Estee Lauder shares up on strong 1Q results

AP News
Posted: Nov 03, 2011 1:19 PM
Estee Lauder shares up on strong 1Q results

Beauty products seller Estee Lauder Co. said Thursday that its fiscal first-quarter net income jumped 46 percent as luxury shoppers the world over paid up for pampering, despite the weak economy.

Results beat expectations and the company raised its annual guidance and lifted its dividend by 40 percent. Shares of Estee Lauder, which makes namesake cosmetics and skin care as well as products under the Clinique, Bobbi Brown and MAC makeup brands, jumped 17 percent in afternoon trading.

Since Estee Lauder makes more than half of its sales overseas and sells both high-priced and cheaper makeup, creams and hair products, results reflect broader trends in the economy. The luxury sector has rebounded quicker than other shopper segments, and Estee Lauder said sales of its costlier "prestige" products outpaced lower-priced "mass" products during the quarter.

Affluent consumers have been more "resilient" in their purchasing habits than poorer shoppers, said CEO Fabrizio Freda on a call with analysts.

"Across the world, the luxury sector remains strong," he added.

Freda said high-priced brands like Bobbi Brown makeup, Jo Malone candles and perfume and La Mer _ a 10-oz. jar of body cream sells for $195 _ were some of the best performers.

But results improved across all regions and categories. Net income rose to $278.6 million, or $1.40 per share, during the three months ended Sept. 30. That compares with $191.1 million or 95 cents per share, last year.

Excluding restructuring costs, Estee earned $1.41 per share. Analysts polled by FactSet expected $1.18 per share.

Revenue rose 18 percent to $2.48 billion. Analysts expected $2.4 billion.

Shoppers in emerging markets and in airports propelled sales.

Revenue in the Americas rose 11 percent to $1.05 billion, with strength in the U.S. and Latin America, particularly Brazil.

Revenue from Europe, the Middle East & Africa rose 26 percent, boosted by sales in airport stores as more people took flights and bought rather than browsed.

In the Asia/Pacific region, revenue rose 24 percent. China and Hong Kong had strong sales but Japan and Australia were weaker.

In the current quarter, which ends in December, the cosmetics maker expects adjusted net income of $1.85 to $2. Analysts expect $1.95 per share.

For the year ending in June 2012, Estee Lauder expects adjusted annual net income of $4.25 to $4.45 per share, from prior guidance of $4 to $4.20 per share. Analysts expect $4.30 per share.

Separately, Estee Lauder said it is raising its annual dividend 40 percent to $1.05 per share. It was previously 75 cents per share.

Estee Lauder is also issuing a 2-for-1 stock split in the form of a stock dividend. Additional shares will be issued on Jan. 20. As of Oct. 25, Estee Lauder had 192.6 million common shares outstanding.

Shares rose $16.82, or 16.7 percent, to $117.65. The stock had been up 25 percent in 2011 before Thursday's move.