NEW YORK — Fragrance is coming into focus at the Estée Lauder Cos. Inc., which beat first-quarter profit expectations with a modest gain and drove currency-adjusted sales up 6 percent.
This story first appeared in the November 1, 2013 issue of WWD. Subscribe Today.
The company has a slate of new scents — including Estée Lauder Modern Muse, Zegna Uomo, Michael Kors Sexy Amber and Tory Burch — as well as a long-term plan to expand its fragrance business, which can help bolster other categories.
First, those fragrances, and all of the Lauder empire, will have to contend with what’s expected to be a very competitive holiday season.
“We expect the promotional level in the market to be high,” Fabrizio Freda, president and chief executive officer, told WWD. “We have seen it already…and I believe it will stay high across the holiday season. The consumer is a bit volatile and so a lot depends on how they feel about the economy and how they feel about their government…and how they feel about the specific opportunities for buying what they find in the market.”
Freda said traffic was soft in July and August, but “very solid” in September.
“What we expect is a solid holiday season for cosmetics,” he said, “but a bit more promotional and with consumers paying a lot of attention to high-quality innovation.”
The ceo said Lauder would build on its fragrance business for “many years to come” and that the category was a “very big opportunity,” particularly in Europe, Latin America, the Middle East and China.
“We are not in the business of only building fine fragrances,” he said. “We are in the business of [helping] consumers fragrance themselves in the way they want, respecting their culture.”
For instance, Freda noted that Japanese consumers use very few spray fragrances, favoring body products or shower gels. That’s just the opposite in the Middle East, where he said customers are “spraying pretty aggressively.”
Lauder’s net profits for the quarter increased 0.4 percent to $300.7 million from $299.5 million a year earlier. Earnings per diluted share were flat at 76 cents and came in 3 cents ahead of the 73 cents analysts predicted.
Net sales for the three months ended Sept. 30 increased 4.9 percent to $2.68 billion from $2.55 billion. Fragrance sales rose 5.7 percent to $367.4 million in the quarter.
Lauder continues to project sales growth of 6 percent to 8 percent in local currency this year — double the company’s estimate for the whole global prestige beauty market. The firm also tightened its annual earnings projections and is now projecting EPS of $2.80 to $2.87, up from $2.74 to $2.87.
The beauty giant boosted its quarterly dividend to 20 cents a share, up from 18 cents.
Lauder’s shares fell 0.6 percent on the New York Stock Exchange to close at $70.96 on Thursday.