NEW YORK — Standard & Poor’s Ratings Services downgraded its outlook on The Estée Lauder Cos. Inc. to negative from stable Tuesday, but did affirm two of the company’s credit ratings.

S&P said the outlook revision was based on Lauder’s expected “weakened credit protection measures (adjusted for operating leases) in the intermediate term, which will be below S&P’s established guidelines” at the stable rating level.

S&P added that Lauder “continues to face a very challenging competitive environment, resulting in a 13.5 percent operating margin for fiscal 2003, which is below Lauder’s high of 15.1 percent achieved in fiscal 2001.”

However, S&P affirmed both Lauder’s long-term corporate credit and senior unsecured debt ratings at “A-plus” and its short-term corporate credit and commercial paper ratings at “A-1.” S&P based the affirmation on Lauder’s “leadership position within the prestige segment of the cosmetics industry, the company’s weakened yet still solid financial profile and its geographic diversity.” S&P noted that those factors are partially offset by vulnerability because of changing consumer preferences and a soft economic environment.

“S&P believes that the company’s financial performance will strengthen due to management’s focus on improving its operating performance through cost controls, new product introductions, distribution gains and marketing initiatives,” said the ratings agency in a statement. “Furthermore, Estée Lauder has been able to maintain strong market shares in a number of core categories, namely skin care, makeup and fragrances.”

As of June 30, Lauder’s total debt outstanding was about $291 million, S&P said.

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