Byline: Matthew W. Evans

NEW YORK — The Estee Lauder Cos. Inc. said it will shift 10 to 20 percent of its business away from department stores over the next several years and focus more on other outlets, including its own stores and the Internet.
The gradual move seeks to offset an expected rise in operating expenses from opening more of its own stores and relaunching e-tail site this year. The company sees diversification of channels, coupled with an emphasis on new, higher-margin products, as key growth drivers compensating for increased costs.
More freestanding MAC, Aveda and Origins stores are on the drawing board. The company opened in late January its first Stila store in the U.S.
Department stores currently account for 80 percent of Lauder’s revenues, according to chief financial officer Richard Kunes, who addressed Wednesday’s Merrill Lynch Consumer Conference. Sales in the channel could decline to 70 to 60 percent levels over the next three to five years, he said. A Lauder spokeswoman declined further comment.
That department stores will become a smaller business for this leading beauty products company is “par for the course,” said Margaret Cannella, managing director at J.P. Morgan Chase & Co.
“It’s nothing new,” she remarked, adding that the percentage of retail dollars spent at department stores is shrinking. “They [Lauder] have to look for new doors and have increasingly been going into their own stores. They’ve been targeting other channels for a long time.”
Shares of Estee Lauder were trading as high as 2.1 percent on Wednesday, and settled at $38.64, up 39 cents, or 1 percent.