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4. Estee Lauder.

New York, NY


Sales: $5.1 billion

Sales: $5.1 billion. Net income: $319.8 million for the year ended June 30, 2003.

Key Personnel: Leonard A. Lauder, chairman; William P. Lauder, chief executive officer; Ronald S. Lauder, chairman, Clinique Laboratories; Patrick Bousquet-Chavanne, group president; Daniel J. Bestle, group president; Philip Shearer, group president; Cedric Prouve, group president, international; Edward M. Straw, president, global operations; Fred H. Langhammer, chairman, global affairs.

Chief Scientific Officer: Harvey Gedeon, senior vice president, research and development.

Major Products: Cosmetics, fragrance and toiletries marketed under such brand names as Estee Lauder, Clinique, Prescriptives, Aramis, Origins, M.A.C., La Mer, Bobbi Brown, Tommy Hilfiger, Donna Karan, Aveda, Stila, Jo Malone, Kate Spade, Bumble and bumble, Darphin.

New Products: Estee Lauder--Hydra Complete Multi-Level Moisture Creme and Idealist Micro-D Deep Thermal Refinisher, Beyond Paradise fragrance, MagnaScopic maximum volume mascara and Artist's lip and eye pencils. Body Performance and Clear Difference skin care. Clinique--Perfectly Real makeup, High Impact mascara and eye shadow, Dewy Smooth anti-aging makeup, Colour Surge lipstick and Simply fragrance. Darphin and Michael Kors fragrance lines. Aramis--Aramis Life. To be launched: Sean John and Beyonce Knowles (True Star) fragrances, and American Beauty skin care and color cosmetics collection (October).

Comments: Corporate sales rose 8% last year, driven by gains in every product category and every geographic region. Skin care paced category growth gains, while the best regional results were turned in by Europe and the Middle East & Africa. Both regions benefited from favorable exchange rates and improvements in retail travel.

Skin care sales rose 11% to nearly $1.9 billion, powered by the introduction of products such as Perfectionist Correcting serum for lines/wrinkles and Resilience Lift Overnight face and throat creme, as well as the Repairwear line of products and Advanced Stops Signs from Clinique.

Makeup sales improved 7% to top $1.9 billion. The company attributed the gains to the launch of Dewy Smooth anti-aging makeup and Colour Surge lipstick by Clinique, as well as MagnaScopic maximum volume mascara and Artist's Lip and Eye Pencils from Estee Lauder.

Estee Lauder even managed to post gains in the beleaguered fragrance category, where sales rose 4% to top $1 billion. The company credited the improving travel business as well as introductions such as Pleasures Intense, T girl by Tommy Hilfiger, Clinique Happy Heart, Lauder Intuition for Men and Donna Karan Black Cashmere.

Hair care sales increased 6% to nearly $229 million. The company credited the increase to gains in the Aveda and Bumble and Bumble businesses. Lauder also increased the number of company-owned Aveda Experience Centers and decreased the number of salons that offer Aveda products.

By region, sales in the Americas rose 3% to more than $2.9 billion. Sales in Europe, the Middle East and Africa rose 19% to about $1.5 billion, helped along by double-digit gains the UK, Spain, Italy, France, Switzerland and Greece. Sales in Asia/ Pacific rose 8% to $658 million.

The good results continued into 2004. But first the company did some long-range planning and housekeeping. In January, William P. Lauder was named chief executive officer. He replaced Fred H. Langhammer, effective July 1. Then, to tighten its portfolio of brands, in February, Estee Lauder sold its Jane business to a newly-formed company backed by Mr. Harry Adjmi, owner and operator of a manufacturing company and an investor in various consumer goods companies and real estate, and Ms. Lisa Yarnell, a mass market cosmetics, health and beauty products executive. The terms of this transaction were not disclosed.

Those moves didn't slow gowth by any means. For the third fiscal quarter ended March 31, 2004, the company reported sales rose 15% to $1.42 billion. Excluding the impact of foreign currency translation, net sales rose 10%. Net earnings rose 27% to $100.1 million.

"The solid results we turned in this quarter build on the strong momentum we achieved in the first half of our fiscal year. Sales were up strongly in each of our regions with Europe the frontrunner, buoyed by robust travel retail results," said Mr. Langhammer, president and chief executive officer.

In the U.S., a strong retail environment led to better-than-expected sales growth. Sales were also up in all product categories paced by strong new product introductions, as well as solid sales of existing products, with makeup sales particularly strong.

"We will continue to grow sales and at the same time increase our advertising spending to further build brand equity, while holding the line on other expenses," said William P. Lauder. "We remain focused on keeping our competitive advantage by virtue of the strength of our brand names, their enormous reach, unmatched distribution and the relationships we've established in key global markets. Our company is well prepared to capitalize on the opportunities we see while remaining committed to the core values that have made us successful."

Net sales of skin care products for the quarter increased 10% to $559.1 million. The increase reflects the inclusion of sales of the Darphin line of products, which are primarily skin care, as well as growth in developing brands, particularly outside the Americas. The higher sales were supported by recent launches from Estee Lauder of Hydra Complete Multi-Level Moisture Creme and Idealist Micro-D Deep Thermal Refinisher, as well as strong sales of Re-Nutriv Intensive Lifting products. Strong sales of Repairwear Day SPF 15 Intensive Cream and Pore Minimizer by Clinique also contributed to the category's growth.

Makeup sales for the quarter rose 22% to $591 million. In addition to solid growth from M.A.C. and Bobbi Brown, the higher sales reflect new or recent product introductions such as Perfectly Real makeup, High Impact mascara and High Impact eye shadow from Clinique, as well as Electric Intense lipcreme, Ideal matte refinishing makeup SPF 8, the Pure Color lip and nail line and Artist's lip and eye pencils by Estee Lauder.

Fragrance sales on a reported basis increased 12% to $203.4 million compared to the prior year and rose 5% in local currencies. The higher sales were generated outside the Americas, along with improved results in the company's travel retail business during the quarter. Fragrance sales benefited from the recent launches of Estee Lauder Beyond Paradise, Aramis Life and Clinique Simply. These increases were partially offset by lower sales of Clinique Happy Heart, Beautiful by Estee Lauder, Estee Lauder Pleasures and certain Tommy Hilfiger fragrances.

Hair care product sales rose 15% to $61.3 million. The increase reflects higher sales at Aveda and Bumble and Bumble due to growth in existing and new points of distribution, as well as the success of new and existing products.

Operating income increased in skin care, makeup and hair care primarily due to higher sales. However, fragrance operating loss widened due to the soft domestic fragrance market, coupled with increased support spending behind recent product launches and their international rollout, as well as development costs for future fragrance launches and new brands.

By region, net sales in the Americas increased 9% to $783.1 million. The increase is due to the success of new and certain existing products, growth from most brands and solid increases from most of the company's freestanding retail stores, all of which reflected the strengthening retail environment during the quarter.

In Europe, the Middle East and Africa, sales increased 25% to $453.1 million. The company's travel retail business continued to recover, with sales growth in the double-digits during the current quarter compared with the prior-year period.

Asia/Pacific net sales grew 19% to $185.4 million. In local currency every market experienced sales growth, led by double-digit increases in China, Taiwan, Thailand, Malaysia and Hong Kong. Sales in Japan also increased in the quarter.

For the nine months ended March 31, 2004, Estee Lauder reported a 13% increase in net sales to nearly $4.4 billion. For the fiscal 2004 full-year results, the company expects to grow sales approximately 13%, which translates into approximately a 9% increase on a constant currency basis versus the prior fiscal year. The company said it expects geographic region net sales growth in constant currency to be led by Europe, the Middle East & Africa, followed by Asia/Pacific and the Americas. On a product category basis, in constant currency, fragrance is expected to be the leading sales growth category, followed by makeup, skin care and hair care.

On April 24, company co-founder Estee Lauder died at 97 (see Happi, June, p. 56), but the family ties remain strong.

This month Aerin Lauder, granddaughter of the founders, was senior vice president of global creative directions in the Estee Lauder division of Estee Lauder Cos. She had been vice president of global advertising for the division for the past three years. Ms. Lauder now works with Douglas Lloyd who joined the company as senior executive, creative and conceptual development, a new position. Both Ms. Lauder and Mr. Lloyd report to group president Patrick Bousquet-Chavanne. In another announcement, Marc Benhamou has been named senior vice president, global creative director for the Aramis and Designer Fragrances division.

In October, Estee Lauder will launch American Beauty, a new skin care and color cosmetics collection. It's the first of three major brands from Estee Lauder that will come from its BeautyBank division. The new venture is available only in Kohl's department stores in North America However, Estee Lauder executives said all three lines may be sold in department stores outside North America.

American Beauty will include more than 200 color and skin products and industry sources suggest the brand could post first-year sales of $40 million (retail). The mid-priced line of products will be promoted by actress Ashley Judd.
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Title Annotation:The Top 50
Publication:Household & Personal Products Industry
Geographic Code:1USA
Date:Jul 1, 2004
Previous Article:3. S.C. Johnson.
Next Article:5. Avon Products.

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