Advance retail orders and prestige drive Estée Lauder results

By Simon Pitman

- Last updated on GMT

Related tags Foreign currency translations Fiscal year Estée lauder companies

Advance retail orders and prestige drive Estée Lauder results
Estée Lauder has delivered strong first quarter results that have helped counter on-going headwinds from foreign currency translations, while also giving profits a significant boost.

The company said that net sales grew by 8% to reach $2.83bn compared to a figure of $2.63bn for the corresponding period last year.

This figure looked even more impressive at constant currency rates, with sales increasing by 15%, without the consideration of the negative 7% for foreign currency translations against a strong dollar.

Positive effect of advanced retailer orders

The company did point out that the first quarter was also positively impacted by accelerated retailer orders that created a favorable comparison.

This positively impacted results by approximately $178m and was the result of the company’s July 2014 implement of its Strategic Modernization Initiative, which led to advanced orders being placed at that time for the current quarter.

The sales gains also led to a significant rise in net profits, which were up by 36% to $309.3m, gains that were also driven by dividends derived by the company’s cost savings initiative.

“We achieved this strong performance by leveraging our multiple engines of growth, driven by our broad portfolio of prestige brands, which is diversified by category, geography and channel,” ​said Fabrizio Freda, president and CEO.

“Our results this quarter were led by our luxury and makeup brands, Europe, where every country posted gains, emerging markets, and online, specialty-multi and freestanding store channels.”

Slower pace in Greater China

Conversely, the company did also point out that growth has slowed in certain developing markets, evinced by Greater China, where an economic slowdown has been seen in the past six months.

Breaking the figures down into the company’s four main business divisions, the biggest gains were seen in its makeup division, where reported sales were up 14% during the quarter, while fragrance sales were up 9%.

Sales in skin care rose by just 2%, thanks to gains from the La Mer and Origins brands, but were offset by lower sales in Greater China and Hong Kong that particularly affected Clinique sales.

Looking ahead to the full financial year

Looking ahead to the second quarter and full financial year, the company believes it is well positioned, particularly as the next quarter falls within the holiday period, which is traditionally its busiest quarter.

“The focus on supporting those areas of proven growth is expected to drive sales momentum throughout the fiscal year to achieve strong bottom line results,”​ Freda said.

“With the strong start to the year and the opportunities we see ahead, we are raising our forecasted adjusted constant currency earnings per share growth to 10% to 12% for the full 2016 fiscal year.”

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