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The Estee Lauder Companies Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 6, 2012 09:37AM

The Estee Lauder Companies Inc. (EL) filed Quarterly Report for the period ended 2011-12-31. Estee Lauder Cos. Inc. has a market cap of $22.14 billion; its shares were traded at around $57.48 with a P/E ratio of 26.19 and P/S ratio of 2.51. The dividend yield of Estee Lauder Cos. Inc. stocks is 0.91%. Estee Lauder Cos. Inc. had an annual average earning growth of 8% over the past 10 years. GuruFocus rated Estee Lauder Cos. Inc. the business predictability rank of 3.5-star.



Highlight of Business Operations:

Operating income increased 12%, or $66.1 million, to $603.1 million. Operating margin improved to 21.8% of net sales as compared with 20.8% in the prior-year period, reflecting our higher gross margin, partially offset by the increase in our operating expense margin, as previously discussed. The higher results also reflected approximately $23 million related to accelerated orders from certain of our retailers, as previously discussed. The following discussions of Operating Results by Product Categories and Geographic Regions exclude the impact of total returns and charges associated with restructuring activities of $6.1 million, or less than 1% of net sales, for the three months ended December 31, 2011 and $19.3 million, or 1% of net sales, for the three months ended December 31, 2010. We believe the following analysis of operating results better reflects the manner in which we conduct and view our business.

Skin care operating income increased 20%, or $52.0 million, to $312.2 million, primarily reflecting improved results from higher-margin product launches from certain of our heritage brands, as well as increased results from higher-end prestige skin care products. Makeup operating income increased 9%, or $16.6 million, to $208.5 million, primarily reflecting improved results from our makeup artist brands. Fragrance operating results increased less than 1%, or $0.3 million, to $73.2 million, primarily reflecting increased profitability from Estée Lauder and Jo Malone fragrances, mostly offset by lower results from our designer fragrances, particularly in the Europe, Middle East & Africa region due to economic uncertainties and, to a lesser extent, due to higher spending in support of recent launches. Hair care operating results increased 3%, or $0.3 million, to $12.5 million, primarily reflecting higher net sales driven by expanded global distribution and new product launches, partially offset by the other intangible asset impairment, as previously discussed. The accelerated orders from certain of our retailers, as previously discussed, benefited results in the skin care, makeup, fragrance and hair care categories by approximately $13 million, $6 million, $2 million and $2 million, respectively.

Net sales increased 14%, or $630.5 million, to $5,214.2 million, primarily reflecting growth in all of our major product categories within each geographic region. In advance of our January 2012 implementation of SAP at certain of our locations and to provide adequate safety stock to mitigate any potential short-term business interruption associated with the rollout, certain of our retailers accelerated their orders during the fiscal 2012 second quarter. Those additional orders, which totaled approximately $30 million, likely would have occurred in our fiscal 2012 third quarter. Excluding the impact of foreign currency translation, net sales increased 12%. The following discussions of Net Sales by Product Categories and Geographic Regions exclude the impact of adjustments to decrease (increase) the reserve for anticipated returns associated with restructuring activities of $0.6 million and $(1.5) million for the six months ended December 31, 2011 and 2010, respectively. We believe the following analysis of net sales better reflects the manner in which we conduct and view our business.

Operating income increased 24%, or $197.6 million, to $1,037.2 million. Operating margin improved to 19.7% of net sales as compared with 17.8% in the prior-year period, reflecting our higher gross margin and the decrease in our operating expense margin, as previously discussed. The higher results also reflected approximately $23 million related to accelerated orders from certain of our retailers, as previously discussed. The following discussions of Operating Results by Product Categories and Geographic Regions exclude the impact of total returns and charges associated with restructuring activities of $10.2 million, or less than 1% of net sales, for the six months ended December 31, 2011 and $23.9 million, or less than 1% of net sales, for the six months ended December 31, 2010. We believe the following analysis of operating results better reflects the manner in which we conduct and view our business.

Skin care operating income increased 31%, or $125.8 million, to $535.9 million, primarily reflecting improved results from higher-margin product launches from certain of our heritage brands, as well as increased results from higher-end prestige skin care products. Makeup operating income increased 25%, or $73.0 million, to $368.1 million, primarily reflecting improved results from our makeup artist brands. Fragrance operating results decreased 1%, or $1.7 million, to $121.5 million, primarily reflecting higher spending in support of recent launches of designer fragrances and lower results as a result of economic uncertainties in the Europe, the Middle East & Africa region. Hair care operating results increased 26%, or $3.6 million, to $17.6 million, primarily reflecting higher net sales, partially offset by the other intangible asset impairment, as previously discussed. The increased orders from certain of our retailers, as previously discussed, benefited results in the skin care, makeup, fragrance and hair care categories by approximately $13 million, $6 million, $2 million and $2 million, respectively.

Read the The complete Report



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