Earnings Preview: Estee Lauder to report fiscal 1Q

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NEW YORK -Cosmetics company Estee Lauder reports its fiscal first-quarter results on Friday before the market opens. The following is a summary of key developments and analyst commentary for the period.

OVERVIEW: Estee Lauder, like many other consumer products companies, has been hurt by a pullback in discretionary spending. Weakness at department stores has also hurt Estee Lauder, which typically sells its products there.

Estee Lauder also has a large presence in Europe, the Middle East and Asia and is tied to fluctuations in currency exchange rates.

Earlier this month, Estee Lauder said new product launches, growth in Asia and higher customer traffic in its travel retail business will lift fiscal first-quarter earnings significantly above company expectations.

Some of the company's new products include Beautiful sheer body spray and an Evelyn Lauder lip design collection.

The company said first-quarter sales were strong and that it benefited from earlier holiday shipments, which were previously anticipated for the fiscal second quarter.

Estee Lauder said on Oct. 16 it will increase earnings per share guidance for the full fiscal year ending June 30 when it reports first-quarter results.

Estee Lauder's brands include its namesake line, Aramis, Clinique, Aveda, La Mer and others.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters expect profit of 34 cents per share and revenue of $1.82 billion for the quarter ended Sept. 30.

In August, Estee Lauder forecast first-quarter earnings between 23 cents and 30 cents per share, excluding restructuring charges.

ANALYST TAKE: Deutsche Bank analyst Bill Schmitz said better-than-expected retail orders have boosted Estee Lauder's sales for the quarter.

However, Schmitz said that there haven't been many signs of robust consumer consumption outside the company's Asia and travel retail businesses.

Schmitz also said the company has aimed to save at least $250 million in fiscal 2009 by cutting costs. But Schmitz called that a "short-term earnings cushion," not the best way to drive growth.

"Management deserves credit for quickly adjusting to the awful environment, but at some point, sales meetings, travel and compensation need to come back to drive market share gains and get people motivated," Schmitz said.

WHAT'S AHEAD: Analysts and investors will now look toward the crucial holiday season when retailers record a large portion of sales.

STOCK PERFORMANCE: Shares rose 13.5 percent during the quarter.

2009-10-29 14:08:07