Estée Lauder's full year sales rise slightly but strong dollar impacts results

American beauty care manufacturer Estée Lauder reported a slight increase in full year sales but said it was negatively impacted by the strong US dollar.

For the year ended 30 June, sales increased 4% to $11.26bn, compared to the previous financial year. Earnings for the year rose 2% to $1.11bn and diluted net earnings per common share rose 5% to $2.96.

The negative impact of foreign currency translation on diluted net earnings per common share was 26 cents. Adjusting for the restructuring and other charges, diluted net earnings per common share for the year was $3.20, and in constant currency rose to $3.46.

The year was favourably affected by the acceleration of sales orders from certain retailers of about $178m due to the company’s strategic modernisation initiative in July 2014 in certain locations, which involved cutting about 1,200 jobs to invest further in research and development. The restructure cost about $134.7m, including other costs.

Estée Lauder said sales and operating income in each of the product categories was negatively impacted by the strength of the US dollar. Total operating income in constant currency, before charges, increased 17%.

Skin care sales were down due to the negative impact of foreign currency fluctuations. Makeup generated sales grew significantly, driven by strong double-digit increases from brands MAC, Smashbox and Tom Ford.

Fragrance sales rose due to strong double-digit gains from luxury brands Jo Malone London and Tom Ford and from recent acquisitions. Sales in hair care also grew due to new product launches, such as Invati Men, Shampure dry shampoo and Thickening Tonic by Aveda.

Estée Lauder said it expected sales to grow between 6% and 7% for the 2017 financial year, and adjusted profit is expected to be between $3.38 and $3.44 per share. Analysts on average were expecting profit of $3.53 per share, according to Thomson Reuters.

President and chief executive Fabrizio Freda, said: “We will continue to diversify our distribution toward the fastest growing channels, while further developing our mid-sized brands and the newest additions to our portfolio. With our leading beauty forward initiative, we are laying the foundation for future growth by lowering our cost base, increasing our agility and investing behind our strengths and improving our go-to-market capabilities.

“We will also seek geographic and channel opportunities to reach even more consumers, while keeping a sharp focus on like-door growth. We expect our new product launches, digital programs, social media engagement and focused merger and acquisition activities to drive constant currency net sales growth of 6% to 8% and double-digit earnings per share growth over the next three years, excluding restructuring and other charges, consistent with our long-term objectives.”