By Bella Goodyear

‎Tuesday, ‎November ‎4, ‎2014   Pacific Time (US & Canada)

NEW YORK—Cosmetics company Estée Lauder Cos Inc. (NYSE:EL) today reported net sales for its first quarter ended September 30, 2014 of $2.63 billion, a 2% decrease compared with $2.68 billion in the prior-year quarter. Excluding the impact of foreign currency translation, net sales decreased 1%. Net earnings for the quarter were $228.1 million, compared with $300.7 million last year and diluted net earnings per common share were $.59, compared with $.76 in the prior year.

Estee Lauder earnings fell 24% for the September quarter because of Asian market slack and the strong U.S. dollar. The company manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide. It has a high market share in Hong Kong and said political unrest that affected its results with sales falling dramatically in those areas. The protests have led to a weakening of sales in Hong Kong from mainland Chinese travelers.

China accounts for 6% of of the company’s total sales. “If Hong Kong gets a cold, we get a bigger cold than any of our other competitors,” Mr. Freda said on a call with market analysts.

The company reports in the fiscal 2014 fourth quarter, some retailers accelerated sales orders in advance of the Company’s July 2014 implementation of its Strategic Modernization Initiative (SMI) in certain of its largest remaining locations of approximately $178 million. These orders would have occurred in the Company’s fiscal 2015 first quarter. This amounted to approximately $127 million in operating income, equal to approximately $.21 per diluted common share. Adjusting for the impact of the accelerated orders, net sales in constant currency and diluted earnings per share for the three months ended September 30, 2014 each would have increased 5%.

“While our current business is solid, we recognize the recent challenges around the globe, including the strength of the U.S. dollar, geopolitical tensions and soft retail environments in certain important markets, like Hong Kong,” said Chief Executive Fabrizio Freda.

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