(Updates with comments from a conference call, stock price)
DOW JONES NEWSWIRES
Estee Lauder Cos.' (EL) fiscal first-quarter profit more than
doubled as the beauty products company posted higher earnings
across all of its businesses.
Estee Lauder joins peers Avon Products Inc. (AVP) and Elizabeth
Arden (RDEN) in reporting better-than-expected results, as sales
for beauty products are starting to show some improvement after a
sharp dip during the recession.
Earlier this month, the company said the quarter benefited from
strong product launches, especially in Asia. As expected, Estee
Lauder boosted its full-year earnings target on Thursday. The stock
was recently up 9.3% to $44.96.
For the quarter ended Sept. 30, Estee Lauder posted a profit of
$140.7 million, or 71 cents a share, up from $51.1 million, or 26
cents a share, a year earlier. Excluding $42.3 million in
restructuring charges, the latest quarter's earnings were 85
cents.
Net sales fell 3.7% to $1.83 billion, or down 0.8% in local
currencies.
Earlier this month, Estee Lauder said it expected earnings to be
"significantly" higher than its already-rosy August view of 23
cents to 30 cents on a sales decline of 5% to 9%. Still, consumers
remain cautious in their spending and Estee Lauder said on a
conference call that the outlook for holiday spending in the U.S.
remains uncertain.
Gross margin improved to 75.7% from 73.7%. Operating margin
surged to 12% from 4.8%
The larger skin-care business reported sales grew 1.9%. Makeup
and fragrance sales were down 3.4% and 11.1%, respectively. Profits
grew in the skin-care and makeup businesses due to improvements at
some of the company's heritage brands, while the fragrance unit
swung to an operating profit.
The improvements in the fragrance and makeup business were
notable after weakness was seen in the prior quarter. Market
researcher IBISWorld said the fragrance business is highly
competitive, and the business faces geographic challenges due to
regulatory and cultural barriers.
The company also projected fiscal second-quarter earnings of 80
cents to 87 cents a share on net sales growing up to 3%. Analysts
polled by Thomson Reuters expected earnings of 85 cents and sales
rising 4% to $2.13 billion.
For the year, Estee Lauder raised its earnings target to $1.95
to $2.10 from its August view of $1.55 to $1.70, but lowered its
sales growth view, now seeing sales growing up to 2%.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com