Boss puts positive spin on Estee Lauder results
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Cosmetics maker Estee Lauder has forecast a lower-than-expected profit for the full year, hurt by fewer customer visits to department stores and uncertainties in some markets.
“We believe the risk of other economic and political disruptions will remain high as we start our new fiscal year,” says CFO Tracey Travis of the latest estee Lauder results.
Weak sales in some Asia-Pacific countries, mainly Hong Kong, helped dent its sales figures.
The company also says it expects to incur charges of about US$80 million to $100 million in fiscal 2017, related to restructuring initiatives, quitting businesses in certain markets and cutting its global workforce.
However, president/CEO Fabrizio Freda has a positive spin, saying the company’s performance “gives us much to celebrate”.
He says the company capitalised on shifting consumer preferences by leveraging its strength in makeup and positioning the company to win in luxury fragrances.
“We nimbly allocated resources and made strategic investments in areas that gave us terrific results, including emerging markets, our makeup category, and the online and specialty-multi retail channels. Importantly, we achieved these results against a backdrop of social and political instability, currency volatility and economic challenges.”
For the quarter ended June 30, the company had net sales of $2.65 billion, a 5 per cent increase on the prior-year period. It posted across-the-board sales gains in all geographic regions and product categories, except fragrance.
Sales benefitted from new products and double-digit growth in several emerging and developed markets. The company also generated double-digit gains in its travel retail and online channels. Net earnings for the quarter were $93.5 million, compared with $153 million last year.
For the year, the company achieved net sales of $11.26 billion, a 4 per cent increase over the previous year. Net earnings were $1.11 billion, up 2 per cent.
Freda says the company will continue to seek geographic and channel opportunities to reach more consumers “while keeping a sharp focus on like-door growth”.
During the fourth quarter, the company recorded restructuring and other charges of $101 million ($69.6 million after tax).
Questions & Answers
Q.Why is Estee Lauder forecasting lower-than-expected profit for the full year?
Why is Estee Lauder forecasting lower-than-expected profit for the full year?
The company anticipates reduced profit due to fewer customer visits to department stores and uncertainties in some markets. Weak sales in certain Asia-Pacific countries, primarily Hong Kong, also contributed to this outlook.
Q.What initiatives are leading to the expected charges of $80 million to $100 million in fiscal 2017?
What initiatives are leading to the expected charges of $80 million to $100 million in fiscal 2017?
These charges are linked to restructuring initiatives the company is undertaking. They also include costs from exiting businesses in specific markets and reducing its global workforce.
Q.How did Estee Lauder manage to increase net sales despite economic and political challenges?
How did Estee Lauder manage to increase net sales despite economic and political challenges?
The company capitalised on shifting consumer preferences by focusing on makeup and luxury fragrances. They also made strategic investments in emerging markets, online, and specialty-multi retail channels.
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