Estee Lauder performs better than expected

13-Aug-2008 - Last updated on 14-Aug-2008 at 16:48 GMT

Estée Lauder has reported higher than expected profits from the year, despite its weakening performance in the US.

Strong market growth in Europe and the Asia Pacific region has driven the growth along with improved performance in the QVC and travel retail channels.

Fourth quarter sales revenues increased by 14 per cent from $1.75bn to $2.01bn, representing a 9 per cent increase excluding the impact of currency effects.

Increased sales revenues were complemented by a lower investment spending compared to 2007’s fourth quarter, leading to a 36 per cent jump in net income to $120.2m.

Annual results driven by emerging markets

Results for the fiscal year ending June 30th were also positive, and the company appears to have shrugged off the weakening consumer spend in the US.

Sales revenue for the year came in at just short of $2bn ($1.9968bn), an increase of 12 per cent on the prior year, and 8 per cent excluding the effect of currency exchange.

Net income was slightly more modest, increasing by 5.5 per cent to $473.8m for the year.

US operations struggled

However, the Americas region suffered significantly over the year.

Operating income dropped by 32.1 per cent in the region over the year to $228.3m reflecting weak sales growth of 3.5 per cent.

However, strength in the emerging markets in the Asia Pacific region resulted in sales growth of 14.6 per cent and an increase in operating income of over 60 per cent.

Europe, particularly the UK, France, Germany and Italy as well as the company’s travel retail business in the region, also reported positive results, with sales revenues up 12.3 per cent.

The performance was more positive than analysts had expected and according to CEO William Lauder is a testament to the company’s brand strength.

“We effectively managed our business through diverse economic challenges, particularly in the United States, by building the strength of our brand portfolio,” he said in a company statement.

Lauder also highlighted the importance of international operations to the company and the double digit sales growth.

On the back of the positive annual performance the company is predicting fiscal 2009 growth of 6-8 per cent in constant currency.