Estée Lauder Companies has reported a 5% first quarter net sales rise to $2.68bn to the end of September in local currency.

 

Excluding the impact of foreign currency translation, net sales increased 6%, while net earnings for the quarter reached $300.7m, compared with $299.5m last year. Diluted net earnings per common share yielded $0.76, which ELC says was flat with the prior year.

 

In pointed reference to its European, the Middle East and African business, ELC said that in constant currency, net sales increased in the majority of countries in the region and it estimates that it continued to outperform prestige beauty in many markets.

 

GOOD TRAVEL RETAIL GROWTH

This net sales increase was led by high-single-digit growth in the beauty firm’s travel retail business and double-digit growth in the UK and Switzerland. Germany and France also generated solid growth, while sales in Southern Europe, where the retail environment continues to be challenging, were relatively flat.

 

Net sales growth in travel retail primarily reflected a stronger retail environment for the company’s products – particularly the luxury brands – rather more than any great growth in global airline passenger traffic.

 

In its results statement, the company said: “Operating income decreased, as higher results from the company’s travel retail business and the Balkans were more than offset by lower operating results in most other countries – primarily due to increases in investment spending for recent major launches and initial costs associated with freestanding retail store expansion”.

 

TOP IMAGE AND ABOVE: The Estée Lauder and Clinique brands at Lotte Duty Free’s downtown flagship store in Seoul, South Korea.

 

Turning to The Americas, ELC reports that net sales in the US rose moderately, reflecting growth from some of its luxury, makeup artist, hair care and designer fragrances brands, although this was partially offset by sales declines with certain heritage brands.

 

Nevertheless, double-digit sales growth was recorded in Latin America and net sales in Canada also increased. Sales to specialty-multi stores rose high-single digits, and the company’s online business grew in double-digits.

 

Operating income in The Americas also fell, reflecting the planned higher marketing spend during the current-year period designed to support major product launches. The decrease also reflected lower sales on some base business in certain heritage brands in softer markets.

 

ASIA PACIFIC STILL STRONG

By contrast with the mixed picture everywhere else, ELC reports that every country posted net sales increases in the Asia Pacific region except South Korea. The company said that its strongest local currency growth was generated in China, Hong Kong and Taiwan, each posting strong double-digit increases.

 

Results in China included sales to new consumers in expanded distribution in tier two, three and four cities and new skincare product launches. Sales at retail continued to grow strongly in  double-digits.

 

ELC said that the lower sales in Korea were due to continuing difficult economic conditions and competitive pressures and it expects continued weakness in the prestige beauty in Korea.

 

ABOVE: M.A.C at World Duty Free, Heathrow Terminal 5.

 

More happily, it estimates that it gained share in certain countries, including China, within its points of distribution during the quarter. In Asia Pacific, operating income also increased slightly, with higher results, primarily from China, Taiwan and Hong Kong, being partially offset by lower operating results in Japan and Vietnam.

 

EARNINGS ESTIMATE EXCEEDED

Commenting on the results, Fabrizio Freda, President and CEO said: “I’m pleased that our sales growth was in line with our target and we exceeded our earnings per share estimate for the quarter, despite softer-than-expected market conditions in certain countries.

 

“We achieved these results on the strength of our brands, many of which have introduced successful new innovations that we have supported with strong marketing programs.

 

“Our luxury brands, online and travel retail channels, and emerging markets continued to generate excellent results, lead our growth and contributed to broad sales gains in each of our geographic regions and major product categories.

 

“Looking ahead, we are well positioned for the important holiday shopping period, with the strongest slate of new fragrances in more than a decade, as well as other innovative products across our categories.

 

“We are focused on achieving superior top-line growth by driving sales momentum throughout the fiscal year with our product and service innovations, backed by creativity, product quality and comprehensive marketing programs”.

 

For the full fiscal year, he said the company is now expecting to grow sales by between 6% to 8% in local currency – double the global prestige beauty estimate – and it has also revised its  earnings per share estimate to between $2.80 to $2.87.