Estee Lauder profits hit by restructuring and sales dip

By Simon Pitman

- Last updated on GMT

Cosmetics giant Estee Lauder says its third quarter was hit by rising costs from its restructuring plans as well as a 10 percent fall in sales.

The company, which has been undergoing extensive restructuring under the guidance of new CEO Fabrizio Freda, who officially takes over on July 1, revealed that sales dropped from $1.88bn in the corresponding period last year to $1.70bn this year.

The company said that sales were also significantly impacted by a big hit from a strong US dollar, underlining the fact that without the effects of currency translations, sales only fell 2 percent.

Restructuring hits net earnings

Likewise, net earnings took a big hit, which the company said was mainly attributable to heavier restructuring charges, with the figure falling from $90.1bn last year, to $27.2bn this year.

“The confluence of lower consumer spending and continuing macroeconomic conditions resulted in our third quarter performance being lower than the prior-year period,”​ said incumbent CEO William Lauder.

The company announced that it was ramping up its ongoing restructuring plan at the beginning of this year and has already said that it intends to shed around 2,000 jobs worldwide, or 6 percent of its workforce, in the course of the next year.

Fragance sales hit hard

Dividing the figures up according to product segment, the hardest hit was fragrance sales, which fell 27.6 percent to reach $187.7m, a figure that represented falls in all geographic regions, attributable to tough market conditions.

Least impacted was the skin care category, where sales fell by 6.6 percent to reach $709.0m. Sales in make-up fell 8.1 percent to $694.5m, while sales in hair care fell 7.7 percent to $90.6m.

On a geographical basis sales were hardest hit in the Europe, Middle East and Africa market, where the comparable figure for the quarter fell by 16.8 percent to $535.5m, largely attributable to a steep decline in its travel retail operations in Spain, France and Italy.

Americas hit by low make-up and fragrance sales

In the Americas sales for the period fell by 6.7 percent to $804.4m, a figure that was largely attributable to lower sales in the company’s make-up and hair care categories.

Looking ahead to the full year, the company pointed out that the current economic conditions made predictions difficult, but underlined that net sales are expected to fall by 1 – 3 percent in constant currency, compared to last year's sales which came in at just under $2bn.

This figure is expected to be futher impacted by the continuing strength of the US dollar in the fourth quarter, which means that foreign currency translation is likely to see net sales fall between 5 – 7 percent.

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