The Estée Lauder Companies’ Sales Increased 10% in Fiscal 2012

The Est\u00E9e Lauder Companies

The Estée Lauder Companies’ Sales Increased 10% in Fiscal 2012

NEW YORK--(BUSINESS WIRE)--Aug. 14, 2012-- The Estée Lauder Companies Inc. (NYSE: EL) today reported a strong financial performance for its fourth quarter and fiscal year ended June 30, 2012. For the year, the Company had net sales of $9.71 billion, a 10% increase compared with $8.81 billion reported in the prior year. Excluding the impact of foreign currency translation, net sales also increased 10% from a year ago. The Company reported a 110 basis point increase in operating margin and net earnings for the year rose 22% to $856.9 million, compared with $700.8 million last year. Diluted net earnings per common share rose 24% to $2.16, compared with $1.74 reported in the prior year. All mention of net earnings in the body of this release refers to net earnings attributable to The Estée Lauder Companies Inc., which reflects the adjustment for noncontrolling interests.

The fiscal 2012 full year results included returns and charges associated with restructuring activities of $63.2 million ($44.1 million after tax), equal to $.11 per diluted common share. The fiscal 2011 full year results included returns and charges associated with restructuring activities of $59.4 million ($41.7 million after tax), equal to $.10 per diluted common share.

Excluding these returns and charges in fiscal 2012 and 2011, net sales for the year ended June 30, 2012 increased 10% to $9.72 billion and net earnings rose 21% to $901.0 million. Diluted net earnings per common share rose 23% to $2.27 versus a comparable $1.85 in the prior-year period. A reconciliation between GAAP and non-GAAP financial measures is included in this release.

Fabrizio Freda, President and Chief Executive Officer, said, “A very strong fourth quarter, in which we generated double-digit growth in sales, excluding currency, and earnings per share, was driven largely by continued momentum in the U.S. and strong growth in China and travel retail. This performance capped another record year for our Company.

In fiscal 2012, we grew sales, net earnings and earnings per share by double digits. Our sales grew at twice the rate of worldwide prestige beauty, owing to the success of our highly innovative products, marketing prowess and personalized services. Despite pockets of economic uncertainty around the globe, our sales growth was broad-based, with strong gains in every geographic region and product category and many distribution channels. Financial discipline throughout our Company enabled us to bring much of our sales growth to the bottom line. Our operating margin increased 120 basis points to a record 14.2% -- exceeding our original forecast -- and operating cash flow reached an all-time high of $1.1 billion. These superb results reflect the success of our focused growth strategy and effective business model.

“Our strategy is working, we believe it is sustainable and we continue to further strengthen our leadership in prestige beauty. Leveraging the global reach of our diverse and powerful brand portfolio, we plan to continue to focus our efforts and resources in the most promising areas for prestige beauty, including emerging markets, travel retail and digital. At the same time, we expect to generate further cost savings and improve profitability as we move forward. While we are positive about our long-term outlook we are cautious of further weakening in certain global markets. Nonetheless, we are confident in our growth prospects and we are extending our financial goals to fiscal 2015 and raising our operating margin target to 15.5% to 16%.”

The Company’s performance was due to solid overall business, particularly from its largest brands. The Company reported sales gains in each of its product categories and geographic regions. Net sales also grew in each major product category within each region. Sales growth was particularly strong in travel retail and overall in emerging markets, along with solid gains in several developed countries.

During the fiscal year, the Company made substantial progress on its previously stated strategic goals, with a strong improvement in cost of sales as a percentage of net sales. All product categories and geographic regions benefited from Company-wide efforts to reduce or eliminate non-value added costs. In connection with the long-term strategic plan and certain ongoing initiatives, the Company realized savings of $145 million during the year. As a percentage of net sales, advertising, merchandising and sampling expenses increased to support the Company’s biggest innovations, while all other significant operating expenses were lower. Gross margin expanded 140 basis points and operating margin rose 120 basis points, before restructuring charges.

During the fiscal year, the Company recorded $21.7 million of charges for the impairment of other intangible assets related to the Ojon brand that negatively impacted operating results. In fiscal 2011, the Company recorded $38.0 million of charges for the impairment of goodwill and other intangible assets primarily related to the Ojon brand.

CONTINUE TO FULL YEAR-END RESULTS HERE