Estee Lauder Companies (EL)
Q2 2012 Earnings Call
February 03, 2012 9:30 am ET
Dennis D'Andrea - Vice President of Investor Relations
Fabrizio Freda - Chief Executive Officer, President and Director
Thia Breen - Global President of Estee Lauder Brand
Richard W. Kunes - Chief Financial Officer, Principal Accounting Officer And Executive Vice President
Wendy Nicholson - Citigroup Inc, Research Division
Lauren R. Lieberman - Barclays Capital, Research Division
Nik Modi - UBS Investment Bank, Research Division
Alice Beebe Longley - Buckingham Research Group, Inc.
Christopher Ferrara - BofA Merrill Lynch, Research Division
Caroline S. Levy - CLSA Asia-Pacific Markets, Research Division
Constance Marie Maneaty - BMO Capital Markets U.S.
Linda Bolton-Weiser - Caris & Company, Inc., Research Division
Javier Escalante - Consumer Edge Research, LLC
John A. Faucher - JP Morgan Chase & Co, Research Division
William Schmitz - Deutsche Bank AG, Research Division
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Good morning, everyone. On today's call, we have Fabrizio Freda, President and Chief Executive Officer; Rick Kunes, Executive Vice President and Chief Financial Officer; and Thia Breen, President of our North American affiliate. Thia's going to recap the holiday season and discuss our strategic progress in North America.
Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements. Except when noted, our discussion of our financial results and our expectations are before restructuring and other charges. You can find a reconciliation between GAAP and non-GAAP figures in our press release and on the Investor Relations section of our website.
And I'll turn the call over to Fabrizio.
Thank you, Dennis. Good morning, and welcome to our Fiscal 2012 Second Quarter Earnings Call. First, I want to acknowledge the passing of our dear friend and colleague, Evelyn Lauder, who was the heart and soul of our company. She was best known for her work in fragrance development and breast cancer awareness, but she was truly a pivotal architect of our vision, values and culture. Her incredible strengths, compassion and generosity will leave a lasting legacy on all of us personally.
Now let me turn to the quarter. I'm pleased to tell you that our company once again achieved strong double-digit sales and profit growth, and the second quarter results was largely higher than the top of our expectations. Importantly, our terrific performance was broad based across geographies, categories and brands. For the period, our sales rose 10%, and our earnings per share were $1.01 after the recent 2:1 stock split.
We are now in the third year of our strategy and extremely gratified that we continue to achieve solid gains worldwide regardless of economic conditions. This clearly demonstrates that we have a winning and sustainable strategy and that consumers are drawn to our unique and innovative products and High-Touch service approach.
As a company, we continue to increase share in many large and critical markets, outpacing both mass and prestige competitors. Here in the United States, our largest market, our brands increased share by 40 basis points in the high-margin prestige skin care category, where we had focused much of our resources. We also improved our competitive position in key categories in countries across Asia and Europe, including China, France, Germany, Turkey and Italy.
Spending by affluent consumers remained buoyant this quarter, particularly for the kind of affordable luxuries that we offer. Sales of our higher-end brands, including La Mer, Bobbi Brown, Jo Malone and Tom Ford, enjoyed chart double-digit growth globally. What's driving consumers to our brands, whether in Shanghai, London, Los Angeles or Milan, is a winning formula that combines incredible innovation, brilliant advertising, local relevance and improved High-Touch services.
We have attract thousands of new multiethnic consumers, increased our repeat business and even launched products that created new subcategories. We began this approach about 2 years ago by strategically advertising several cutting-edge skin care products from Estée Lauder and Clinique with the more frequent use of TV. Now we have taken the same approach to makeup. Using a full spectrum of television, digital and print ads in key markets worldwide, we recently started aggressive campaigns for foundation products. And later this year, we'll promote eye and lips products on television, in numerous websites as well as in magazines.
Our advertising is compelling and creative. Early results for the new makeup ads are extremely encouraging. For instance, at the end of the first quarter, Clinique ran a commercial in the U.S. for Even Better makeup, which helped lead foundation sales and its entire makeup category. The TV ads, our first for makeup, followed a major TV campaign for the continuous skin care product, Even Better Clinical Dark Spot Corrector. And some ads promote the 2 products together.
Clinique makeup sales in North America grew 13% this recent quarter, confirming that our advertising works and draws new consumer to our innovative products. We've also been collaborating with our retail partners to reinvigorate the beauty floor in North America department stores, and results continue to be robust. Both Estée Lauder's and Clinique's sales in the channel climbed high single digits. Much of this is driven by sourcing demand for prestige skin care, and Estée Lauder enjoyed great success. Its North America skin care sales jumped 23%.