Estee Lauder reports strong sales growth but lower net profit

By Guy Montague-Jones

- Last updated on GMT

Related tags: Estée lauder, Profit, Generally accepted accounting principles, William lauder

High sales in international markets helped Estee Lauder secure
double-digit growth in the third quarter but the increase was not
enough to prevent the company from suffering a dip in profits.

On a reported basis, sales increased 11 percent to $1.88m for the three months ending March, 31 although the weak dollar did inflate this figure. Strong international performance​ The remaining growth was achieved on the back of a strong performance internationally especially in the Asia/Pacific region where sales were up 26.4 percent. "These results underscore the validity of our investment in international businesses, including emerging markets, where we see positive trends for long-term, profitable growth,"​ said Estee Lauder CEO William Lauder. Despite the strong sales figures, Estee Lauder failed to deliver net profit growth as the company reported a 4 percent reduction to $90.1m for the quarter. Meanwhile, operating profit faired slightly better but did not match the sales performance increasing 2.9 percent to $161.2m. Poor US figures push profits down​ Operations in the US were largely responsible for the lower profits as the soft retail environment and higher costs conspired to reduce Estee Lauder's operating profit from activities in the Americas by 30 percent to $50.4m. The company said department store sales were particularly weak while on the costs side IT systems and infrastructure became more expensive and spending on advertising, merchandising and sampling increased. Sales by product category​ Looking at Estee Lauder's performance by product category, skin care proved to be a particularly strong area with net sales and operating profit increasing significantly. Here Asia/Pacific was vital to the success story as more than 50 percent of the company's sales in the region are for skin care products. Color cosmetics also sold well during the quarter supported by the strong performance of makeup artist brands. In the fragrance business sales growth was strong but high product launch costs meant its operating loss widened. Modest growth was reported in hair care but operating results declined due to investments to support growth and an increase in intangible asset amortization caused by recent strategic acquisitions. Looking to its full year results Estee Lauder expects to continue on its current top line path with net sales predicted to grow between 7 and 9 percent at constant exchange rates.

Related topics: All Asia-Pacific, Business & Financial

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