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The Estee Lauder Companies Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 7, 2012 09:19AM

The Estee Lauder Companies Inc. (EL) filed Quarterly Report for the period ended 2012-03-31. Estee Lauder has a market cap of $25.21 billion; its shares were traded at around $61.04 with a P/E ratio of 29.6 and P/S ratio of 2.9. The dividend yield of Estee Lauder stocks is 0.8%. Estee Lauder had an annual average earning growth of 4.3% over the past 10 years. GuruFocus rated Estee Lauder the business predictability rank of 3.5-star.



Highlight of Business Operations:

During the nine months ended March 31, 2012, we recorded adjustments to reflect revised estimates of sales returns associated with prior initiatives. During the three and nine months ended March 31, 2012, we recorded a write-off of inventory of $0.4 million associated with the exit of unprofitable operations. During the three months ended March 31, 2011, we recorded $0.7 million reflecting sales returns (less a related cost of sales of $0.3 million) and a write-off of inventory of $1.3 million associated with turnaround operations, primarily related to the reformulation of Ojon brand products. During the nine months ended March 31, 2011, we recorded $2.2 million reflecting sales returns (less a related cost of sales of $0.8 million) and a write-off of inventory of $6.4 million associated with turnaround operations, primarily related to the reformulation of Ojon brand products.

Net sales increased 4%, or $82.5 million, to $2,248.2 million, primarily reflecting growth in our skin care product category within each geographic region. As a result of the SAP rollout, approximately $30 million of accelerated orders were recorded as net sales in the fiscal 2012 second quarter that likely would have occurred in the fiscal 2012 third quarter. In addition, approximately $42 million of accelerated orders were recorded as net sales in the fiscal 2011 third quarter that would have occurred in the fiscal 2011 fourth quarter. Combined, these actions created a difficult comparison between the fiscal 2012 third quarter and the fiscal 2011 third quarter of approximately $72 million in net sales. Excluding the impact of foreign currency translation, net sales increased 5%. The following discussions of Net Sales by Product Categories and Geographic Regions exclude the impact of adjustments to increase the reserve for then-anticipated returns associated with restructuring activities of $0.7 million for the three months ended March 31, 2011. We believe the following analysis of net sales better reflects the manner in which we conduct and view our business.

Operating income increased 1%, or $2.4 million, to $211.5 million. Operating margin decreased to 9.4% of net sales as compared with 9.6% in the prior-year period, reflecting the increase in our operating expense margin, partially offset by our higher gross margin, as previously discussed. The overall operating results were negatively impacted by approximately $54 million related to the timing of orders from certain of our retailers, as previously discussed. In addition, in the current-year period we established a provision for anticipated returns and wrote off inventory of approximately $17 million, combined, as a result of repositioning certain products due to changes in regulations related to sunscreen products in the United States. 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 $28.8 million, or 1% of net sales, for the three months ended March 31, 2012 and $23.5 million, or 1% of net sales, for the three months ended March 31, 2011. We believe the following analysis of operating results better reflects the manner in which we conduct and view our business.

Net sales increased 11%, or $713.0 million, to $7,462.4 million, primarily reflecting growth in all of our major product categories within each geographic region. As a result of the SAP rollout, as previously discussed, approximately $42 million of accelerated orders were recorded as net sales in the fiscal 2011 third quarter that would have occurred in the fiscal 2011 fourth quarter, which created a difficult comparison to the prior-year period. Excluding the impact of foreign currency translation, net sales increased 9%. 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 $(2.2) million for the nine months ended March 31, 2012 and 2011, respectively. We believe the following analysis of net sales better reflects the manner in which we conduct and view our business.

Operating income increased 21%, or $213.7 million, to $1,238.5 million. Operating margin improved to 16.6% of net sales as compared with 15.2% in the prior-year period, reflecting our higher gross margin partially offset by the increase in our operating expense margin, as previously discussed. The overall operating results were negatively impacted by approximately $31 million related to the timing of orders in the prior-year period from certain of our retailers, as previously discussed. In addition, in the current-year period we established a provision for anticipated returns and wrote off inventory of approximately $17 million, combined, as a result of repositioning certain products due to changes in regulations related to sunscreen products in the United States. 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 $39.0 million, or less than 1% of net sales, for the nine months ended March 31, 2012 and $47.4 million, or 1% of net sales, for the nine months ended March 31, 2011. We believe the following analysis of operating results better reflects the manner in which we conduct and view our business.

Read the The complete Report



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