Estee Lauder sees strong results, but US disappoints

By Simon Pitman

- Last updated on GMT

Related tags: Cent, Revenue, Us

New York-based Estee Lauder reported a 7 per cent increase in sales
on the back of a strong performance in Europe and Asia, but the
performance could have been even stronger if US sales had been
better.

The company said that net sales grew to $1.69bn for its third quarter, a figure that was 5 per cent up on the same period last year taking into account the positive impact of foreign currency translation. The figures for net profit looked even better, with net earnings rising 59.5 per cent to reach $93.9m, compared to the same period last year, thanks both to restructuring and the strong increase in sales. US sales were let down by a drop in performance in big brands such as Clinique, whereas overall sales of fragrances were also reported to have dropped off. The poor performance in the crucial US sales unnerved investors, who reacted to the results by selling off shares, leading to a 5 per cent drop in share prices immediately after the announcement, reversing a trend that had put 25 per cent on share prices so far this year. However, the lower sales in the US were offset by increased sales in overseas markets, which now account for more than 50 per cent of the company's total revenues. In particular markets such as the UK, Russia, China and international airport duty-free shopping were all reported to have performed particularly well. The company said that it remained bullish over the results, despite the poorer performance in the US market, and underlined its expectations to grow sales by 6 - 7 per cent during the financial year. "We are confident in our long-term growth prospects,"​ said William Lauder Estee Lauder CEO. "During the quarter, we improved our capital structure by repurchasing $750m of our stock, while increasing our debt levels." ​Sales in the Americas for the quarter fell by 1.5 per cent to $856.9m, with gains from internet sales, MAC color cosmetics and strong sales in Mexico and Canada being offset by the lower sales in the US. Sales in Europe, Middle, East and Africa rose by 19 per cent to $598.4m, mainly off the back of increases in Russia and the UK, whereas sales in Asia rose by 14 per cent to reach $235.2m, driven by the Hong Kong, China, Australia and Singapore markets. On a divisional basis, hair care, although the smallest segment, rose by 20.9 per cent to reach sales of $97.1m, whereas sales in the biggest division, skin care, rose by 9.5 per cent to reach $668.9m.

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