artist brands. Fragrance product line followed
with 16% growth over the year-ago quarter. Makeup category came
next with year-over-year growth of 11%. Hair Care reported only
5% growth year over year. Other products, contributing less than
1% to total revenue, registered the maximum growth of 32%.
Gross margin shrank 30 basis points (bps) to 80.4% in the
third quarter of fiscal 2014 owing to higher cost of sales.
Higher operating expenses led to operating income margin
contraction of 300 bps to 67.0%.
: Excluding the effect of shift of orders, sales in the Americas
rose 5.0% on a constant currency basis to $1.1 billion. Sales
increased on the back of growth in the company's makeup artist,
luxury and certain heritage brands. Excluding the effect of shift
of orders, operating income shot up 22% to $111.5 million backed
by increased sales and tight spending.
, the Middle East & Africa:
Double-digit growth in travel retail drove overall sales for this
segment. Sales grew 11% on a constant currency basis to $959.4
million. Operating income increased 11% to $160.2 million on the
back of higher results from the company's travel retail business,
the United Kingdom, Russia, Israel and Iberia.
Sales in the region improved 2% on a local currency basis to
$518.4 million, backed by double-digit sales growth in China,
Hong Kong and Taiwan which was, however, partially offset by weak
sales growth in Korea. Operating income decreased 13% year over
year to $70.1 due to soft results in Hong Kong and
Other Financial Update
Estee Lauder has announced a dividend of 20 cents per share
payable on Jun 16, 2014 to stockholders of record at the close of
business on Mar 31.
Guidance for Fiscal 2014
Following better-than-expected results in the second quarter,
for fiscal 2014, Estee Lauder raised it earnings per share
outlook to a range of $2.86 to $2.90 compared with $2.80 to
$2.87. Estee Lauder, however, reaffirmed its organic sales
guidance to a range of 6-7%. Estee Lauder expects growth to be
fuelled by success in high-growth channels and emerging
Other Stocks to Consider
Headquartered in New York, Estee Lauder engages in the
manufacture and sale of skin care, makeup, fragrance and hair
care products and currently carries a Zacks Rank #3 (Hold).
Better-ranked stock in the cosmetics and toiletries sector
Helen of Troy Limited
). Both the stocks have a Zacks Rank #2 (Buy). Another
stock in the retail sector worth considering is
American Apparel, Inc.
) carrying the same Zacks Rank as Helen of Troy.
AMER APPAREL (APP): Free Stock Analysis
COTY INC-A (COTY): Free Stock Analysis Report
ESTEE LAUDER (EL): Free Stock Analysis Report
HELEN OF TROY (HELE): Free Stock Analysis
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