Estée Lauder nails quarter

Investors cheer as the company beats expectations after rivals Avon and Revlon fall short.

By Kim Peterson Oct 29, 2010 3:45PM
Woman with lipstick © Stockbyte/PictureQuest Shares of Estée Lauder (EL) shot to an all-time high Friday after the cosmetics company reported stellar earnings, bolstered by strong international sales.

The struggling economy was not a problem for the maker of higher-priced brands such as Clinique and M.A.C. Encouraged by the results, the company raised its full-year profit forecast.

"The luxury consumer is shopping again," chief executive Fabrizio Freda said on a conference call with analysts.

Estée Lauder reported a $191.1 million profit, or 95 cents a share, for the quarter, up from a $140.7 million profit, or 71 cents a share, in the year-ago period.

Removing one-time charges related to restructuring and other items, earnings came in at 97 cents a share. Analysts were expecting only 77 cents a share. Revenue saw a 14% gain to $2.09 billion, and excluding the impact of foreign currency translation the gain rose to 15%.

The results were particularly surprising given the dreary quarters at rivals Avon Products (AVP) and Revlon (REV). Both companies reported disappointing numbers on weak U.S. sales.

"The biggest surprise is that the upside (in first-quarter results) came from better-than-expected sales growth and stronger-than-expected margins, despite the fact that margins had more than doubled in the year-ago quarter," said a Citigroup analyst, according to MarketWatch.

Estée Lauder gave several reasons for its strong performance. They include:
  • Robust sales growth in the U.S.
  • Strong worldwide demand for products
  • An increase in advertising spending in the quarter
  • A weaker U.S. dollar
Sales growth was led by international segments, the company said.

For the current quarter (its second quarter) the company said it expected a profit of $1.32 to $1.45 a share, excluding some one-time charges. Analysts were expecting $1.37 a share.

And the company raised its full-year profit forecast to $2.90 to $3.10 a share. Previously, it had forecast $2.80 to $3.05 a share. Analysts are expecting $3.07 a share.



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