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Estée Lauder Q1 results beat, raises low end FY EPS outlook

Estee Lauder posts Q1 results that come in ahead of estimates on strong sales growth in the Americas and Asia/Pacific.

Estée Lauder Companies (NYSE: EL) Thursday saw its shares fall over four per cent in premarket hours, despite posting fiscal first quarter results that came in ahead of analysts’ estimates.

Shares of the company were lately down $2.62, trading at $59.00.

For the three months that ended September 30, net earnings rose eight per cent to $299.5 million, compared with $278.6 million last year. Diluted net earnings per share rose nine per cent to 76 cents, compared with 70 cents in the prior year quarter.

Excluding certain charges, net earnings per share rose 12 per cent to 79 cents versus 70 cents a year earlier.

Net sales increased three per cent to $2.55 billion, compared with $2.48 billion reported a year ago. Excluding the impact of foreign currency translation, Estee Lauder said net sales rose six per cent.

Analysts polled by Thomson Reuters had expected per share earnings of 77 cents on revenues of $2.54 billion.

“Our first quarter results demonstrate the solid fundamentals underlying our business and I am pleased and encouraged with our performance even in softer markets,” said president and CEO Fabrizio Freda.

“Organic sales growth for the quarter was in line with our expectations, while earnings per share were better than planned. 

“In particular, strong growth in North America and China drove our sales gains and, when coupled with cost of sales improvements and effective expense management, we generated a significant operating margin increase.”

Gross margin increased to 78.9 per cent from 78.4 per cent in the year-ago quarter.

Estee Lauder said its first quarter saw “solid overall business”, particularly from its largest brands. 

Local currency sales gains were generated in each of its product categories and geographic regions. Sales growth was particularly strong in the U.S. and overall in emerging markets, along with solid gains in certain developed countries, it said.

In the Americas, sales growth improved eight per cent year-over-year, with strong local currency gains in Canada and Latin America. 

In Europe, the Middle East and Africa, net sales increased two per cent, on growth in most countries in the region and in each product category, except fragrance. 

Economic uncertainties in some Western European countries impacted the beauty markets more than anticipated, but the company said it continued to generate growth in most of the markets.

In its Asia/Pacific unit, sales rose seven per cent, with the strongest gains coming from China, Hong Kong and Thailand, primarily reflecting strong sales of skin care products. 

Looking ahead, the company said second-quarter net sales are forecasted to increase between six and seven per cent in constant currency. Diluted net earnings per share, including charges associated with restructuring activities, are projected to be between 97 cents to $1.03.

The company expects to take charges associated with restructuring activities in its second quarter of about $2 million. 

For the full year, net sales are forecasted to grow between six and seven per cent in constant currency. Diluted net earnings per share before charges associated with restructuring activities and the impact of the early extinguishment of debt are now projected to be $2.47 to $2.56, up nine to 13 per cent.

“We are very mindful of the uncertain market dynamics in several countries and of the solid growth in others, but we are judicious in our resource allocation to maximize our results in this dynamic market situation,” said Freda.

“We are confident that we have developed the necessary agility to manage our business effectively.”