NEW YORK — Grappling with retail consolidation and cost-cutting efforts, the Estée Lauder Cos. Inc. reported third-quarter net earnings that fell by 44 percent, despite a 3.5 percent sales gain.
In a move to address the evaporating pool of department store nameplates, the company said it will restructure its sales force, transitioning from a geographic approach to an account-specific one.
A third-quarter charge of $51.6 million tied to an employee buyout offer was the primary drag on earnings, which for the quarter ended March 31 decreased 44 percent to $59.5 million, or 28 cents per diluted earnings per common share, from $106.2 million, or 46 cents a share, in the same period last year. Sales rose to $1.58 billion from $1.53 billion.
The company expects its cost-savings initiatives to reap approximately $75 million in future years. While encouraged by the firm’s belt tightening, Oppenheimer & Co. analyst Linda Bolton Weiser noted that management has work to do in transitioning the organization to a “cost-cutting culture.”
Retail consolidation is a continued challenge with Federated Department Stores planning to shutter 75 doors during Lauder’s fiscal 2006. The beauty firm anticipates the store closures will impact revenues by $70 million due to lost sales and a disruption in business as Federated changes regional nameplates.
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