Estée Lauder reported solid financial performance for its th

The Estée Lauder Companies Inc. reported a solid financial performance for its third quarter ended March 31, 2012. For the quarter, the Company had net sales of $2.25 billion, a 4% increase compared with $2.17 billion reported in the prior-year quarter. Excluding the impact of foreign currency translation, net sales increased 5%. The Company reported net earnings for the quarter of $130.4 million, a 5% increase compared with $124.7 million last year. Diluted net earnings per common share rose 6% to $.33, compared with $.31 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.

For the nine months ended March 31, 2012, the Company reported net sales of $7.46 billion, an 11% increase from $6.75 billion in the comparable prior-year period.

Fabrizio Freda, President and Chief Executive Officer, said, “Our third quarter sales came in slightly ahead of our forecast and, importantly, we were able to leverage part of that growth into an overachievement of earnings per share. Driving our performance are focused investments on our distinctive product innovations, supported by strong creative capabilities and elevated high-touch services. These elements provide a foundation for continuous growth and, coupled with cost savings and productivity improvements, increased and sustainable profitability. On the strength of our brands, we posted across-the-board sales gains in our regions, strong skin care growth and increases in most channels, while further generating substantial gross margin improvements.

“Sales and operating income in the quarter were unfavorably impacted by shifts in orders in advance of our implementation of SAP in various geographic locations. Adjusting for these sales shifts and a returns charge, our current third quarter sales would have increased 9% in local currency, which speaks to the strength of our underlying business. We will continue to opportunistically invest behind our advertising and merchandising to further propel the momentum our businesses are enjoying. Our outlook for the balance of the year remains positive, giving us the confidence that for the full fiscal year we will achieve double-digit local currency sales growth and the ability to raise our full-year earnings per share estimate, before restructuring charges, to $2.21 to $2.26.”

The Company’s performance was due to solid overall business, particularly from its largest brands. The Company reported sales gains in every region, including strong skin care growth within each region. Sales growth in other product categories in each region was mixed. Sales growth was particularly strong in travel retail and emerging markets, along with solid gains in several developed countries.

The skin care category is a strategic priority for the Company. The Company gained share in this category during the quarter in certain countries where its products are sold. Skin care sales growth was strong, particularly in view of the 14% growth comparison in the prior-year period (2% of which related to the shift in sales orders).

Makeup net sales decreased less than 1%. Makeup sales were up against a tough comparison to the prior-year period when the category grew 24% (3% of which related to the shift in sales orders).

Fragrance sales decreased less than 1%, with sales gains in Europe being more than offset by declines in Asia/Pacific. Fragrance sales in the prior-year period grew 4% (3% of which related to the shift in sales orders).

Hair care net sales increased less than 1%. Hair care sales were up against a tough comparison to the prior-year period when the category grew 14% (2% of which related to the shift in sales orders).

Outlook for Fiscal 2012 Fourth Quarter and Full Year

The Company has benefitted from the strength in global prestige beauty, particularly in North America, China and travel retail and expects this positive industry trend to continue. The Company’s growth has outpaced prestige beauty and should continue to grow faster than the industry. Certain European countries, Japan and Australia are soft due to ongoing economic uncertainties and volatility in financial markets. The Company has been able to offset to some extent the impact of these factors, demonstrating its ability to grow ahead of global prestige beauty in both soft and strong environments. During the remainder of fiscal 2012, the Company will continue to execute its winning strategy and expects continued solid results.

Specifically, in the context of its strategy, during the remainder of fiscal 2012, the Company expects to further increase global advertising spending on winning brands, new initiatives, impactful product launches and successful existing products. The Company’s strong performance has enabled it to substantially increase year-over-year global advertising, while still significantly improving its operating margin. The increased advertising spend is financed by fewer promotions, non-value added cost reductions, as well as mix improvements. The Company believes its successful advertising pull strategy will continue to stimulate and sustain its growth.

Additionally, the Company will continue its planned investment behind its strategic modernization initiative, including the rollout of SAP and upgraded capabilities to support its human resources and retail operations, which is part of a broader plan to modernize the Company’s systems and infrastructure.