Estée Lauder sales jump in Q2, net earnings fall

By

Obi Anyanwu

Published
Feb 2, 2017

Estée Lauder remains on target for fiscal 2017 with net sales increasing 3% to $3.21 billion in the second quarter. The company’s skin care, makeup, and fragrance segments posted increases, but the hair care segment fell 8% on a reported basis.

 
The Asia/Pacific region led the company’s net sales increase driven by double-digit growth in Japan and the Philippines. The company also achieved double-digit growth in China, which offset a sales decline in Hong Kong.
 
Tom Ford, La Mer, Smashbox and Jo Malone performed very well in North America, the Estée Lauder brand grew in the low-single digits, and Clinique and MAC struggled in the region due to a decline in retail traffic and tourism

In addition, Estée Lauder in the second quarter completed the acquisition of Too Faced, Becca and By Kilian, which contributed 90 basis points to sales growth.
 
Fabrizio Freda, President and Chief Executive Officer, said, “Our second quarter sales growth accelerated as planned, reflecting the benefits of our portfolio diversity by brand, channel, product category and country. Our small, mid-sized and luxury brands continued to lead growth, contributing strong sales increases, and recent acquisitions added incremental sales. For the quarter, our profits were higher than expected, reflecting our ability to leverage sales growth and manage expenses.”
 
Despite the positive sales performance, the company posted a decrease in net earnings to $428 million compared to $447 million in the previous year. Diluted net earnings per common share were $1.15, including the effect of restructuring and other charges, compared with $1.19 reported in the prior year.
 
Freda added, “We expect sales and profit growth to further accelerate in the second half of our fiscal year, due largely to strong product innovation, increased consumer coverage and improving trends in certain brands and markets. We plan to make targeted investments throughout the balance of the fiscal year to support and grow our brands.”
 
For the third quarter, Estée Lauder expects its net sales to increase between 5% and 6%, and 7% and 8% on constant currency, and for its full year net sales to increase between 4% and 5%, and 6% and 7% on constant currency.