Travel retail aids +11% surge in Estée Lauder's second quarter net sales
Source: ©The Moodie Report
By Dermot Davitt
Fabrizio Freda: "I am very pleased with our performance in our travel retail business, the Asia region and [with the] holiday season in the US and UK"
INTERNATIONAL. The Estée Lauder Companies has reported a surge of +11% in second quarter net sales (to 31 December) to US$2.26 billion. And travel retail played a key role in driving growth, said the group.
Excluding the impact of foreign currency translation, net sales increased by +6% from the year-ago period. The company reported net earnings for the quarter of US$256.2 million, compared with US$158.0 million last year. Diluted net earnings per common share rose by +60% to US$1.28, compared with US$.80 reported a year ago.
The company said: “The better-than-anticipated sales stemmed, in part, from strong growth in Asia, solid increases from higher-margin product launches, higher gains in the company’s travel retail business and the holiday season in the US and the UK, and improved foreign currency translation.”
President and CEO Fabrizio Freda noted: “The strong results we posted this quarter reflect the vitality of our brands, increased locally relevant innovation and the value consumers find in our product offerings.
“Our strong top-line growth indicates consumers have responded positively. I am very pleased with our performance in our travel retail business, the Asia region and a good holiday season, particularly in the United States and the United Kingdom, where we had the right mix of gift sets and basic products, supported by the integral personal service from beauty advisors.
“Many aspects of our business this quarter came together, as strong global sales growth, cost of sales reductions, restructuring savings and efficient cost management translated into significant operating margin improvement.”
|Olivier Bottrie: Leading a strong year-to-date performance of the Travel Retailing Worldwide division at Estée Lauder|
Speaking to analysts after the results announcement, Freda added: “We believe our sales grew faster than market trends in many countries. Our international sales expanded faster than our US business, moving us closer to our target of generating more than 60% of sales outside the US.
“Compared to the second quarter last year, our top line growth was driven by our robust International business. We had solid growth in Asia Pacific led by Greater China and Korea. Sales in our European region expanded sharply driven primarily by travel retail in the UK, Russia and Belarus.
“Sales in emerging markets, which had an increasingly important contribution, climbed +14%. These countries, which include China, Russia, Turkey and Brazil among others, accounted for 12% of total sales.”
For the six months ended December 31, 2009, the company reported net sales of US$4.10 billion, a +4% increase over a year ago. Excluding the impact of foreign currency translation, net sales increased +3%. On a reported basis, as well as in constant currency, net sales growth in Asia Pacific and Europe, the Middle East & Africa, more than offset lower sales in the Americas in the six months.
Outlook for Q3 and full year
The group noted that global economic uncertainty has had a negative effect on consumer confidence, demand and spending.
It said: “The uncertainty about future market conditions, consumer spending patterns and the financial strength of some of the company’s key retail customers, coupled with select retailer destocking, will continue to negatively affect the company’s results for fiscal 2010. A continuation of these conditions makes definitive forecasting difficult.
“During the balance of the fiscal year, the company expects to increase investment spending well above first-half levels to enhance competitiveness, build momentum and drive growth. The company also plans incremental spending to build capabilities in the areas of digital applications, regional research and development and consumer insights.”
Based on this, the group expects net sales in Q3 to increase between +4% and +7% in constant currency terms.
For the full year, net sales are forecast to grow between +3% and +5% in constant currency, with sales in skincare and makeup expected to lead growth, followed by hair care and fragrance.
Geographic region net sales growth in constant currency is expected to be led by Asia Pacific, followed by Europe, the Middle East & Africa. Sales in the Americas are expected to decline slightly in the full year.
MORE STORIES ON ESTEE LAUDER
Travel retail boosts Estée Lauder amid robust second quarter
Lauder goes to extremes with Resilience Lift make-up - 11/01/10
Leonard Lauder to speak at FT luxury summit - 06/01/10
Nuance-Watson (Singapore) and Estée Lauder team create special gift services for travellers at Changi Airport – 14/12/09
The Lauder Group brands are prospering in Korean travel retail doors such as Lotte Duty Free in downtown Seoul