Estee Lauder Companies Inc.
) posted second-quarter fiscal 2014 earnings of $1.09 per share
(excluding restructuring charges). The earnings exceeded the
Zacks Consensus Estimate of $1.06 by 2.8% and management's
guidance of a range of 99 cents-$1.04.
However, earnings were down 6.0% from $1.16 reported in the
prior-year quarter due to shift of orders from third-quarter
fiscal 2013 to second-quarter 2013.
Quarter in Detail
Excluding the impact of one-time restructuring activities and
shift of sales orders from the third quarter to second quarter of
fiscal 2013, net sales went up 7% to $3.02 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
In the quarter under review, the Makeup category was strongest
with 8% growth benefiting from strong growth from the company's
makeup artist brands. Fragrance product line followed with 4%
growth over the year-ago quarter. Hair Care reported only 2%
growth year over year. Skin Care's net sales remained flat year
over year. Other products, contributing less than 1% to total
revenue, registered a maximum growth of 16%.
Gross margin inflated 10 basis points (bps) to 80.7% in the
second quarter of fiscal 2014 owing to lower cost of sales. Lower
selling, general & administrative expenses led to operating
income margin expansion of 90 bps to 21.7%.
: Sales in the Americas rose 8.0% to $1.2 billion. Sales
increased on the back of growth in the company's makeup artist
brands. Operating income shot up 40% to $152.2 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 8% on a constant currency basis to $1.2
billion. Operating income increased 6% to $332.4 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 1% to $643.0 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 remained flat year over year at $168.2 million
as higher results in Korea and Australia were offset by lower
results in China, Hong Kong and Taiwan.
Other Financial Update
EL has announced a dividend of 20 cents per share payable on
Mar 17, 2014 to stockholders of record at the close of business
on Feb 28, 2014.
Guidance for Fiscal 2014
Following better-than-expected results in the second quarter,
for fiscal 2014, Estee Lauder reaffirmed it earnings per share
outlook to the range of $2.80 to $2.87. EL, however, narrowed its
sales guidance to a range of 6%-7% compared to previously
announced range of 6%-8% in constant currency.
Guidance for Third-Quarter Fiscal 2014
For the third quarter of fiscal 2014, earnings per share
excluding restructuring charges are projected in the range of 52
cents to 55 cents. Net sales are expected to increase between
10%-11% in constant currency, negatively impacted by foreign
currency translation of 1%-2%. Estee Lauder expects to augment
its advertising spend to back its product launches.
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 #2 (Buy). Other
stocks in the retail sector worth considering are
Green Mountain Coffee Roasters Inc.
Hain Celestial Inc.
SJM Smucker Inc.
). All these stocks carry a Zacks Rank #2.
ESTEE LAUDER (EL): Free Stock Analysis Report
GREEN MTN COFFE (GMCR): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
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