2nd UPDATE: Estee Lauder 1Q Profit Surges, Lifts Fiscal Year EPS
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(Updates with comments from an interview with the company's chief executive)
By John Kell and Anjali Cordeiro
DOW JONES NEWSWIRES
Estee Lauder Cos.' (EL) fiscal first-quarter profit more than doubled as the
beauty products company posted higher earnings across all of its businesses.
Estee Lauder joins peers Avon Products Inc. (AVP) and Elizabeth Arden (RDEN)
in reporting better-than-expected results, as sales for beauty products are
starting to show some improvement after a sharp dip during the recession.
Earlier this month, the company said the quarter benefited from strong product
launches, especially in Asia. As expected, Estee Lauder boosted its full-year
earnings target on Thursday. The stock was recently up 9.3% to $44.96.
For the quarter ended Sept. 30, Estee Lauder posted a profit of $140.7
million, or 71 cents a share, up from $51.1 million, or 26 cents a share, a year
earlier. Excluding $42.3 million in restructuring charges, the latest quarter's
earnings were 85 cents.
Net sales fell 3.7% to $1.83 billion, or down 0.8% in local currencies.
There have been some improvements in the beauty industry, said Chief Executive
Fabrizio Freda in an interview. "The consumer in North America seems [to be] out
of panic mode, but they still are holding back their spending." The picture on
consumer spending is mixed around the world, he said. Even within Asia there are
differences. Consumers are returning to more normal spending patterns in China,
while spending remains cautious in Japan, he said.
Estee Lauder is staying cautious in its outlook for holiday spending in the
U.S. "We don't know if the consumer will go into these holidays with the
sentiment of spending or with a more prudent sentiment," Freda said.
Earlier this month, Estee Lauder said it expected earnings to be "
significantly" higher than its already-rosy August view of 23 cents to 30 cents
on a sales decline of 5% to 9%.
Gross margin improved to 75.7% from 73.7%. Operating margin surged to 12% from
4.8%
The larger skin-care business reported sales grew 1.9%. Makeup and fragrance
sales were down 3.4% and 11.1%, respectively. Profits grew in the skin-care and
makeup businesses due to improvements at some of the company's heritage brands,
while the fragrance unit swung to an operating profit.
The improvements in the fragrance and makeup business were notable after
weakness was seen in the prior quarter. Market researcher IBISWorld said the
fragrance business is highly competitive, and the business faces geographic
challenges due to regulatory and cultural barriers.
The company also projected fiscal second-quarter earnings of 80 cents to 87
cents a share on net sales growing up to 3%. Analysts polled by Thomson Reuters
expected earnings of 85 cents and sales rising 4% to $2.13 billion.
For the year, Estee Lauder raised its earnings target to $1.95 to $2.10 from
its August view of $1.55 to $1.70.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
(END) Dow Jones Newswires
10-30-091151ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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