EL Estee Lauder Companies Inc

By Austen Hufford 

Estée Lauder Cos. reported better-than-expected growth in profit and revenue but said the strong dollar will continue to hurt its results.

Shares rose 2.2% to $88.89 in midday trading.

The cosmetics company--whose brands include Clinique, MAC and Bobbi Brown--said it plans to increase investment to fuel growth. Chief Executive Fabrizio Freda told The Wall Street Journal in an interview that the company is launching new products and corresponding marketing campaigns, including some aimed directly at millennials.

"This quarter, we are investing first of all in new innovations for our key brands," he said.

For the current quarter, Estée Lauder expects revenue to increase between 2% and 3%, but sees the stronger dollar hurting sales by about 4%. Analysts surveyed by Thomson Reuters were projecting growth of 3%, on average. The company expects adjusted per-share earnings of between 53 cents and 58 cents, below analyst estimates of 76 cents.

For the year, sales are expected to grow between 4% and 5%. On a constant-currency basis, the company expects revenue to increase between 9% and 10%, upping the lower end of its forecast by 1 percentage point. The company lowered its forecast of per-share earnings to between $3.07 and $3.12, compared with $3.10 to $3.17 earlier. Analysts had expected $3.18 a share on revenue growth of 9%.

Sales to travelers boosted results in the quarter, and Mr. Freda said the company will expand into new airports and aim more brands at them.

Estée Lauder said volatility and economic challenges are slowing growth in Hong Kong, China and other emerging markets. Sales in the Asia-Pacific regions fell 0.3%

As previously announced, Estée Lauder said it was overhauling its global technology infrastructure, transitioning to a primarily vendor-owned model. The company record a charge of $18.5 million in the second quarter.

Over all, Estée Lauder reported a profit of $446.2 million, or $1.19 a share, compared with $435.7 million, or $1.13 a share, a year earlier. Excluding the technology charges, earnings were $1.22 a share.

Total sales grew 2.6% to $3.12 billion.

Analysts polled by Thomson Reuters had expected earnings of $1.11 a share on sales of $3.08 billion.

Gross margin remained 81.2%.

Skin care sales fell 3.3% because of currency fluctuations that were partially offset by increases in sales of its La Mer brand. Makeup sales increased 6.4% on expanded distribution and from lipsticks and foundations. Skin care and makeup segments contributed about 40% of revenue each.

Sales in the Americas increased 2.1% as sales in the Europe, Middle East and Africa regions grew 4.7%.

The stock, which increased 0.3% in the past three months, was inactive premarket.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

February 05, 2016 12:26 ET (17:26 GMT)

Estee Lauder Companies (NYSE:EL)
Historical Stock Chart
From Mar 2024 to Apr 2024

Estee Lauder Companies (NYSE:EL)
Historical Stock Chart
From Apr 2023 to Apr 2024