Estee Lauder forecasts big profits rise on expansion plans

By Simon Pitman

- Last updated on GMT

Related tags Cent Finance United states dollar Stock market

Global premium cosmetics maker Estee Lauder is forecasting that
profits will rise in double digit figures over the course of the
next three years and sales growth will be ahead of average industry
growth, as it focuses on expanding international markets.

The company says that its initiative to cut costs and drive expansion in new overseas markets, will help to drive net sales growth of 6 - 8 per cent and net earnings growth of 10 - 12 per cent during period. William Lauder, company CEO, said the company had exceeded its five-year goals and, combined with its soon-to-be incorporated cost cutting initiatives, he added that he was interested in 'maximizing on international opportunities'. The company has been encouraged by its recent financial performance, giving it reason to reinforce its forecast for 2007 that sales will grow at 6 - 7 per cent, or $6.87bn - $6.89bn, helped along by the positive impact of currency translation, which is expected to add 1.5 per cent to the results. As part of its restructuring, the company also confirmed that its is repurchasing 16 million Class A shares at a cost of $750m as part of a share repurchase program designed to boost share values and bring about greater investor returns. As part of its cost saving initiatives, the company plans to gain about $200m in saving over the 3-year period - mainly by reinvesting in building investments that drive the company top and bottom line growth. This will see investments made to 'aggressively expand in international markets', together with global infrastructure investments, new brand development and strengthening human resources. The company recently reported that for its second quarter, sales rose 12 per cent to reach $1.99bn, boosted by a weak dollar currency. Excluding the impact of foreign currency, net sales rose 9 per cent. Net earnings from continuing operations were up 38.6 per cent, to reach $208.5m, compared to $150.4m for the corresponding quarter in 2005. The results prompted the company to up its sales and earnings potential for the fiscal 2007, with net sales expected to increase 6 - 7 per cent, or $6.87bn - $6.891bn. For the coming third quarter net sales are expected to rise 4 - 6 per cent, positively impacted by up to 2 per cent from the translation of foreign currency, whereas earnings per share are expected to remain flat.

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