Estee Lauder profits beat expectations on high sales

By Simon Pitman

- Last updated on GMT

Related tags Estée lauder companies Generally accepted accounting principles

Estee Lauder Companies has beat profit expectations having posted a 10 percent increase in Q3 sales as consumers of prestige products return to their old spending patterns.

The company recorded sales of $1.86bn for the quarter, compared to $1.70bn in the same period last year, which excluded the positive impact of currency translation represented growth of 5 percent.

The figures were in line with Estee Lauder’s own forecasts, which had predicted that sales would increase at between 4 – 7 percent in respect to constant currency, but profits were ahead of expectations.

Net earnings increase 100 percent

Net earnings were up 100 percent to $57.5m, compared to $27.2m in the comparable quarter last year, a figure that, together with the improved sales, was also positively impacted by cost savings from its restructuring plan.

The increase in sales was generated from improved results across the board, including all product categories as well as different geographical regions.

Big gains in international sales

The company said that there were particularly strong gains in the international markets, specifically the Asia Pacific region as well as the company’s travel retail division. Likewise sales growth in the Americas was also underlined.

The company said that the gains in the category were driven by double-digit growth in the Middle East & Africa, Europe and the Asia/Pacific regions, while the Americas was reported to have had a mid-single digit gain.

With respect to product categories, the biggest gains were seen in the company’s mainstay skin care division, with sales up 15.6 per cent on a reported basis to $819.8m.

Make-up gains failed to dazzle

The weakest performing category was make-up, which saw sales grow by 2.3 percent on a reported basis to $710.8m, while sales in fragrance grew by 18.7 percent to $222.8m and sales in hair care were up 6.1 percent to $96.1m.

"Our performance in the past quarter continued to be of high quality, reflecting strong top-line growth, particularly from our international businesses, a streamlined cost structure and improved inventory management,”​ said Fabrizio Freda Estee Lauder CEO.

"During the quarter, we increased investment spending behind more targeted advertising, merchandising and sampling to enhance competitiveness and accelerate momentum,”​ he added.

Looking to the full year, the company forecasts that net sales will grow at 4 – 5 percent in constant currency, while the impact of currency translations is expected to positively impact that result by a further 2 percent.

“For the balance of the fiscal year, we plan to continue these investments well above the prior-year period,"​ Freda said, explaining his aim of maintaining the increased level of marketing and promotion spend in order to retain the growth momentum in the coming year.

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