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  • bluecheese4u bluecheese4u Feb 5, 2013 8:27 AM Flag

    The Estée Lauder Companies Reports Solid Fiscal 2013 Second-Quarter Results

    The Estée Lauder Companies Reports Solid Fiscal 2013 Second-Quarter Results

    - Earnings Per Share Rose 14% to $1.16 on 7% Sales Growth -
    Before Charges

    NEW YORK--(BUSINESS WIRE)--Feb. 5, 2013-- The Estée Lauder Companies Inc. (NYSE: EL) today reported net sales for its second quarter ended December 31, 2012 of $2.93 billion, a 7% increase compared with $2.74 billion in the prior-year quarter. Excluding the impact of foreign currency translation, net sales also increased 7% from a year ago. These results were delivered against a 10% local currency sales increase in the prior-year quarter and continued softness in certain markets, particularly Southern Europe and Korea. The Company reported a 50-basis-point increase in operating margin and net earnings for the quarter rose 13% to $447.5 million, compared with $396.7 million last year. Diluted net earnings per common share rose 13% to $1.13, compared with $1.00 reported in the prior year. All mention of net earnings in the body of this release refers to net earnings attributable to The Estée Lauder Companies Inc., which reflects the adjustment for noncontrolling interests.

    The fiscal 2013 second-quarter results included returns and charges associated with restructuring activities of $14.6 million ($9.5 million after tax), equal to $.02 per diluted common share. The fiscal 2012 second quarter results included returns and charges associated with restructuring activities of $6.1 million ($4.4 million after tax), equal to $.01 per diluted common share.

    Excluding these returns and charges in the second quarters of fiscal 2013 and 2012, net sales for the three months ended December 31, 2012 increased 7% to $2.93 billion and net earnings rose 14% to $457.0 million. Diluted net earnings per common share rose 14% to $1.16, versus a comparable $1.01 in the prior-year period. A reconciliation between GAAP and non-GAAP financial measures is included in this release.

    In the second quarter of fiscal 2013, some retailers accelerated their orders in advance of the Company’s January 2013 implementation of SAP at certain of its locations and brands. Those additional orders amounted to approximately $94 million in sales that would have likely occurred in the Company’s fiscal 2013 third quarter. These orders, while planned, were above the Company’s expectations. Similarly, the Company’s fiscal 2012 second quarter included approximately $30 million of sales resulting from accelerated retailer orders in advance of the Company’s January 2012 implementation of SAP at certain of its locations. Combined, these actions created a difficult comparison between the fiscal 2013 and fiscal 2012 second quarters of approximately $64 million in sales and $55 million in operating income, equal to $.09 per diluted common share. Excluding the impact of the timing of orders and returns and charges associated with restructuring activities, net sales and operating income would have increased 5% and 2%, respectively, which was better than expected. The impact of these shifts by region and product category is included in this release.

    Additionally, in December 2012, the Company amended the agreement related to the August 2007 sale of Rodan + Fields to receive a fixed amount in lieu of future consideration and other rights and, as a result, recognized $21.3 million in other income.

    Fabrizio Freda, President and Chief Executive Officer, said, “Our performance this quarter reflected the global appeal of our brands in all regions. These results demonstrate our ability to continue to grow, on top of the double-digit trends we generated in the prior year, even in the face of macro-economic headwinds and challenges in certain international countries. Organic sales growth for the quarter was in line with our expectations, while earnings per share exceeded our forecast.

    “We began the second half of our fiscal year by successfully launching another wave of our Strategic Modernization Initiative in early January, a key driver to achieving additional long-term efficiencies. Our recent increased strategic marketing spending behind key innovations and existing winning products in countries with good momentum should help drive sales growth in coming months. We expect continued solid growth in the U.S., many emerging markets and e-commerce and improving trends in travel retail. For the full fiscal year, we are re-affirming our sales growth forecast of between 6% and 7% in local currency, while raising our earnings per share guidance to $2.51 to $2.59.”

    The global prestige beauty industry continues to experience mixed results and overall growth has slowed from the prior year as the Company expected. Nonetheless, the Company’s performance was broad-based, generating local currency sales gains in each of its geographic regions and major product categories. Sales growth was solid in the United States and certain developed countries and strong overall in emerging markets.

    During the quarter, the Company made substantial progress on its strategic goals, with a strong improvement in cost of sales 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 and certain ongoing initiatives, the Company realized savings of $26 million during the quarter. As planned, the Company increased global advertising spending versus the prior-year quarter to build momentum and gain share in its key markets and product categories. As a percentage of net sales, certain significant operating expense categories were lower. Gross margin expanded 80 basis points, operating expense margin remained unchanged and operating margin rose 80 basis points, before charges.

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