| Estée Lauder Companies Reports Third Quarter Earnings Per Share of $.46 |
Sales Increase 11% on Strong International Growth Full Year EPS Outlook Remains on Track
NEW YORK--(BUSINESS WIRE)--May 6, 2008--The Estée Lauder Companies Inc. (NYSE: EL) today reported $1.88 billion in net sales for its fiscal third quarter ended March 31, 2008, an 11% increase over the $1.69 billion reported in the prior-year quarter. Excluding the impact of foreign currency translation, net sales rose 7%. The Company reported net earnings for the quarter ended March 31, 2008 of $90.1 million compared with $93.9 million last year. Diluted net earnings per common share for the quarter was $.46 compared with $.45 reported in the prior year. William P. Lauder, Chief Executive Officer said, "One of the great strengths of our Company is our geographic and product category balance. This was clearly visible in our results this quarter, which enabled us to deliver solid sales growth despite the softness in the U.S. retail environment. Continued strong double-digit sales gains in our international operations, marked by increases in all product categories in Europe and Asia, drove our third quarter performance. These results underscore the validity of our investment in international businesses, including emerging markets, where we see positive trends for long-term, profitable growth. We are continuing to capitalize on those international growth opportunities and at the same time address the challenges in the U.S. through our innovation, marketing prowess and brand building expertise. "Based on our results to date we remain confident that we are on track to meet our previously announced full fiscal year sales and earnings objectives and are comfortable narrowing our earnings per share range to $2.34 and $2.40 for the 2008 fiscal year."
Results by Product Category
--------------------------------------------------------
Three Months Ended March 31
------------------------------------
(Unaudited; Dollars in millions) Net Sales Percent Change
----------------- ------------------
Reported Local
2008 2007 Basis Currency
-------- -------- -------- ---------
Skin Care $ 756.8 $ 668.9 13.1% 8.1%
Makeup 755.7 678.4 11.4 7.4
Fragrance 259.1 240.1 7.9 2.9
Hair Care 98.2 97.1 1.1 (1.0)
Other 10.0 6.0 66.7 60.0
Adjustments related to cost
savings initiative - -
-------- --------
Total $1,879.8 $1,690.5 11.2% 6.7%
======== ========
Three Months Ended March 31
---------------------------
(Unaudited; Dollars in millions) Operating Percent
Income (Loss) Change
--------------- --------
Reported
2008 2007 Basis
------- ------- --------
Skin Care $ 96.0 $ 80.9 18.7%
Makeup 93.2 87.4 6.6
Fragrance (28.2) (21.4) (31.8)
Hair Care (0.8) 11.4 (100.0+)
Other 0.3 (1.7) 100.0+
Adjustments related to cost savings
initiative 0.7 0.1
------- -------
Total $161.2 $156.7 2.9%
======= =======
Skin Care
-- The 13% net sales growth in skin care products in the current
quarter was particularly strong in view of the 9% sales gain
in the category in last year's third quarter.
-- The current quarter's growth was fueled by increases in all
geographic regions, particularly Asia/Pacific, where more than
50% of the Company's sales in the region is in skin care.
-- In addition to sales growth from certain existing products,
the skin care category benefited from strong worldwide
incremental sales of recent products, such as Idealist Pore
Minimizing Skin Refinisher and Cyber White EX by Estée Lauder,
and Acne Solutions Clear Skin System from Clinique. The
category's growth reflected double-digit gains from the
Company's La Mer brand, due in part to the momentum from the
recent launch of The Eye Concentrate.
-- Operating income increased, primarily reflecting improved
results internationally.
Makeup
-- The makeup category posted solid sales growth led by
double-digit gains internationally and a single-digit increase
in the Americas.
-- Double-digit growth in the Company's makeup artist brands
contributed more than 65% of the incremental sales. The strong
gains in the makeup artist brands were generated by solid
product performances, additional market expansion, and for the
M A C brand, new freestanding retail stores. The increase also
reflects the positive contributions of new and existing
products from certain core brands.
-- Operating income increased, primarily reflecting strong
international growth.
Fragrance
-- In absolute dollars, fragrance sales growth was strongest in
the Company's European region, primarily driven by newer
fragrance offerings, followed by gains in Asia/Pacific.
Fragrance sales in the Americas declined, tempered by the soft
retail environment in the United States.
-- While current quarter sales compared favorably to the same
prior-year period, the Company continues to face challenges in
this product category, primarily in the United States.
-- Contributing to the sales growth were recent launches, such as
Dreaming Tommy Hilfiger, Estée Lauder Pure White Linen Light
Breeze, DKNY Delicious Night and Sean John Unforgivable Woman.
-- Operating loss in the fragrance category widened, primarily
reflecting lower results from the Company's designer fragrance
business due to incremental spending in support of new product
launches as well as existing fragrances.
Hair Care
-- Sales of hair care products increased modestly, reflecting the
inclusion of the Ojon brand, which was acquired in July 2007,
partially offset by lower sales from Aveda and Bumble and
bumble.
-- The decrease in Aveda net sales reflected the anniversary of
solid product launches in the prior-year quarter. These
results were partially offset in the current quarter by the
recent launches of Aveda Men Pure-Formance and Smooth Infusion
products.
-- Lower sales at Bumble and bumble were due to the
discontinuance of its hotel amenities program.
-- Hair care operating results declined, reflecting the soft
sales growth coupled with investments designed to support
short- and long-term growth in this category through new
points of distribution. The lower results are also due to an
increase in intangible asset amortization resulting from
recent strategic acquisitions.
Results by Geographic Region
--------------------------------------------------------
Three Months Ended March 31
-------------------------------------
(Unaudited; Dollars in millions) Net Sales Percent Change
------------------ ------------------
Reported Local
2008 2007 Basis Currency
--------- -------- -------- --------
The Americas $ 880.9 $ 856.9 2.8% 1.8%
Europe, the Middle East & Africa 701.5 598.4 17.2 9.4
Asia/Pacific 297.4 235.2 26.4 18.2
Adjustments related to cost
savings initiative - -
--------- --------
Total $1,879.8 $1,690.5 11.2% 6.7%
========= ========
Three Months Ended March 31
----------------------------
(Unaudited; Dollars in millions) Operating Percent
Income (Loss) Change
----------------- --------
Reported
2008 2007 Basis
---------- ------ --------
The Americas $ 50.4 $ 72.0 (30.0)%
Europe, the Middle East & Africa 77.3 66.0 17.1
Asia/Pacific 32.8 18.6 76.3
Adjustments related to cost savings
initiative 0.7 0.1
---------- ------
Total $ 161.2 $156.7 2.9%
========== ======
The Americas
-- Sales growth reflected overall gains in Canada, including the
addition of the Ojon brand, and Latin America. Gains were also
achieved in the United States from the Company's makeup artist
brands and internet distribution.
-- The Company believes the soft retail environment in the United
States during the quarter, particularly in the department
store channel, as well as competitive pressures, negatively
impacted certain of the Company's brands. These challenges
have been mitigated through sales in alternative channels,
such as freestanding stores, the internet, self-select
distribution and direct-response television.
-- Operating income in the Americas declined versus the
prior-year period, reflecting higher costs of global
information technology systems and infrastructure and
increased spending on advertising, merchandising and sampling
activities. Operating results also reflected the investments
and higher intangible asset amortization related to the
Company's hair care business mentioned above.
Europe, the Middle East & Africa
-- In constant currency, net sales increased in most countries in
the region. The higher sales were led by double-digit growth
in the Company's travel retail business and strong gains in
the United Kingdom, Spain and Italy.
-- Double-digit increases were also achieved in certain countries
including Benelux and Russia.
-- Operating income increased, primarily due to improved results
in travel retail, Italy and Spain. Partially offsetting these
increases were lower results in Russia, reflecting spending to
support market expansion.
Asia/Pacific
-- This region generated significant constant currency sales
growth with virtually every country posting solid increases.
Strong double-digit growth was generated in most countries
with the strongest gains in China, Korea and Hong Kong. Japan,
the Company's largest Asian market, continued to improve with
sales rising high-single digits.
-- In China, the Company's largest emerging Asian market, most of
the Company's brands recorded double-digit retail sales
growth, reflecting the strength of the brands and the appeal
of their products.
-- Operating income in the region increased substantially, with
most countries experiencing profit growth in the quarter.
Improved results were led by China, Japan, Korea and Hong
Kong.
Nine-Month Results
-- For the nine months ended March 31, 2008, the Company reported
net sales of $5.90 billion, a 12% increase from $5.28 billion
in the comparable prior-year period. Excluding the impact of
foreign currency translation, net sales rose 8%. The Company
reported net earnings of $353.6 million for the nine months,
compared with $360.6 million in the same period last year.
Diluted net earnings per common share for the nine months
ended March 31, 2008 increased 5% to $1.80, compared with
$1.71 reported in the prior-year period.
Cash Flows
-- For the nine months ended March 31, 2008, net cash flows
provided by operating activities from continuing operations
increased 14% to $518.5 million, compared with $456.3 million
in the prior-year period.
-- The increase primarily reflects higher net earnings from
continuing operations before certain non-cash items, such as
depreciation, amortization and stock-based compensation, as
well as an improvement in certain working capital components.
-- Operating cash flow was utilized primarily for capital
investments, dividends, the acquisition of Ojon and the
repurchase of shares of the Company's Class A Common Stock.
Estimate of Fiscal 2008 Full Year
-- Net sales are forecasted to grow between 7% and 9% in constant
currency.
-- Foreign currency translation benefit is expected to be
approximately 4% versus the prior-year period.
-- The Company projects diluted earnings per share to be between
$2.34 and $2.40.
-- On a product category basis, in constant currency, sales in
skin care and hair care are expected to be the leading sales
growth categories, followed by makeup and fragrance.
-- Geographic region net sales growth in constant currency is
expected to be led by Asia/Pacific, followed by Europe, the
Middle East & Africa, and the Americas.
Forward-Looking Statements
The forward-looking statements in this press release, including those containing words like "expect," "planned," "may," "could," "anticipate," "estimate," "projected," "forecasted," those in Mr. Lauder's remarks and those in the "Estimate of Fiscal 2008 Full Year" section involve risks and uncertainties. Factors that could cause actual results to differ materially from those forward-looking statements include the following:
(1) increased competitive activity from companies in the skin care,
makeup, fragrance and hair care businesses, some of which have
greater resources than the Company does;
(2) the Company's ability to develop, produce and market new
products on which future operating results may depend and to
successfully address challenges in the Company's core brands,
including gift with purchase, and in the Company's fragrance
business;
(3) consolidations, restructurings, bankruptcies and reorganizations
in the retail industry causing a decrease in the number of
stores that sell the Company's products, an increase in the
ownership concentration within the retail industry, ownership
of retailers by the Company's competitors and ownership of
competitors by the Company's customers that are retailers;
(4) destocking by retailers;
(5) the success, or changes in timing or scope, of new product
launches and the success, or changes in the timing or scope, of
advertising, sampling and merchandising programs;
(6) shifts in the preferences of consumers as to where and how they
shop for the types of products and services the Company sells;
(7) social, political and economic risks to the Company's foreign or
domestic manufacturing, distribution and retail operations,
including changes in foreign investment and trade policies and
regulations of the host countries and of the United States;
(8) changes in the laws, regulations and policies (including the
interpretation and enforcement thereof) that affect, or will
affect, the Company's business, including those relating to its
products, changes in accounting standards, tax laws and
regulations, trade rules and customs regulations, and the
outcome and expense of legal or regulatory proceedings, and any
action the Company may take as a result;
(9) foreign currency fluctuations affecting the Company's results of
operations and the value of its foreign assets, the relative
prices at which the Company and its foreign competitors sell
products in the same markets and the Company's operating and
manufacturing costs outside of the United States;
(10) changes in global or local conditions, including those due to
natural or man-made disasters, real or perceived epidemics, or
energy costs, that could affect consumer purchasing, the
willingness or ability of consumers to travel and/or purchase
the Company's products while traveling, the financial strength
of the Company's customers, suppliers or other contract
counterparties, the Company's operations, the cost and
availability of capital which the Company may need for new
equipment, facilities or acquisitions, the cost and
availability of raw materials and the assumptions underlying
the Company's critical accounting estimates;
(11) shipment delays, depletion of inventory and increased production
costs resulting from disruptions of operations at any of the
facilities that manufacture nearly all of the Company's supply
of a particular type of product (i.e., focus factories) or at
the Company's distribution or inventory centers, including
disruptions that may be caused by the implementation of SAP as
part of the Company's Strategic Modernization Initiative;
(12) real estate rates and availability, which may affect the
Company's ability to increase the number of retail locations at
which the Company sells its products and the costs associated
with the Company's other facilities;
(13) changes in product mix to products which are less profitable;
(14) the Company's ability to acquire, develop or implement new
information and distribution technologies, on a timely basis
and within the Company's cost estimates;
(15) the Company's ability to capitalize on opportunities for
improved efficiency, such as publicly announced cost-savings
initiatives and to integrate acquired businesses and realize
value therefrom;
(16) consequences attributable to the events that are currently
taking place in the Middle East, including terrorist attacks,
retaliation and the threat of further attacks or retaliation;
(17) the timing and impact of acquisitions and divestitures, which
depend on willing sellers and buyers, respectively, and;
(18) additional factors as described in the Company's filings with
the Securities and Exchange Commission, including its Annual
Report on Form 10-K for the fiscal year ended June 30, 2007.
The Company assumes no responsibility to update forward-looking
statements made herein or otherwise.
The Estée Lauder Companies Inc. is one of the world's leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. The Company's products are sold in over 135 countries and territories under well-recognized brand names, including Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M A C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, Donna Karan, Aveda, Jo Malone, Bumble and bumble, Darphin, Michael Kors, American Beauty, Flirt!, Good Skin(TM), Grassroots, Sean John, Missoni, Daisy Fuentes, Tom Ford Beauty, Mustang, Coach and Ojon. An electronic version of this release can be found at the Company's website, www.elcompanies.com.
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; In millions, except per share data and percentages)
Three Months Ended
March 31
-------------------
Percent
2008 2007 Change
--------- --------- --------
Net Sales $1,879.8 $1,690.5 11.2%
Cost of sales 471.9 426.0
--------- ---------
Gross Profit 1,407.9 1,264.5 11.3%
--------- ---------
Gross Margin 74.9% 74.8%
Operating expenses:
Selling, general and administrative 1,247.4 1,107.9
Charges (adjustments) related to cost
savings initiative (0.7) (0.1)
--------- ---------
1,246.7 1,107.8 12.5%
--------- ---------
Operating Expense Margin 66.3% 65.5%
Operating Income 161.2 156.7 2.9%
Operating Income Margin 8.6% 9.3%
Interest expense, net 16.1 8.8
--------- ---------
Earnings before Income Taxes, Minority
Interest and Discontinued Operations 145.1 147.9 (1.9)%
Provision for income taxes 53.7 52.4
Minority interest, net of tax (1.3) (1.7)
--------- ---------
Net Earnings from Continuing Operations 90.1 93.8 (3.9)%
Discontinued operations, net of tax - 0.1
--------- ---------
Net Earnings $ 90.1 $ 93.9 (4.0)%
========= =========
Basic net earnings per common share:
Net earnings from continuing operations $ .47 $ .46 1.0%
Discontinued operations, net of tax - .00
--------- ---------
Net earnings $ .47 $ .46 1.0%
========= =========
Diluted net earnings per common share:
Net earnings from continuing operations $ .46 $ .45 1.6%
Discontinued operations, net of tax - .00
--------- ---------
Net earnings $ .46 $ .45 1.6%
========= =========
Weighted average common shares
outstanding:
Basic 193.9 203.8
Diluted 196.6 208.0
Nine Months Ended
March 31
-------------------
Percent
2008 2007 Change
--------- --------- -------
Net Sales $5,898.7 $5,275.1 11.8%
Cost of sales 1,506.2 1,353.1
--------- ---------
Gross Profit 4,392.5 3,922.0 12.0%
--------- ---------
Gross Margin 74.5% 74.4%
Operating expenses:
Selling, general and administrative 3,783.4 3,332.6
Charges (adjustments) related to cost
savings initiative (0.5) 0.4
--------- ---------
3,782.9 3,333.0 13.5%
--------- ---------
Operating Expense Margin 64.1% 63.2%
Operating Income 609.6 589.0 3.5%
Operating Income Margin 10.4% 11.2%
Interest expense, net 52.8 23.2
--------- ---------
Earnings before Income Taxes, Minority
Interest and Discontinued Operations 556.8 565.8 (1.6)%
Provision for income taxes 197.7 199.1
Minority interest, net of tax (5.5) (6.4)
--------- ---------
Net Earnings from Continuing Operations 353.6 360.3 (1.9)%
Discontinued operations, net of tax - 0.3
--------- ---------
Net Earnings $ 353.6 $ 360.6 (1.9)%
========= =========
Basic net earnings per common share:
Net earnings from continuing operations $ 1.83 $ 1.74 5.2%
Discontinued operations, net of tax - .00
--------- ---------
Net earnings $ 1.83 $ 1.74 5.1%
========= =========
Diluted net earnings per common share:
Net earnings from continuing operations $ 1.80 $ 1.71 5.2%
Discontinued operations, net of tax - .00
--------- ---------
Net earnings $ 1.80 $ 1.71 5.2%
========= =========
Weighted average common shares
outstanding:
Basic 193.8 207.7
Diluted 196.8 211.0
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions)
Three Months Ended
March 31 Percent Change
------------------- ------------------
Reported Local
2008 2007 Basis Currency
--------- --------- -------- ---------
NET SALES
By Region:
The Americas $ 880.9 $ 856.9 2.8% 1.8%
Europe, the Middle East &
Africa 701.5 598.4 17.2 9.4
Asia/Pacific 297.4 235.2 26.4 18.2
--------- ---------
Total $1,879.8 $1,690.5 11.2% 6.7%
========= =========
By Product Category:
Skin Care $ 756.8 $ 668.9 13.1% 8.1%
Makeup 755.7 678.4 11.4 7.4
Fragrance 259.1 240.1 7.9 2.9
Hair Care 98.2 97.1 1.1 (1.0)
Other 10.0 6.0 66.7 60.0
--------- ---------
Total $1,879.8 $1,690.5 11.2% 6.7%
========= =========
OPERATING INCOME (LOSS)
By Region:
The Americas $ 50.4 $ 72.0 (30.0)%
Europe, the Middle East &
Africa 77.3 66.0 17.1
Asia/Pacific 32.8 18.6 76.3
(Charges) adjustments related
to cost savings initiative 0.7 0.1
--------- ---------
Total $ 161.2 $ 156.7 2.9%
========= =========
By Product Category:
Skin Care $ 96.0 $ 80.9 18.7%
Makeup 93.2 87.4 6.6
Fragrance (28.2) (21.4) (31.8)
Hair Care (0.8) 11.4 (100.0+)
Other 0.3 (1.7) 100.0+
(Charges) adjustments related
to cost savings initiative 0.7 0.1
--------- ---------
Total $ 161.2 $ 156.7 2.9%
========= =========
Nine Months Ended
March 31 Percent Change
------------------- -----------------
Reported Local
2008 2007 Basis Currency
--------- --------- -------- --------
NET SALES
By Region:
The Americas $2,808.0 $2,701.4 3.9% 3.2%
Europe, the Middle East &
Africa 2,185.9 1,832.0 19.3 11.4
Asia/Pacific 904.8 741.7 22.0 15.5
--------- ---------
Total $5,898.7 $5,275.1 11.8% 7.8%
========= =========
By Product Category:
Skin Care $2,207.5 $1,937.0 14.0% 9.3%
Makeup 2,246.1 2,042.0 10.0 6.4
Fragrance 1,092.6 994.5 9.9 5.4
Hair Care 311.2 273.4 13.8 11.9
Other 41.3 28.2 46.5 42.6
--------- ---------
Total $5,898.7 $5,275.1 11.8% 7.8%
========= =========
OPERATING INCOME (LOSS)
By Region:
The Americas $ 193.8 $ 255.0 (24.0)%
Europe, the Middle East &
Africa 293.3 255.1 15.0
Asia/Pacific 122.0 79.3 53.8
(Charges) adjustments related
to cost savings initiative 0.5 (0.4)
--------- ---------
Total $ 609.6 $ 589.0 3.5%
========= =========
By Product Category:
Skin Care $ 298.3 $ 272.6 9.4%
Makeup 283.7 265.8 6.7
Fragrance 15.0 21.2 (29.2)
Hair Care 12.9 30.9 (58.3)
Other (0.8) (1.1) 27.3
(Charges) adjustments related
to cost savings initiative 0.5 (0.4)
--------- ---------
Total $ 609.6 $ 589.0 3.5%
========= =========
THE ESTEE LAUDER COMPANIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)
March 31 June 30 March 31
2008 2007 2007
-------- -------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 410.0 $ 253.7 $ 202.0
Accounts receivable, net 1,137.9 860.5 964.9
Inventory and promotional merchandise, net 927.9 855.8 806.3
Prepaid expenses and other current assets 336.0 269.4 292.7
-------- -------- --------
Total Current Assets 2,811.8 2,239.4 2,265.9
-------- -------- --------
Property, Plant and Equipment, net 991.1 880.8 830.5
Other Assets 1,249.4 1,005.5 917.8
-------- -------- --------
Total Assets $5,052.3 $4,125.7 $4,014.2
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 191.7 $ 60.4 $ 141.2
Accounts payable 339.0 314.7 273.0
Other current liabilities 1,235.1 1,125.6 1,233.6
-------- -------- --------
Total Current Liabilities 1,765.8 1,500.7 1,647.8
-------- -------- --------
Noncurrent Liabilities
Long-term debt 1,085.8 1,028.1 1,033.0
Other noncurrent liabilities and minority
interest 643.3 397.9 268.5
Total Stockholders' Equity 1,557.4 1,199.0 1,064.9
-------- -------- --------
Total Liabilities and Stockholders'
Equity $5,052.3 $4,125.7 $4,014.2
======== ======== ========
SELECTED CASH FLOW DATA
(Unaudited; In millions)
Nine Months Ended
March 31
------------------
2008 2007
-------- ---------
Cash Flows from Operating Activities
Net earnings $ 353.6 $ 360.6
Depreciation and amortization 184.5 152.8
Deferred income taxes (80.1) (16.3)
Discontinued operations - (0.3)
Other items 53.0 44.6
Changes in operating assets and liabilities:
Increase in accounts receivable, net (189.9) (174.7)
Increase in inventory and promotional
merchandise, net (18.8) (29.3)
Increase in accounts payable and other
accrued liabilities 259.1 166.4
Other operating assets and liabilities, net (42.9) (47.5)
-------- ---------
Net cash flows provided by operating
activities of continuing operations $ 518.5 $ 456.3
======== =========
Capital expenditures $ 250.3 $ 212.0
Payments to acquire treasury stock 93.6 1,004.3
Dividends paid 106.6 103.6
CONTACT: The Estée Lauder Companies Inc.
Investor Relations:
Dennis D'Andrea, 212-572-4384
or
Media Relations:
Alexandra Trower, 212-572-4430
SOURCE: The Estée Lauder Companies Inc.
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