Estee Lauder 2nd-quarter profit rises on better results in Asia, cost-cutting plan

Estee Lauder 2Q up on Asia sales, cost-cutting

NEW YORK — Growth in Asia and a cost-cutting worldwide program helped Estee Lauder’s second-quarter profit rise 62 percent, and the company said it sees signs that consumer spending is stabilizing.

The maker of Clinique and Aveda products, which raised its guidance last week, said Thursday that better-than-expected growth at airport stores and strong holiday sales boosted its results.

Even some expensive products did well. Popular sellers included Advanced Night Repair Synchronized Recovery Complex skin treatment — an ounce of which costs $47.50. Clinique’s Youth Surge line of moisturizers also saw strong sales.

Quarterly profit rose to $256.2 million, or $1.28 per share, from $158 million, or 80 cents per share a year earlier. Analysts polled by Thomson Reuters predicted a profit of $1.21 per share.

Revenue rose 11 percent to $2.26 billion, from $2.04 billion last year. Analysts predicted revenue of $2.24 billion.

It was the first sales increase in a year, led by higher skin and hair care product sales, while fragrance sales declined.

“Globally, the consumer is gradually, cautiously coming back,” Freda said. “There’s a stabilization of consumer confidence overall.”

The company’s customers are strongest in Asia, where higher-priced items are top sellers, and weakest in continental Europe, he said. In the U.S., consumers are “stable,” he said.

“We see much more attention to quality, the full experience, and (U.S.) consumers are more value-conscious than what used to be in the past,” Freda said. “These changes are here to stay.”

In the U.S., sales edged up just 1.4 percent as retailers held back on ordering new products. Sales rose 18 percent in Europe, the Middle East and Africa and jumped 18 percent in Asia and the Pacific rim.

Cosmetics makers face cautious consumer spending and ordering by retailers, particularly at department stores. The company, based in New York, started a four-year cost cutting plan last year in response.

Estee Lauder said it saved $83 million during the quarter through the plan, including cutting the number of items it offers, restructuring and closing some underperforming units. The wholesale business of the Prescriptives brand will close Jan. 31.

It expects to save $275 million to $300 million for the year.

“Estee Lauder is making better-than-expected restructuring progress,” said BMO Capital Markets Connie Maneaty in a note to investors. “Most of its brands appear healthy and, even though recessionary risks remain, there is continued strength in Asia, travel retail is rebounding, and the U.S. shows somewhat improving trends.”

The company remains cautious about the rest of the year.

“While certain businesses have shown signs of improvement, and the economic challenges and some external uncertainties have abated, we remain mindful that they have not completely disappeared,” Freda said.

The company expects third-quarter earnings excluding charges of 20 cents to 30 cents per share on sales growth of 4 percent to 7 percent, implying sales of $1.77 billion to $1.82 billion. Analysts expect a profit 28 cents per share on revenue of $1.85 billion.

For the year, it predicts earnings excluding charges of $2.55 to $2.73 per share, on revenue growth of 3 percent to 5 percent, implying revenue of $7.54 billion to $7.69 billion. Analysts predict a profit of $2.59 per share on revenue of $7.78 billion.

Meanwhile, on Wednesday, fellow cosmetics maker Elizabeth Arden Inc. said profit rose 54 percent to $21.1 million, while sales rose 6 percent to $393.3 million. Elizabeth Arden also credited better-than-expected holiday sales and travel retail for the results and raised guidance.

Shares fell 2 cents to $53.62 during midday trading.