The Estée Lauder Companies: Mixed results in Q3

The Estée Lauder Companies reported net sales for its third quarter ended March 31, 2013 of $2.29 billion, a 2 % increase compared with $2.25 billion in the prior-year quarter. Excluding the impact of foreign currency translation, net sales increased 3 %.

The fiscal 2013 third-quarter results included net adjustments associated with restructuring activities of $1.7 million ($1.0 million after tax) and included charges associated with restructuring activities of $28.8 million ($18.8 million after tax). Excluding these charges in the third quarters of fiscal 2013 and 2012, net earnings increased 19 % to $177.8 million in the prior-year period, the company stated.

Fabrizio Freda, President and Chief Executive Officer, said, “Organic sales growth this quarter was in line with our expectations and earnings per share were better than expected. Adjusting for the shift of sales orders related to our Strategic Modernization Initiative (SMI) implementation, our local currency sales increased more than five percent. Despite macroeconomic headwinds, particularly in Southern Europe and Korea, and short term global supply planning issues related to SMI, we delivered solid growth ahead of the industry and a 20 percent earnings per share increase. The strength of our strategy and our ability to execute on it continues to produce consistent and reliable results. Looking at the remainder of fiscal 2013, we are on track to deliver another record year of solid sales and a double-digit increase in earnings per share. In our fiscal fourth quarter, we expect an acceleration of our top-line growth. For the full fiscal year, we are expecting sales growth of approximately 6 % in local currency ... .”

Globally, prestige beauty continues to experience mixed results and overall growth has slowed from the prior year, the company pointed out. Nonetheless, the company’s performance was broad based, generating local currency sales gains in each of its geographic regions and most product categories.

The net sales increase in the Americas reflects growth from the company’s makeup artist brands and Aveda. Double-digit sales growth in Latin America was offset by sales declines in the United States and Canada.

According to the company, net sales increased in constant currency in a number of countries in Europe, the Middle East & Africa. Economicuncertainties in Southern European countries impacted the beauty markets, but the company continued to outperform the industry in many markets.

In Asia/Pacific, the company’s strongest local currency sales growth was generated in Hong Kong, Thailand and Australia, primarily reflecting strong sales of skin care products. Lower sales were experienced in China and Taiwan. Korea reflected difficult economic conditions and competitive pressures. In Asia/Pacific, operating income decreased, with higher results from Australia, Hong Kong, New Zealand and Thailand, being more than offset by lower operating results in China and Japan.

Nine-Month Results

For the nine months ended March 31, 2013, the company reported net sales of $7.77 billion, a 4 % increase from $7.46 billion in the comparable prior-year period. Net sales grew in each of the company’s geographic regions and major product categories. Net earnings increased up to $925.8 million for the nine months ended March 31, 2013, a 15 % increase from the $805.7 million in the same period last year.

Outlook for Fiscal 2013 full year

According to the corporation, The Estée Lauder Companies has benefited from the strength in prestige beauty in North America and China. While overall the Company’s business is performing well, Southern European countries and Korea continue to face weakness due to economic uncertainties. Net sales are forecasted to grow approximately 6 % in constant currency. The company’s broad-based growth is expected to continue ahead of the prestige beauty industry for the full fiscal year.