NEW YORK--The Estee Lauder Cos. Inc. is protecting its market share, but will miss profit expectations, much to the chagrin of Wall Street.Lauder, based here, set its fourth-quarter projections at 18 cents a diluted share, before charges, 2 cents below the Street's 20-cent estimate. The beauty firm said it was attempting to gain market share through accelerated sales momentum with a ramp-up in advertising and promotional spending.Investors, however, weren't pleased by the surprise and took a $3.10, or 8.7 percent, bite out of the shares, which closed at $32.50 Tuesday on the New York Stock Exchange.Fred Langhammer, president and chief executive officer, told WWD: "I can't run the company based purely on estimates. We're keenly interested in generating some momentum in the new fiscal year, because nothing good happens without growth."Lauder sees sales for the fourth quarter, which ended June 30, increasing 7 percent on a constant currency basis with "a minimal impact" from currency exchange. For the year, sales are expected to rise 3 percent in constant currencies and be up closer to 2 percent after currency translation. Quarterly and full-year results are expected on July 15.In a January conference call reviewing the first half of the year, Langhammer warned investors that the firm wouldn't return to its customary 8 to 9 percent sales growth until after fiscal 2003. "That business model is not realistic [now]," he said. "Therefore, the number's going to be lower for the next 18 months or two years." He reasserted Tuesday that even though sales for fiscal 2002 will fall short of the goal, 6 to 7 percent sales growth on a constant currency basis is more appropriate in the near term.The increased brand spending was concentrated in the Americas region, where constant currency sales grew in the high-single digits during the quarter, but were up just slightly for the year. "Obviously, in the Americas, the traffic in the distribution channels is not exactly buoyant, so we needed to stimulate it a little bit," said the ceo."It's a question of putting a little more power behind our product launches," he said. "An object in motion stays in motion. Keep sales momentum and that is the best insurance to get profit growth."The projected fourth-quarter profit of 18 cents a diluted share is a nickel below year-ago earnings of 23 cents, which also excludes special items.Lauder previously reported that the fourth quarter would carry an aftertax charge of $77 million, or 32 cents a diluted share, to reduce costs and refine its distribution channels. Included in the restructuring is the shuttering of's San Francisco office, a tweaking of the firm's supply chain, a streamlining of its global organization and closure of the remaining 84 in-store Tommy Shops of toiletries and cosmetics. Additionally, the quarter will include a charge of $20.6 million, or 9 cents a diluted share, for the cumulative effect of an accounting change. The company absorbed a prior-year aftertax charge of $40.3 million, or 17 cents a diluted share, for restructuring, including adjusting fixtures for the Jane brand, closing in-store shops and realigning global brand structuring. The fourth-quarter restructuring charges in consecutive years represent the first such adjustments in Lauder's history.For the full year, earnings are slated to be $1.10 a diluted share, also 2 cents below estimates.Banc of America Securities analyst William Steele noted: "There was a near-term expectation of strong earnings growth for Estee Lauder and, at this stage, expectations should be muted." Some investors and analysts were anticipating a stronger contribution from currency translation, he said."The company's doing the right thing for the long term," said Steele. "They're clearly putting more money behind the brand and protecting their well-known brand equity. It's a long-term position that just happens to have a near-term negative. The most important asset that Estee Lauder has, perhaps, is their brands," said Steele."One of the most difficult things to do is recoup lost market share," he said. "Sometimes, the stock market is very short-term focused: It's `what are you going to do for me tomorrow?"'For the year and in constant currencies, sales in Lauder's Asia-Pacific region should rise by high-single digits. The region encompassing Europe, the Middle East and Africa, which also includes the firm's travel retail business, expects to post a mid-single-digit increase, or a high-single-digit rise without the ailing travel unit.

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