By  on October 26, 2006

NEW YORK — Despite the challenges of department store consolidation, the Estée Lauder Cos. delivered solid first-quarter results Wednesday as the beauty giant continues to expand its global distribution.

In the wake of Federated Department Stores' string of store closures and the new national gift-with-purchase program implemented this fall at Macy's, the company's net earnings from continuing operations for the quarter ended Sept. 30 fell 6.1 percent to $58 million, or 27 cents a diluted share, from $61.8 million, or 28 cents a share, in the prior year on sales that gained 6.4 percent to $1.6 billion.

Lauder's results beat its own estimates, and Wall Street applauded by sending the company's stock price up more than 8 percent in morning trading to $43.60. Shares later closed up 4.9 percent to 41.81, on the New York Stock Exchange.

William P. Lauder, president and chief executive officer of the Estée Lauder Cos., declared that fiscal 2007 "started on a firm footing" as the company continues to widen its international scope and tap into new distribution channels.

Referring to the balancing act of blazing new distribution paths and maintaining established ones, Lauder acknowledged, "Fundamentally, it comes down to a balance of power between ourselves and our retailers. We have to make sure that we have something that they want and they have something that we want." He continued, "What we have is great brands and a great connection to our consumers; they've got a great retail brand name and great real estate presence in the right place."

Making good on the beauty firm's plan to venture beyond department stores, during the quarter the Estée Lauder Cos.' Clinique brand entered into a long-term agreement to roll out to Canada's largest drugstore chain, Shoppers Drug Mart, which is a purveyor of prestige and mass market beauty products. The brand isn't sold in U.S. drugstore chains.

"Shoppers Drug Mart in Canada is a baby toe in the water," Lauder told analysts during a conference call Wednesday morning, adding the company will continue to look for similar avenues where the prestige customer is shopping and where the company sees a financial impact that will not jeopardize its brand equity.

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