Strong broad-based topline growth drives double-digit EPS increase at Estée Lauder

The Estée Lauder Companies achieved record net sales and reported overall strong financial results for the fourth quarter and fiscal year ended June 30.

For the year, the company achieved record net sales of $10.97 billion, an 8% increase compared with $10.18 billion in the prior year. Even excluding the impact of foreign currency translation, net sales still increased 8%.

The company reported a 170 basis-point increase in operating margin, and net earnings for the year rose 18% to $1.20 billion, compared with $1.02 billion last year. Diluted net earnings per common share rose 19% to $3.06, compared with $2.58 reported in the prior year.

“Fiscal 2014 was another outstanding year for our company. We achieved record results across many metrics, including sales, operating margin, earnings per share and operating cash flow. Our topline growth was nearly double that of prestige beauty and was broad-based across regions, product categories and channels, despite slower industry growth in some key countries,” Fabrizio Freda, president and CEO, said. “Our emerging markets, makeup and luxury brands, and our online, freestanding store and travel retail channels led our growth. At the same time, we made careful investment choices to support the fastest areas of growth, while continuing to eliminate non-value-added costs. This excellent performance further demonstrates the resilience and consistency of our strategic business model and strengthened our leadership in global prestige beauty.”

Additionally, the company’s fiscal 2014 fourth-quarter and full-year results included the acceleration of sales orders by some retailers of approximately $178 million in advance of the company’s July 2014 implementation of its Strategic Modernization Initiative (SMI) in certain of its largest remaining locations. These orders would normally have been expected to occur 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.

“Fiscal 2014 marks the fifth consecutive year that we achieved outstanding results for our company and stockholders and is a testament to our ability to execute our winning strategy,” Freda said. “The cornerstone of our success is powerful brands, a robust innovation pipeline and a sharp focus on fast-growth areas prioritized in our strategy. We are a growth company well positioned to identify, create and capture the best global opportunities in the growing prestige beauty industry. Increased efficiency and effectiveness, along with benefits from the recent substantial completion of our Strategic Modernization Initiative, should allow us to reinvest for future growth, increase our profitability and continue to generate value for our stockholders.”

For the quarter, the company reported net sales of $2.73 billion, a 13% increase from $2.41 billion in the comparable prior-year period. Excluding the impact of foreign currency translation, net sales also increased 13%. Along with the accelerated retailer orders, fourth-quarter sales benefited from new products and growth in emerging and developed markets.

The company’s fourth-quarter sales growth reflects double-digit gains in the U.S. and travel retail, as well as double-digit local currency increases in many European emerging markets. In Asia/Pacific, local currency growth was led by strong increases in Japan, China and Hong Kong. Sales gains in the U.S., travel retail and Japan include the effect of the accelerated retailer orders.

Looking ahead to fiscal 2015, the company estimates global prestige beauty will grow approximately 3% to 4%. The company expects to grow ahead of the industry by bringing highly innovative products to market and focusing on the fastest growing countries, product categories and channels. The company also expects to leverage its strong sales growth and continue to reduce non-value-added costs to further improve its operating margin in fiscal 2015.



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