Estee Lauder drops annual expectations due to uncertain times

By Katie Bird

- Last updated on GMT

Related tags Asia pacific region Sales growth United states dollar Middle east

Estée Lauder has lowered expectations for the year in the light of ‘extraordinary uncertainty’ in the global economy.

Although the New York-based company has reported strong sales growth and operating profit for the first quarter of fiscal 2009, it has lowered its full year expectations.

Sales led by skin care

Net sales for the three month period ending September 30 2008 came in at $1.9bn, an 11 percent increase on last year’s figures.

Strong sales were translated into a 31 percent increase in net earnings, with the company reporting a bottom line of $51.1m for the quarter.

Results were particularly rosy in the skin care segment, rising 15.7 percent (13.9 percent in local currency) on last year’s figures, bringing the total for the quarter up to $716.6m.

The company also noted that the sales growth in the sector was particularly impressive in the light of last year’s strong first quarter.

In contrast, the company’s hair care segment did not shine, reporting a 3.7 percent (4.4 percent in local currency) decrease in sales for the period.

According to the company this is due to the loss of a hotel amenities program for the Bumble and bumble brand and it expects the category’s performance to improve over the next few quarters.

Asia Pacific region in first place

The Asia Pacific region led the way during the quarter with every country in the region posting an increase in sales. Second place was taken by Europe, the Middle East and Africa, and the company said the UK had taken a starring role in the success along with certain emerging markets in Eastern Europe.

Indeed CEO William Lauder said the results highlighted the importance of emerging markets, along with the strength of the company’s brands and its multi-channel distribution network.

However Lauder was not so positive when it came to future predictions.

“In the near term, we see this as a time of extraordinary uncertainty. We believe the global economic challenges will be extensive and ongoing, and we are managing our business with these expectations in mind,”​ he said.

The company will continue to focus on its core strengths along with ‘vigilantly’ taking the steps necessary to protect the bottom line, he added.

In light of the current global situation Estée Lauder has revised its estimates for the full year and now expects to achieve sales growth between 3 and 5 percent and earnings between $2.20 and $2.50 per share.

In addition, Lauder noted that the ‘unprecedented strengthening’ of the US dollar is likely to negatively impact the company’s results.

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