Estee Lauder performs well, but US market proves challenging

- Last updated on GMT

Related tags: Euro, Cosmetics, Us

Estee Lauder has reported a strong first quarter, with profits
rising 23 per cent to $95 million. And like the rash of other
cosmetics companies posting good results in the last week, it is
the international markets outside of the US that are continuing to
drive sales. Simon Pitman reports.

The company, which has also just announced a management shake-up to reflect its renewed focus on global branding, said that its performance had reflected strong international sales and an expanding product portfolio. The performance also nudged ahead of analysts expectations, although the financial world did aired certain cautions over results in the US.

Reflecting particularly strong sales in Europe, the company's sales grew by 12 per cent to reach €1.50 billion, up from $1.35 billion in the previous quarter. Excluding the positive effect of foreign currency which reflected a strong euro, net sales rose by 9 per cent.

Particularly strong increases were experienced in the makeup category, up 23 per cent to $599.5 million, and in the skin care category, up 13 per cent to $524.3 million. The performance in the skin care category reflected strong sales of Perfect Anti-Wrinkle Radiance Cream and Hydra Complete Multi-Level Moisture Crème, whereas the make-up category reflected new and recent launches such as Superbalanced Compact Makeup and the Colour Surge line of products from Clinique.

In the Americas sales were up by 4 per cent to $888.2 million, reflecting a generally stagnant retail sector. Despite a number of new product launches sales were not boosted significantly, which in turn meant that operating profits were down on the corresponding quarter for 2003. In contrast to the US market, the company pointed out that its performance in Canada had been particularly strong.

In Europe, the Middle East & Africa, net sales increased by 29 per cent to $423.8 million. This translated as a 20 per cent actual rise in income, reflecting the continuing strength of the euro. Although the majority of the increase was attributed to the company's travel division, consistently strong cosmetic sales were reported in the UK, Switzerland, Spain and Italy.

Looking to the year ahead, the company reaffirmed its commitment to further developing of its brands and management. "Two of our most important priorities this fiscal year continue to be developing and enhancing our strong brand equities and talented people,"​ said William Lauder, Estee Lauder​ president and chief executive officer.

"Our entrance into fiscal 2005 with strong double-digit top and bottom line growth sets the stage and gives us confidence that we are on our way to achieving our previously stated full year financial objectives."

In the past two weeks major cosmetics companies such as P&G and Avon have all posted results that have reflected a strong performance in markets outside of the domestic US market, reflecting the continuing challenge that market is facing.

The sheer size and importance of the US market means that, with markets such as Europe and Asia Pacific performing well, the US will continue to be the biggest challenge for all leading cosmetics players.

Related topics: All Asia-Pacific, Business & Financial

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