In the post-Lipstick Index era — when sales trends seem to have debunked the notion that beauty is recession-proof — The Estée Lauder Cos. Inc. is fine-tuning its messaging to trumpet value.

This story first appeared in the April 24, 2009 issue of WWD. Subscribe Today.

“We believe value, which can be expressed in various ways, will be a powerful message for the foreseeable future, especially for prestige brands,” said chief executive officer William Lauder, who is slated to become executive chairman July 1, clearing the way for Fabrizio Freda to take over the helm as ceo. As an example, Lauder told analysts during the company’s earnings call Monday that Clinique’s 9,000 U.S. consultants have begun explaining to consumers that the brand’s three-step treatment system can last for three months.

The shift in messaging comes as consumer restraint and restructuring charges dragged the beauty firm’s third-quarter earnings down 69.8 percent to $27.2 million, or 14 cents a diluted share, from $90.1 million, or 46 cents a share, in the year-earlier period. Excluding the extraordinary charges, the company’s earnings for the quarter ended March 31 were $31.4 million, or 16 cents a share — well ahead of the 5 cents analysts were expecting.

The strength of the results relative to expectations helped shares of the beauty firm rise $5.70, or 18.3 percent, to $36.83 in New York Stock Exchange trading Monday.

Sales for the quarter declined 9.8 percent to $1.7 billion, from $1.88 billion in the year-ago period.

For the first nine months, Lauder’s earnings declined 33.2 percent to $236.3 million, or $1.19 a share, from $353.6 million, or $1.80 a share, on sales that fell 4.4 percent to $5.64 billion.

The prestige beauty firm’s largest retail channel, U.S. department stores, continued to see erosion, with sales falling 10 percent overall in the quarter, and about 5 percent in beauty, according to the company. As sales decline, retailers continue to attempt to boost profitability by trimming inventory. For its part, Lauder continues to pare its assortment. Today, its stockkeeping units number 15,400, down 25 percent from several years ago, said Freda, president and chief operating officer. In the fragrance category, Lauder told WWD in 2008 the firm trimmed sku’s by 20 percent, with plans to reduce sku count by 15 percent this year.

On average, retailers are holding about two weeks less worth of inventory on hand, said Lauder, who acknowledged initially the cuts can be uncomfortable but ultimately yield long-term benefits. “Faster turns are more profitable for everybody,” said Lauder.

The company continues to look outside department stores as well, noting Bobbi Brown now has 12 freestanding stores, located in Dubai, Paris and most recently Tokyo, where it opened last month. Also, Good Skin, a brand born out of its BeautyBank division, now distributes to 50 markets, and Origins will host a show on QVC Japan. Freda said the naturally positioned brand is slated to exit some smaller international markets to better “focus on winning markets.”

Reiterating Lauder’s call for value, Freda said some of the firm’s entry price point brands, including Clinique and Aveda, are infusing their advertising with the value message without overtly mentioning price. In store, the Clinique brand has begun making its prices more visible to shoppers through sales associates and “elegant signage,” said Freda. “The consumer is simply more interested in price today.”

The soon-to-be ceo acknowledged market conditions continue to be tough, but said nevertheless Lauder has made strides. “We are really achieving success in the areas we can control,” he said, mentioning the firm’s actions to reduce sku’s and grow share. “These are early indicators of the success of our strategy,” Freda told WWD.

When asked by an analyst why there were no “new faces” in the company’s newly unveiled management structure, Freda said, “We have some really great people with excellent expertise in the industry, and they are showing they can drive the new strategy in the right way.”

By region, the company reported quarterly sales in the Americas fell 8.7 percent to $804.4 million. In Europe, the Middle East and Africa, sales declined 16.8 percent to $583.5 million. Asia-Pacific gained 3.8 percent to $308.6 million.

Following Monday’s earnings call, Goldman Sachs analyst Andrew Sawyer wrote, “Estée beat our third-quarter estimate by 14 cents, but benefited from some timing shifts that will hurt the fourth quarter. In fact, [the company] expects June fourth-quarter sales to fall between 8 and 10 percent in local currency. This outlook seems conservative, but even our negative 6 percent organic sales forecast would still mark sales deterioration versus the [third quarter] and even the [second quarter].”

Lauder projected full-year earnings of $1.32 to $1.44 a diluted share before restructuring charges. The company said sales for the year would fall 1 to 3 percent in constant currency terms.