NEW YORK — Recent financial results at the top beauty firms reveal the challenges of doing business in a consolidating market. Destocking policies pulled down annual sales at Groupe Clarins while taxes took a big bite out of Shiseido Group's third quarter profits. At the Estee Lauder Cos., though, seeking alternative distribution channels resulted in robust operating earnings in its second quarter.
Groupe Clarins reported fourth-quarter 2006 net sales that fell 7.2 percent, to 277.9 million euros, or $358.4 million at the average exchange rate. On a like-for-like basis, revenues rose 3.9 percent. For the full year ended Dec. 31, the French beauty company posted net sales of 967.2 million euros, or $1.22 billion at average yearly exchange rates, down 3.1 percent year-on-year. At similar group structure and constant exchange, they rose 5.5 percent. Clarins' revenues last year came in 0.3 percent under its announced target. Pierre Milet, the firm's financial chief, during a conference call Friday said the group's 2006 sales turnout was "very satisfactory," given market conditions, and that its distribution license with Procter & Gamble in the U.S. ended Jan. 1, 2006.
The Estee Lauder Cos. delivered a 39 percent gain in profits on an 11.6 percent sales increase from continuing operations in its second quarter as the beauty firm continued to broaden its reach with a spate of recent initiatives, including the television debut of Bobbi Brown on QVC in the U.K., a deal with Coach to launch an eponymous fragrance in its 220 stores and plans to expand its Clinique brand to all Sephora's freestanding doors, with the exception of the J.C. Penney units. Clinique is currently in less than 50 Sephora stores.
"We're pursuing both new and alternative distribution opportunities," William P. Lauder, president and chief executive officer, said during a conference call with investors. "We'll continue to look for opportunities where consumers are shopping for better aspirational cosmetics products around the world."
At Shiseido Group, net profits for the nine-month period ended Dec. 31 were down 16.6 percent to 20.27 billion yen, or $174 million at average exchange for the period. The dip was due to a hike in taxes, the firm said in a statement. The group's sales in the period rose 3.4 percent year-on-year, to 517.34 billion yen, or $4.45 billion. Sales outside of the Tokyo-based brand's domestic market represented 31.1 percent of total revenues in the period.
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