US. The Estée Lauder Companies today reported a solid financial performance for the fourth quarter, and record results for the fiscal year ended 30 June 2011.
President and CEO Fabrizio Freda described 2011 as an “outstanding year”, and praised performance in the “important, fast-growing travel retail channel”, where the group became the leader in skincare, and generated double-digit net sales growth within the Europe, Middle East & Africa region.
For the year, the company confirmed net sales of US$8.81 billion, a +13% increase compared with the US$7.80 billion reported in the prior year. Excluding the impact of foreign currency translation, net sales increased +12%.
Net earnings for the year rose to US$700.8 million, compared with US$478.3 million last year. Diluted net earnings per common share rose +46% to US$3.48, compared with US$2.38 reported in the prior year.
Freda commented: “We achieved record sales, gross margin, operating margin, earnings per share and operating cash flow. These results confirm that our strategy is working and has allowed us to reach our original 13% operating margin target two years earlier than anticipated. We are pleased that our performance is creating greater stockholder value, as evidenced by our increased market capitalization this past year.”
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“In the important, fast-growing travel retail channel the company became the leader in skincare” |
Fabrizio Freda President and Chief Executive Officer The Estée Lauder Companies |
He added: “We made significant progress executing our strategy and we expect to continue to benefit from the many initiatives we are implementing, along with a more strategically focused approach to spending.
“We had strong sales growth in every geographic region and product category, and notably, we recorded the best performance in North America in a decade, including excellent department store results. Our company also established market leadership in China in prestige, and in the important, fast-growing travel retail channel the company became the leader in skincare.
“In fiscal 2012, we will continue to do what has been successful: focus our creative ingenuity on the biggest product ideas and marketing opportunities, improve our High-Touch services, aggressively pursue growth in emerging markets and distribution channels and invest in our strategic modernization initiative.
“We have strong momentum that we will support with higher investment spending, and intend to continue to gain share globally and increase profitability. Based on our conviction in our strategy and long-term outlook, we are extending our financial goals to fiscal 2014 and raising our operating margin target to between 14.5% and 15%.”
The company’s record performance was attributed to stronger overall business, particularly from the largest brands, helped by a weaker US Dollar. The group posted strong across-the-board sales gains in its geographic regions and major product categories. Sales also increased in all major product categories within each region.
Sales growth was particularly strong in the US, travel retail and emerging markets. These results reflect solid increases from higher-margin product launches and the positive impact of more effective advertising spending. The higher results also reflect a favourable comparison to the prior year, which included a charge for returns related to the company’s long-term perfumery strategy in the Europe, the Middle East & Africa region of approximately US$31 million.
During the fiscal year, the Lauder group made substantial progress on its previously stated strategic goals with a solid improvement in cost of sales and operating expenses as a percentage of net sales. All product categories and geographic regions benefited from company-wide efforts to reduce or eliminate non-value added costs.
In connection with the long-term strategic plan, as well as certain ongoing initiatives, the company realised savings of US$199 million during the year. As a percentage of net sales, advertising, merchandising and sampling expenses increased to support the company’s biggest innovations, while all other significant operating expenses were lower.
In geographic terms, the travel retail channel performed particularly strongly within the Europe, Middle East & Africa region, generating double-digit net sales growth for the year, resulting from successful product launches and increased distribution. This reflects both an improvement in global airline passenger traffic and stronger conversion of travellers into purchasers, driven by improved marketing and distribution, according to Lauder, which noted: “Travel retail continues to leverage the strategic investment spending in local markets and benefit from the increase in international travellers, particularly in Asia.”
Fourth-quarter results
For the three months ended 30 June 2011, the company reported net sales of US$2.06 billion, a +12% increase from US$1.84 billion in the comparable prior-year period. Excluding the impact of foreign currency translation, net sales increased +7%.
On a reported basis, net sales grew in each geographic region and product category. Sales also increased in most product categories within each region. The company reported net earnings for the fourth quarter of US$41.1 million, a +72% increase compared with US$23.9 million last year. Diluted net earnings per common share were US$.20, compared with US$.12 in the same prior-year period.
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