Estee Lauder results buck soft US retail trend

By Simon Pitman

- Last updated on GMT

Despite the tough retail conditions in the US Estee Lauder has
recorded particularly strong sales and net profits for its second
quarter thanks to solid international sales boosted by a weak
dollar.

Sales on a reported basis rose 16 percent on the back of strong performances in China, Turkey, Russia and Australia to reach $2.31bn, compared to the same period last year.

Likewise the company referred to 'a favorable currency environment' helping to boost already strong results in a number of the key overseas markets, in turn pushing profits upwards.

In the US the story was not quite so rosy, with the company pointing out that sales during the holiday season reflected the soft retail background in department stores.

Sales for the Americas still solid However, sales for the Americas region still grew by 8.9 percent to reach $1.03bn, up from $944.0m for the same period a year earlier.

The company said that this figure was achieved through higher overall sales growth in Latin America and Canada, as well as increases derived from the shift in the US retail calender.

In Europe, the Middle East and Africa, sales grew by 22.5 percent during the quarter to reach $933.2m reflecting particularly strong performances in both the UK and Russian markets.

Brands sell out in China In the Asia Pacific region sales grew by 21.7 percent during the quarter to reach €347.4m, with the company reporting that most of its brands had sold out in China during the period.

Helped by the strong international sales and the weak dollar, net income rose by 7.7 percent to reach $224.4m, up from $208.4m on the same period a year earlier.

CEO William Lauder said he was confident that, given the current economic conditions and strong sales in overseas environments, the company would be able to weather the storm in the coming months.

Cost control to counteract US slow-down "Despite a slow-down in consumer spending in the US , I believe we can achieve our profit objectives through ongoing containment efforts and disciplined expense control," he said.

He added that given these circumstances he expected that the company would be able to meet its full year sales and profit targets.

Full year forecasts state that sales will grow by 7 - 9 percent, while the weakness of the US dollar is likely to mean that the results will be boosted by around 3.5 percent.

Hair care and skin care are expected to be the categories that will really drive the full year results, while fragrances and make-up will also bring strong dividends.

On a geographical basis it is expected that the Asia Pacific market will show the highest market growth for the year, boosted by particularly strong results in China, while the Europe, Middle East and Africa region will also return a solid performance.

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