USA. The Estée Lauder Companies today reported net sales of US$3.12 billion (a +3% increase) for its second quarter ended 31 December 2015. Net earnings for the quarter were US$446.2 million, compared with US$435.7 million last year. Diluted net earnings per common share increased +5% to US$1.19, compared with US$1.13 in the previous year.
For the quarter, the negative impact of foreign currency translation on diluted net earnings per common share was US$.11. Excluding the impact of foreign currency translation, net sales increased +8% and diluted net earnings per common share rose 15%.
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President and Chief Executive Officer Fabrizio Freda noted: “Our strategy of portfolio diversification and our agility to reallocate resources to the best opportunities enabled us to deliver excellent second quarter sales and earnings. Our strong constant currency sales growth reflects our ability to effectively anticipate key consumer and market trends, including greater demand for products in the fast-growing prestige makeup category and luxury beauty tier, and the importance of a strong and growing online presence. In the holiday season, our brands achieved outstanding results from their e-commerce businesses, as well as the gift sets, services, sampling and events they offered at retail.
“While economic and geopolitical volatility creates challenges, the balance and diversity of our brand portfolio, distribution channels and markets mitigate reliance on any one part of our business. We believe these important characteristics, along with the strength of our underlying fundamentals, our winning innovation and the increasing efficiency of our business model position us well for continued success.
“In the second half of the fiscal year, we will continue to fuel our growth momentum with strategic investments to build upon our strengths, capabilities and infrastructure to further enhance our long-term competitive advantage. We expect to continue to outperform global prestige beauty and we are raising the bottom of our full fiscal year constant currency sales growth estimate to between +7% and +8%. In light of market challenges, expected continued currency headwinds and our decision to invest in sustaining our growth momentum, we are maintaining our forecasted adjusted constant currency earnings per share growth estimate of +10% to +12%, before charges, for the 2016 fiscal year.”
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By product category, skincare net sales decreased due to the unfavourable impact of foreign currency translation. In constant currency, Estée Lauder skincare net sales increased primarily due to recent product launches such as New Dimension and Re-Nutriv Ultimate Diamond eye crème. Lower sales from Clinique reflect a difficult comparison with greater launch activity in the prior-year period. The category’s strong gains were made from luxury brand La Mer and Origins as well as incremental sales from recent acquisitions.
Higher make-up sales primarily reflected very strong growth from the company’s make-up artist brands, with new products and expanded distribution in a number of channels adding to the increase. Strong double-digit growth from Smashbox and Tom Ford also boosted results.
Fragrance sales increased, with Jo Malone London and Tom Ford posting double-digit gains.
For haircare, the category’s growth benefited from expanded global distribution as well as line extensions and new launches for Aveda.
By region, sales in the USA rose, reflecting growth from most brands. Tom Ford, Jo Malone and Smashbox all posted double-digit growth in the region.
Within EMA, in constant currency, net sales rose in all countries. The increase was led by double-digit constant currency growth in the UK, Germany, Italy and a number of emerging markets including Russia. In travel retail, net sales increased on new launch initiatives, global airline passenger traffic growth and expanded distribution.
For Asia Pacific, sales in constant currency increased in every country, except Hong Kong, with double-digit growth in Australia, the Philippines, Singapore and New Zealand. Strong constant currency sales gains were recorded in China, Korea and Japan.
