Estée Lauder Q4 Profit Tops View, But Sales Miss

(RTTNews) - Beauty and personal care products maker Estée Lauder Cos., Inc. (EL) reported Monday a profit for the fourth quarter that declined 41 percent from last year, reflecting lower operating margins amid higher operating expenses.

However, adjusted earnings per share topped analysts' expectations, while quarterly revenues missed their estimates. The company provided earnings and sales growth guidance for the first quarter and full-year 2016.

"Together with our powerful brand portfolio and financial discipline we finished our fiscal year with a strong fourth quarter, generating 7% constant currency sales growth, after adjusting for the accelerated sales orders we reported in fiscal 2014. One of the great strengths of our Company is our ability to successfully execute our well-defined strategy," President and CEO Fabrizio Freda said.

The New York-based company posted net earnings attributable to the company of $153 million or $0.40 per share for the fourth quarter, lower than $257.7 million or $0.66 per share in the prior-year quarter.

Adjusting for the impact of the accelerated orders, net earnings per share in constant currency for the latest quarter would have increased 4 percent.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.34 per share in the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased 7 percent to $2.52 billion from $2.73 billion in the same quarter last year, and missed seventeen Wall Street analysts' consensus estimate of $2.57 billion.

Adjusting for the impact of the accelerated orders, net sales in constant currency for the quarter would have increased 7 percent, with growth in each of the company's geographic regions and product categories, except skin care.

The company, whose brands include its namesake Estee Lauder, Clinique, La Mer and Aveda, attributed the sales growth to innovative new products and growth in emerging and developed markets.

Skin Care net sales declined 16 percent to $1.01 billion, and makeup net sales decreased 4 percent to $1.02 billion, while fragrance net sales advanced 9 percent to $336.1 million and hair care net sales increased 4 percent to $139.8 million from last year.

Region-wise, Americas net sales edged down 1 percent to $1.09 billion, Europe, the Middle East & Africa net sales decreased 13 percent to $982.4 million and Asia/Pacific net sales declined 7 percent to $454.4 million from a year ago.

Operating margin for the quarter contracted 490 basis points to 9.1 percent from last year as operating expense as a percentage of net sales increased 520 basis points, partially offset by a 30 basis point improvement in gross margins.

Separately, Estée Lauder said it will pay a quarterly dividend of $0.24 per share on its Class A and Class B Common Stock on September 15 to stockholders of record at the close of business on August 31, 2015.

Looking ahead to the first quarter, the company expects net earnings in a range of $0.66 to $0.69 per share and adjusted earnings in the range of $0.75 to $0.78 per share in constant currency. Net sales is projected to grow 6 to 8 percent, 13 to 14 percent in constant currency, and 6 to 7 percent in constant currency, excluding the effect of the accelerated retailer orders.

Analysts currently expect earnings of 0.81 per share on revenue growth of 5.7 percent to $2.78 billion for the first quarter.

For fiscal 2016, the firm forecasts net earnings in a range of $3.10 to $3.17 per share and adjusted earnings in the range of $3.28 to $3.35 per share in constant currency. Net sales is projected to grow 4 to 7 percent, 8 to 10 percent in constant currency, and 6 to 8 percent in constant currency, excluding the effect of the accelerated retailer orders.

The Street is looking for full-year 2015 earnings of $3.28 per share on a revenue growth of 5 percent to $11.36 billion.

"I am proud of our accomplishments. Importantly, we are well-positioned for continuing growth through our unique creativity and consumer appeal for our brands and innovative products. Global prestige beauty is a dynamic industry, and we will continue to anticipate and target the areas with the greatest potential," Freda added.

EL closed Friday's regular trading session at $88.82, up $0.60 on a volume of 3.30 million shares. In the past 52-week period, the stock has been trading in a range of $70.18 to $91.68.