Estee Lauder Outpaces Estimates - Analyst Blog

Estee Lauder (EL) reported robust results for the second-quarter of fiscal 2011 with quarterly earnings of $1.77 per share. Earnings were well ahead of the Zacks Consensus Estimate of $1.44 and soared 38% from $1.28 delivered in the prior-year quarter.

New York-based Estee Lauder now expects full-year 2011 earnings in the range of $3.40 to $3.60 per share. Profits were primarily driven by strong holiday season sales and weak U.S. dollar.

Net Sales

Net sales for the quarter grew 11.0% year-over-year to $2.49 billion from $2.62 billion in the prior year quarter. The top line was primarily driven by favorable currency translation.

The company posted sales gains in each of its geographic regions and major product categories. Further, strong sales growth came from the company's international businesses, particularly in travel retail, Asia/Pacific and emerging markets.

Segments

By product categories – Skin Care product sales rose 14% to $1,029 million, Makeup sales jumped 9.0% to $8.82 million, Hair Care product sales inched 2.0% to $111.7 million and Fragrance product sales surged by 13% to $447.6 million.

By region – sales in The Americas rose 9.0% to $988 million; in Europe, the Middle East & Africa sales surged 15% to $993 million, whereas in the Asia/Pacific region, sales soared by 10.0% to $512 million.

Cash Flow and Balance Sheet

The company exited the quarter with net cash flows provided by operating activities of $508 million compared with $617.0 million in the prior year. The decrease was primarily attributable to higher working capital requirements.

As part of a four-year strategic plan (fiscal year 2010 – 2013), which includes trimming of headcount, and realigning and optimizing the structure of the geographic regions resulted in $57 million savings during the reported quarter. Management expects to realize savings of $130 million to $140 million during fiscal 2011.