LAUDER’S BIG QUARTER: NET GAINS 13 PERCENT ON GLOBAL SALES SURGE
Byline: Vicki M. Young
NEW YORK — Fueled by sales growth of its Aveda hair care product line and its skin care and makeup products, The Estee Lauder Cos. Inc. reported a third-quarter earnings jump of 13 percent.
The company said Tuesday that earnings for the quarter ended March 31 were up 13 percent to $60.4 million, or 22 cents per diluted share, from $53.6 million, or 20 cents, in the year-ago period. Sales for the quarter increased 8 percent to $1.04 billion from $964.8 million last year. Excluding the impact of foreign currency translation, the company said, sales would have increased 9 percent.
Lauder’s results, while good, didn’t surpass Wall Street estimates. The firm just met First Call’s mean estimate of 22 cents per share. Shares of the company closed at 43 11/16, down 1 15/16 or 4 1/4 percent, on the New York Stock Exchange.
Fred H. Langhammer, president and chief executive officer, said in a statement, “Our third-quarter results again reflected excellent performance from our businesses, driven by strong consumer response to our innovative product offerings and expanded global distribution. Based on our results to date we are well positioned to meet our fiscal year objectives.”
Looking ahead, the chief executive noted that the company’s prospects are enhanced by initiatives underway to broaden the firm’s business and enhance its service to customers.
“Our recently announced Internet strategy,” Langhammer pointed out, “is geared to building a substantial customer database to communicate with and market directly to both new and existing customers, continue to enhance our brands, and increase access to our products through a variety of compelling online channels, including an exciting multibrand site.”
A spokeswoman said Tuesday that the firm’s Internet initiatives aren’t likely to boost the firm’s bottom line until fiscal 2001. The Lauder site, she said, just went up a few days ago. The other e-commerce sites under the Lauder umbrella — Bobbi Brown, Clinique and Origins — have 1 million registered users, she added.
As noted, part of that Internet strategy, which is aimed at capitalizing on marketing opportunities through the Web, includes Lauder’s acquisition of beauty site Gloss.com. The acquisition, which is subject to certain notices and waiting periods, is expected to close in the next few weeks.
In addition, the initiatives will establish an online presence for each of the company’s 15 brands. Each brand will have its own e-commerce enabled site, as well as a link to a single, multibranded site. The Gloss.com site is set for a relaunch in January 2001. In addition, Lauder’s retailing partners — such as Federated Department Stores, May, Dillard’s and Nordstrom — will now be able to carry the Lauder brands currently sold in their stores at their online Web sites.
Janet Joseph Kloppenburg, analyst at Robertson Stephens, wrote in a research report following the Gloss.com announcement that Lauder is projecting total Internet sales for fiscal 2001 at between $20 and $25 million. “Estee Lauder management’s long-range plans are to fully engage themselves with each of its brands’ core constituencies.+We believe over time Estee Lauder’s Internet business will represent a significant business contributor to its multichannel portfolio of businesses.”
Kloppenburg also wrote in a separate report that Lauder’s acquisitions of MAC, Stila and jane help the firm target a “specific Generation X or Y consumer segment, diversifying and increasing Estee Lauder’s overall market share and enabling the company to be closer to cutting-edge trends in the personal care domain.”
For the current quarter, sales of hair care products increased 36 percent to $28.6 million, primarily due to growth of the Aveda hair care product line, according to the company.
Skin care sales for the quarter rose 8 percent to $404.5 million, due to initial shipments of Resilience Lift Eye Creme by Estee Lauder and jane goodskin. Recent introductions of Body Clinique, Spotlight Skin Tone Perfector from Estee Lauder and Origins’ Ginger Collection added to the quarter’s results. Lauder noted that skin care sales benefited from the continued success of Acne Solutions and All About Eyes from Clinique and Resilience Lift by Estee Lauder. Improved results in certain Asian markets also boosted skin care sales.
Sales of makeup products in the quarter increased 10 percent to $420.1 million. The firm said the increase reflects the current-quarter launch of two Lauder branded products, Futurist Full Treatment Eye Makeup and Futurist Lash-Extending Mascara, and Unmakeup from Prescriptives. Growth in the makeup line benefited from *magic by Prescriptives, Longstemmed Lashes and Liquid Lipstick from Clinique and the Tommy Hilfiger Color line. Sales increases of new and existing products from other brands, including the addition of sales from the August 1999 acquisition of Stila, also contributed to growth in the makeup product category.
Lauder said that the firm shipped about $30 million of merchandise in the second quarter ended Dec. 1999 in connection with its Y2K contingency plan. This merchandise normally would have been shipped in the early part of the third quarter. Sales for the current quarter would have increased 11 percent before considering the impact of the Y2K plan, Lauder said.
The company noted that the impact on its fragrance sales of Y2K merchandise pulled forward into the earlier quarter was “relatively higher versus the company’s other product categories.” The company reported that sales of fragrances dipped 1 percent to $180.8 million from the comparable quarter last year, but would have increased 1 percent excluding the impact of foreign currency rate changes. However, fragrance sales would have increased 8 percent before considering the impact of the merchandise pulled forward, Lauder noted.
Boosting its fragrance sales in the quarter were the domestic launch of DKNY Women and the worldwide rollout of Freedom for him and Freedom for her by Tommy Hilfiger. The introductions, however, were offset by lower sales of previously launched Hilfiger fragrances snf difficult comparisons with prior-year fragrance rollouts.
Sales in the Americas for the period rose 9 percent to $659.4 million. Higher sales were helped by the strength of new products and continued strong results of existing products from core brands, double-digit growth from most newer brands and contributions from Stila.
Sales in Europe, the Mideast and Africa were up 2 percent to $247.1 million. Excluding the impact of foreign currency rate changes, the sales increase was 10 percent. The increase, according to Lauder, was driven by strong results in the U.K., Italy and Spain, as well as contributions from Jo Malone, which Lauder acquired in October 1999.
Sales in the Asia/Pacific region jumped 12 percent to $132.6 million. Excluding the impact of a weaker U.S. dollar against most Asian currencies, the sales increase was 6 percent. Lauder noted that almost every market posted an increase — led by solid performances in Hong Kong, Korea and Taiwan — except Japan, which had lower sales in the quarter.
For the nine months ended March 31, Lauder reported that earnings rose 15 percent to $256.9 million, or 99 cents per diluted share, from $222.5 million, or 85 cents. Sales for the period rose 10 percent to $3.37 billion from $3.05 billion last year. Excluding the impact of foreign currency translation, sales were up 11 percent.
Lauder’s products are sold in over 110 countries and territories under the brand names Estee Lauder, Clinique, Aramis, Prescriptives, Origins, MAC, Bobbi Brown essentials, Tommy Hilfiger, La Mer, jane, Donna Karan, Aveda, Stila and Jo Malone.