Hong Kong
The Estée Lauder Companies Delivers Strong Sales and Earnings Growth in Fiscal 2016 Second Quarter
Press Release, Feb 5, 2016
– Constant Currency Earnings Per Share Rise 18% on 8% Net Sales Growth, before Charges –
During the fiscal 2016 second quarter, the Company recorded charges of
“While economic and geopolitical volatility creates challenges, the balance and diversity of our brand portfolio, distribution channels and markets mitigate reliance on any one part of our business. We believe these important characteristics, along with the strength of our underlying fundamentals, our winning innovation and the increasing efficiency of our business model position us well for continued success.
“In the second half of the fiscal year, we will continue to fuel our growth momentum with strategic investments to build upon our strengths, capabilities and infrastructure to further enhance our long-term competitive advantage. We expect to continue to outperform global prestige beauty and we are raising the bottom of our full fiscal year constant currency sales growth estimate to between 7% and 8%. In light of market challenges, expected continued currency headwinds and our decision to invest in sustaining our growth momentum, we are maintaining our forecasted adjusted constant currency earnings per share growth estimate of 10% to 12%, before charges, for the 2016 fiscal year.”
Information about GAAP and non-GAAP financial measures, including reconciliation information, is included in this release.
Results by Product Category |
|||||||||||||||||||||||
Three Months Ended December 31 | |||||||||||||||||||||||
(Unaudited; Dollars in millions) |
Net Sales |
Percent Change |
Operating |
Percent |
|||||||||||||||||||
2015 | 2014 |
Reported |
Constant |
2015 | 2014 |
Reported |
|||||||||||||||||
Skin Care | $ | 1,232.2 | $ | 1,274.4 | (3 | )% | 2 | % | $ | 309.2 | $ | 317.1 |
(2) |
% |
|||||||||
Makeup | 1,251.2 | 1,176.2 | 6 | 13 | 260.8 | 253.4 | 3 | ||||||||||||||||
Fragrance | 470.6 | 439.7 | 7 | 12 | 53.2 | 47.5 | 12 | ||||||||||||||||
Hair Care | 149.0 | 137.1 | 9 | 14 | 19.9 | 16.2 | 23 | ||||||||||||||||
Other | 21.8 | 17.1 | 27 | 28 | 4.8 | (1.4 |
) |
100 |
+ |
||||||||||||||
Subtotal | 3,124.8 | 3,044.5 | 3 | 8 | 647.9 | 632.8 | 2 | ||||||||||||||||
Charges associated with | |||||||||||||||||||||||
restructuring activities | — | — | (18.5 | ) | — | ||||||||||||||||||
Total | $ | 3,124.8 | $ | 3,044.5 | 3 | % | 8 | % | $ | 629.4 | $ | 632.8 |
(1) |
% |
|||||||||
Net sales and operating income in each of the Company’s product categories were unfavorably impacted by the strength of the U.S. dollar in relation to most currencies. Total operating income in constant currency, before charges, increased 11%.
Skin Care
- Reported skin care net sales decreased due to the unfavorable impact of foreign currency translation.
-
In constant currency, Estée Lauder skin care net sales increased
primarily due to recent product launches such as
New Dimension and Re-Nutriv Ultimate Diamond eye crème. Lower sales from Clinique reflect a difficult comparison with greater launch activity in the prior-year period. - Contributing to the category’s sales were strong gains from La Mer, one of the Company’s luxury skin care brands, and from Origins, as well as incremental sales from recent acquisitions.
- Operating income decreased, primarily reflecting lower results from Estée Lauder, partially offset by higher results from La Mer.
Makeup
-
Higher makeup sales were primarily driven by excellent growth from the
Company’s makeup artist brands and strong double-digit growth from
Smashbox and
Tom Ford . These sales increases resulted from new product offerings, as well as expanded distribution in a number of channels, including freestanding retail stores, travel retail and specialty multi-brand retailers. - Estée Lauder had higher sales from product lines such as Pure Color Envy and Double Wear, that were offset by unfavorable foreign currency translation. Clinique posted higher makeup sales, reflecting new product offerings such as Beyond Perfecting foundation + concealer and Clinique Pop Lip colour + primer.
-
The Company’s makeup category is experiencing strong growth in product
areas such as lipsticks and foundations, as well as increased prestige
makeup usage in
Asia . - The increase in makeup operating income was primarily due to higher results from certain makeup brands and the Estée Lauder brand.
Fragrance
-
In fragrance, the sales increase primarily reflected strong
double-digit gains from luxury brands Jo Malone London and
Tom Ford and incremental sales from recent acquisitions. The sales growth is attributable to new product launches and expanded distribution. -
Higher net sales from
Jo Malone London were due to expanded distribution in department stores and the travel retail channel, the launch of Mimosa & Cardamom, and strong growth from existing fragrances. Increased sales fromTom Ford were primarily due to the success of the Tom Ford Noir line of fragrances. - Fragrance operating income increased, reflecting higher results from luxury fragrance brands, partially offset by lower results from Estée Lauder.
Hair Care
- The hair care category’s growth benefited from expanded global distribution, primarily in salons, freestanding stores and travel retail for Aveda and from specialty-multi brand retailers for Bumble and bumble.
- Hair care also reflects incremental sales from new product launches such as Shampure dry shampoo and the Thickening Tonic by Aveda.
- Hair care operating income increased, reflecting the higher net sales.
Results by Geographic Region |
|||||||||||||||||||||
Three Months Ended December 31 | |||||||||||||||||||||
(Unaudited; Dollars in millions) |
Net Sales |
Percent Change |
Operating |
Percent |
|||||||||||||||||
2015 | 2014 |
Reported |
Constant |
2015 | 2014 |
Reported |
|||||||||||||||
The Americas | $ | 1,227.0 | $ | 1,201.4 | 2 | % | 4 | % | $ | 107.8 | $ | 120.8 |
(11 |
)% | |||||||
Europe, the Middle East & Africa. | 1,268.4 | 1,211.5 | 5 | 13 | 386.5 | 355.2 | 9 | ||||||||||||||
Asia/Pacific | 629.4 | 631.6 | 0 | 6 | 153.6 | 156.8 | (2 | ) | |||||||||||||
Subtotal | 3,124.8 | 3,044.5 | 3 | 8 | 647.9 | 632.8 | 2 | ||||||||||||||
Charges associated with | |||||||||||||||||||||
restructuring activities | — | — | (18.5 | ) | — | ||||||||||||||||
Total | $ | 3,124.8 | $ | 3,044.5 | 3 | % | 8 | % | $ | 629.4 | $ | 632.8 | (1 | )% | |||||||
The
-
Sales in
North America increased, reflecting growth from most brands. New product introductions and expanded distribution contributed to double-digit gains from Smashbox,Tom Ford andJo Malone and solid growth from Aveda. Clinique posted gains in makeup and fragrance and Estée Lauder had growth in skin care. Sales in the Company’s online business grew strong double digits. The net sales growth also included incremental sales from the Company’s fiscal 2015 acquisitions. -
In constant currency, sales in
Canada andLatin America rose double-digits. The strong growth inLatin America was led byBrazil andMexico , due to expanded distribution of M•A•C. On a reported basis, these results were significantly impacted by adverse foreign currency translation. -
Operating income in the
Americas declined due to the significant negative impact of foreign currency translation. The operating results also reflect higher selling, advertising, merchandising, sampling and store operating costs related to retail store openings, product launches, and in-store promotional activities, as well as an increase in product development and research and development expenses.
-
All countries recorded constant currency sales growth, with virtually
all posting double-digit increases, led by the
United Kingdom ,Germany andItaly , and a number of emerging markets, includingRussia ,Turkey and theMiddle East . - The Company estimates that it continued to outperform prestige beauty in most markets in the region.
- In travel retail, net sales increased on new launch initiatives, global airline passenger traffic growth and expanded distribution. The mix of travelers and their consumption is affected by the softness of certain key foreign currencies.
-
Foreign currency translation reduced reported sales by approximately
$100 million or 8%, due to the strength of the U.S. dollar in relation to virtually all currencies in the region, with the largest impact affectingRussia , theUnited Kingdom ,Germany andSouth Africa . -
Operating income increased, with higher operating results posted in
travel retail,
Germany , theUnited Kingdom , theMiddle East ,Switzerland andItaly . Lower operating results were recorded primarily inFrance andRussia .
-
Sales in constant currency increased in every country, except
Hong Kong , with double-digit growth inAustralia ,the Philippines ,Singapore andNew Zealand . Strong constant currency sales gains were recorded inChina ,Korea andJapan . The higher sales inChina reflected sales gains in most brands, due to continued distribution expansion and increased online activity. -
In
Hong Kong , the reduction in tourism fromChina continues to negatively impact business, particularly for the Estée Lauder, Clinique and La Mer brands. The Company remains cautious of the near-term slower growth there. -
Foreign currency translation unfavorably impacted reported sales by 6%
due to the strength of the U.S. dollar in relation to most currencies
in the region, with the largest impact affecting
Australia, China andKorea . -
In
Asia/Pacific , operating income decreased, due to the negative impact of foreign currency translation. Lower results were reported inHong Kong, China andThailand . The lower results inHong Kong were primarily due to the lower sales, and inChina , attributable to increased advertising, merchandising and sampling costs to support certain existing products. These lower results were partially offset by higher operating income inAustralia ,Japan andthe Philippines .
Six-Month Results
-
For the six months ended
December 31, 2015 , the Company reported net sales of$5.96 billion , a 5% increase compared to$5.68 billion in the comparable prior-year period. Net earnings were$755.5 million , a 14% increase compared with$663.8 million in the same period last year, and diluted net earnings per common share increased 17% to$2.00 compared with$1.71 reported in the prior-year period. For the six months endedDecember 31, 2015 , the negative impact of foreign currency translation on diluted net earnings per common share was$.22 . Excluding the impact of foreign currency translation, net sales increased 11% and diluted net earnings per common share rose 30%. Net sales in constant currency grew in each of the Company’s geographic regions and product categories.
-
The fiscal 2016 six-month results include charges of
$18.5 million ($12.4 million after tax), equal to$.03 per share in connection with the Company’s initiative to transform its global technology infrastructure. Excluding these charges, net earnings for the six months endedDecember 31, 2015 were$767.9 million , and diluted net earnings per common share were$2.03 . -
The fiscal 2016 six-month comparison with the prior-year period was
favorably impacted by the acceleration of sales orders from certain
retailers of approximately
$178 million in connection with the Company’s rollout of its last major wave of its Strategic Modernization Initiative (SMI) inJuly 2014 in certain of its locations. Those 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.
-
Before the impact of the charges and accelerated orders, net sales and
earnings per share in constant currency for the six months ended
December 31, 2015 increased 8% and 17%, respectively.
Cash Flows from Operating Activities
-
For the six months ended
December 31, 2015 , net cash flows provided by operating activities was$962.3 million , compared with$993.7 million in the prior year. -
The change resulted from the impact of the accelerated sales orders in
the prior year in connection with the Company’s
July 2014 SMI implementation, which created unfavorable changes in certain working capital components. These decreases were partially offset by higher net earnings this year and an increase in accrued liabilities. - Before the impact of the accelerated orders, the Company’s net cash flows provided by operating activities increased 17%.
Outlook for Fiscal 2016 Third Quarter and Full Year
Global prestige beauty is estimated to continue to generate solid
growth; however, volatility and economic challenges are slowing the pace
of market growth in
The comparison of the Company’s fiscal 2016 full-year results with the
prior-year period will be affected by the previously mentioned
As previously announced, the Company has an ongoing initiative to
upgrade and modernize its global technology infrastructure, which is
expected to result in related restructuring and other charges of between
Third Quarter Fiscal 2016
- Net sales are forecasted to increase between 2% and 3% versus the prior-year period.
- Reflecting the strength of the U.S. dollar, foreign currency translation is expected to negatively impact sales by approximately 4%.
- Net sales are forecasted to increase between 6% and 7% in constant currency.
-
The Company’s recent acquisitions are forecasted to contribute
approximately 70 basis points to the Company’s overall sales growth in
its fiscal 2016 third quarter. Acquisitions are estimated to dilute
earnings per share by approximately
$.02 . -
Diluted net earnings per common share, including charges associated
with restructuring activities, are projected to be between
$.50 and $.55 . -
The Company expects to take charges associated with restructuring
activities in its fiscal 2016 third quarter of about
$16 million , equal to approximately$.03 per diluted common share. -
Diluted net earnings per share before charges associated with
restructuring activities are projected to be between
$.53 and $.58 . -
The approximate 4% negative currency impact on the sales growth
equates to about
$.03 of earnings per share. On a constant currency basis and before restructuring charges, diluted earnings per share are expected to decrease 15% to 22%, reflecting the Company’s planned strategic investments to fuel growth momentum.
Full Year Fiscal 2016
- Net sales are forecasted to increase between 4% and 5% versus the prior-year period.
- Reflecting the strength of the U.S. dollar, foreign currency translation is expected to negatively impact sales by approximately 5%.
- Net sales are forecasted to grow between 9% and 10% in constant currency.
- The accelerated retailer orders will affect the comparison between the fiscal 2016 and fiscal 2015 full year sales by approximately 2%.
- Net sales adjusting for the effect of the accelerated retailer orders are forecasted to grow between 7% and 8% in constant currency.
-
The Company’s recent acquisitions are forecasted to contribute
approximately 50 basis points to the Company’s overall sales growth.
Acquisitions are estimated to dilute earnings per share by
approximately
$.04 . -
Diluted net earnings per common share, including charges associated
with restructuring activities, are projected to be between
$2.98 and $3.05 . -
The Company expects to take charges associated with restructuring
activities in fiscal 2016 of between
$40 million to $50 million , equal to$.07 to $.09 per diluted common share. -
Diluted net earnings per share before charges associated with
restructuring activities are projected to be between
$3.07 to $3.12 . -
The approximate 5% negative currency impact on the sales growth
equates to about
$.29 of earnings per share. On a constant currency basis and adjusting for restructuring charges and the effect of the accelerated retailer orders, diluted earnings per share are expected to grow between 10% and 12%.
Reconciliation between GAAP and non-GAAP | Year Ending June 30, 2016 (F) | Diluted Earnings Per Share | ||||||||||||||||||
Net Sales Growth | Diluted EPS Growth | Twelve Months June 30 | ||||||||||||||||||
(Unaudited) |
Reported |
Constant |
Reported |
Constant |
2016 (F) | 2015 | ||||||||||||||
Forecast / actual results including charges and the |
4-5 | %(1) | 9-10 | % | 6-8 | %(1) | 16-18 | % | $2.98 - $3.05 | (1) | $2.82 | (1) | ||||||||
Non-GAAP |
||||||||||||||||||||
Restructuring charge | — | — | 3 | % | 3 | % | .07-.09 | |||||||||||||
Venezuela charge | — | — | — | — | — | .01 | ||||||||||||||
Impact of fiscal 2015 accelerated orders | ~(2 | )% | ~(2 | )% | ~(8)-(9) | % | ~(9 | )% | — | .21 | ||||||||||
Forecast / actual results excluding charges and |
2-3 | % | 7-8 | % | 1-2 | % | 10-12 | % | $3.07 - $3.12 | $3.05 | ||||||||||
Impact of foreign currency on earnings per share | .29 | |||||||||||||||||||
Forecasted constant currency earnings per share | $3.36 - $3.41 | |||||||||||||||||||
(1) Represents GAAP.
(F) Represents forecast
Amounts
may not sum due to rounding.
Conference Call
The Estée Lauder Companies will host a conference call at
Cautionary Note Regarding Forward-Looking Statements
The forward-looking statements in this press release, including those containing words like “expect,” “plans,” “may,” “could,” “anticipate,” “estimate,” “projected,” “forecasted,” those in Mr. Freda’s remarks and those in the “Outlook for Fiscal 2016 Third Quarter and Full Year” section involve risks and uncertainties. Factors that could cause actual results to differ materially from those forward-looking statements include the following:
(1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses, some of which have greater resources than the Company does;
(2) the Company’s ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in the Company’s business;
(3) consolidations, restructurings, bankruptcies and reorganizations in the retail industry, and other factors causing a decrease in the number of stores that sell the Company’s products, an increase in the ownership concentration within the retail industry, ownership of retailers by the Company’s competitors or ownership of competitors by the Company’s customers that are retailers and our inability to collect receivables;
(4) destocking and tighter working capital management by retailers;
(5) the success, or changes in timing or scope, of new product launches and the success, or changes in the timing or the scope, of advertising, sampling and merchandising programs;
(6) shifts in the preferences of consumers as to where and how they shop for the types of products and services the Company sells;
(7) social, political and economic risks to the Company’s foreign or
domestic manufacturing, distribution and retail operations, including
changes in foreign investment and trade policies and regulations of the
host countries and of
(8) changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, the Company’s business, including those relating to its products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action the Company may take as a result;
(9) foreign currency fluctuations affecting the Company’s results of
operations and the value of its foreign assets, the relative prices at
which the Company and its foreign competitors sell products in the same
markets and the Company’s operating and manufacturing costs outside of
(10) changes in global or local conditions, including those due to the volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, or energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase the Company’s products while traveling, the financial strength of the Company’s customers, suppliers or other contract counterparties, the Company’s operations, the cost and availability of capital which the Company may need for new equipment, facilities or acquisitions, the returns that the Company is able to generate on its pension assets and the resulting impact on its funding obligations, the cost and availability of raw materials and the assumptions underlying the Company’s critical accounting estimates;
(11) shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture nearly all of the Company’s supply of a particular type of product (i.e., focus factories) or at the Company’s distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives or by restructurings;
(12) real estate rates and availability, which may affect the Company’s ability to increase or maintain the number of retail locations at which the Company sells its products and the costs associated with the Company’s other facilities;
(13) changes in product mix to products which are less profitable;
(14) the Company’s ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and within the Company’s cost estimates and the Company’s ability to maintain continuous operations of such systems and the security of data and other information that may be stored in such systems or other systems or media;
(15) the Company’s ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;
(16) consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;
(17) the timing and impact of acquisitions, investments and divestitures; and
(18) additional factors as described in the Company’s filings with the
The Company assumes no responsibility to update forward-looking statements made herein or otherwise.
The Estée
An electronic version of this release can be found at the Company’s website, www.elcompanies.com.
THE ESTÉE LAUDER COMPANIES INC. |
||||||||||||||||||||||
Three Months Ended |
Percent |
Six Months Ended |
Percent |
|||||||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||||||||
|
||||||||||||||||||||||
Net Sales | $ | 3,124.8 | $ | 3,044.5 | 3 | % | $ | 5,959.5 | $ | 5,675.5 | 5 | % | ||||||||||
Cost of Sales | 589.0 | 573.1 | 1,166.2 | 1,109.7 | ||||||||||||||||||
Gross Profit | 2,535.8 | 2,471.4 | 3 | % | 4,793.3 | 4,565.8 | 5 | % | ||||||||||||||
Gross Margin | 81.2 | % | 81.2 | % | 80.4 | % | 80.4 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Selling, general and administrative | 1,887.9 | 1,838.6 | 3,692.2 | 3,585.0 | ||||||||||||||||||
Restructuring and other charges (A) | 18.5 | — |
18.5 |
— |
||||||||||||||||||
1,906.4 | 1,838.6 |
|
4 |
% |
3,710.7 | 3,585.0 |
|
4 |
% | |||||||||||||
Operating Expense Margin | 61.0 | % | 60.4 | % | 62.2 | % | 63.1 | % | ||||||||||||||
Operating Income | 629.4 | 632.8 | (1 | )% | 1,082.6 | 980.8 | 10 | % | ||||||||||||||
Operating Income Margin | 20.2 | % | 20.8 | % | 18.2 | % | 17.3 | % | ||||||||||||||
Interest expense | 17.0 | 15.0 | 34.1 | 29.8 | ||||||||||||||||||
Interest income and investment income, net | 3.2 | 3.8 | 6.2 | 5.4 | ||||||||||||||||||
Earnings before Income Taxes | 615.6 | 621.6 | (1 | )% | 1,054.7 | 956.4 | 10 | % | ||||||||||||||
Provision for income taxes | 167.2 | 183.9 | 295.5 | 289.5 | ||||||||||||||||||
Net Earnings | 448.4 | 437.7 | 2 | % | 759.2 | 666.9 | 14 | % | ||||||||||||||
Net earnings attributable to noncontrolling interests | (2.2 | ) | (2.0 | ) | (3.7 | ) | (3.1 | ) | ||||||||||||||
Net Earnings Attributable to The Estée Lauder | ||||||||||||||||||||||
Companies Inc. | $ | 446.2 | $ | 435.7 | 2 | % | $ | 755.5 | $ | 663.8 | 14 | % | ||||||||||
Net earnings attributable to The Estée Lauder Companies | ||||||||||||||||||||||
Inc. per common share: | ||||||||||||||||||||||
Basic | $ | 1.21 | $ | 1.15 | 5 | % | $ | 2.04 | $ | 1.74 | 17 | % | ||||||||||
Diluted | 1.19 | 1.13 | 5 | % | 2.00 | 1.71 | 17 | % | ||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||
Basic | 369.6 | 380.0 | 371.1 | 380.9 | ||||||||||||||||||
Diluted | 376.0 | 386.1 | 377.5 | 387.1 | ||||||||||||||||||
In the fiscal 2014 fourth quarter some retailers accelerated sales
orders of approximately
(A) As part of the Company’s ongoing initiative to upgrade and modernize
its systems and processes, it is transforming its global technology
infrastructure to fundamentally change the way it delivers information
technology services internally. This initiative is expected to result in
operational efficiencies and reduce the Company’s information technology
service and infrastructure costs in the future. The Company anticipates
this initiative will result in related restructuring and other charges
of approximately
THE ESTÉE LAUDER COMPANIES INC. |
|||||||||||||||||||||
Six Months Ended December 31 |
|||||||||||||||||||||
Net Sales |
Percent Change |
Operating |
Percent |
||||||||||||||||||
2015 |
2014 |
Reported |
Local |
2015 |
2014 |
Reported |
|||||||||||||||
Results by Geographic Region |
|||||||||||||||||||||
The Americas |
$ |
2,495.3 |
$ |
2,316.2 |
8 | % | 11 | % |
$ |
198.4 |
$ |
178.2 |
11 | % | |||||||
Europe, the Middle East & Africa. | 2,285.2 | 2,153.7 | 6 | 16 | 630.2 | 525.1 | 20 | ||||||||||||||
Asia/Pacific | 1,179.0 | 1,205.6 | (2 | ) | 5 | 272.5 | 277.5 | (2 | ) | ||||||||||||
Subtotal | 5,959.5 | 5,675.5 | 5 | 11 | 1,101.1 | 980.8 | 12 | ||||||||||||||
Charges associated with | |||||||||||||||||||||
restructuring activities | — | — | (18.5 |
) |
|
— | |||||||||||||||
Total |
$ |
5,959.5 |
$ |
5,675.5 |
5 | % | 11 | % |
$ |
1,082.6 |
$ |
980.8 |
10 | % | |||||||
Results by Product Category |
|||||||||||||||||||||
Skin Care |
$ |
2,341.0 |
$ |
2,365.8 |
(1) |
% |
4 |
% |
$ |
498.9 |
$ |
493.5 |
1 |
% |
|||||||
Makeup | 2,413.0 | 2,197.5 | 10 | 18 | 450.0 | 379.3 | 19 | ||||||||||||||
Fragrance | 883.5 | 817.1 | 8 | 15 | 119.3 | 86.5 | 38 | ||||||||||||||
Hair Care | 283.3 | 265.2 | 7 | 10 | 25.6 | 25.0 | 2 | ||||||||||||||
Other | 38.7 | 29.9 | 29 | 42 | 7.3 | (3.5 | ) | 100 | + | ||||||||||||
Subtotal | 5,959.5 | 5,675.5 | 5 | 11 | 1,101.1 | 980.8 | 12 | ||||||||||||||
Charges associated with | |||||||||||||||||||||
restructuring activities | — | — | (18.5 |
) |
|
— |
|
||||||||||||||
Total |
$ |
5,959.5 |
$ |
5,675.5 |
5 | % | 11 | % |
$ |
1,082.6 |
$ |
980.8 |
10 | % | |||||||
The net sales and operating income for the six months ended
______________
This earnings release includes some non-GAAP financial measures relating to charges associated with restructuring activities and the accelerated orders associated with the Company’s SMI rollout. The following are reconciliations between the non-GAAP financial measures and the most directly comparable GAAP measures for certain consolidated statements of earnings accounts before and after these items. The Company uses these non-GAAP financial measures, among other financial measures, to evaluate its operating performance, and the measures represent the manner in which the Company conducts and views its business. Management believes that excluding certain items that are not comparable from period to period helps investors and others compare operating performance between two periods. While the Company considers the non-GAAP measures useful in analyzing its results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with GAAP.
The Company operates on a global basis, with the majority of its net
sales generated outside
THE ESTÉE LAUDER COMPANIES INC. |
||||||||||||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||||||||||
As |
|
Charges |
|
Before |
Impact of |
Constant |
As |
|
Charges |
Before |
% Change |
|
% Change |
|||||||||
Net Sales | $3,124.8 | $— |
$3,124.8 |
$167.9 |
$3,292.7 |
|
$3,044.5 |
$— |
$3,044.5 |
3 |
% |
|
8% | |||||||||
Cost of sales | 589.0 | — | 589.0 |
|
573.1 | — | 573.1 |
|
||||||||||||||
Gross Profit | 2,535.8 | — | 2,535.8 | 2,471.4 | — | 2,471.4 |
3 |
% |
|
|||||||||||||
Gross Margin | 81.2% | 81.2% | 81.2% | 81.2% | ||||||||||||||||||
Operating expenses | 1,906.4 | (18.5 | ) | 1,887.9 | 1,838.6 | — | 1,838.6 |
3 |
% |
|||||||||||||
Operating Expense Margin | 61.0% | 60.4% | 60.4% | 60.4% | ||||||||||||||||||
Operating Income | 629.4 | 18.5 | 647.9 | 632.8 | — | 632.8 |
2 |
% |
||||||||||||||
Operating Income Margin | 20.2% | 20.8% | 20.8% | 20.8% |
|
|||||||||||||||||
Provision for income taxes | 167.2 | 6.1 | 173.3 | 183.9 | — | 183.9 | ||||||||||||||||
Net Earnings Attributable to The | ||||||||||||||||||||||
Estée Lauder Companies Inc. | 446.2 | 12.4 | 458.6 | 435.7 |
— |
|
435.7 |
5 |
% |
|
||||||||||||
Diluted net earnings attributable | ||||||||||||||||||||||
to The Estée Lauder Companies | ||||||||||||||||||||||
Inc. per common share | 1.19 | .03 | 1.22 | .11 |
1.33 |
1.13 |
— | 1.13 | 8 | % | 18% | |||||||||||
Amounts may not sum due to rounding.
______________
As part of SMI, the Company implemented the last major wave of SAP-based
technologies in
This action created a favorable comparison between the fiscal 2016 and
fiscal 2015 six months of approximately
THE ESTÉE LAUDER COMPANIES INC. |
|||||||||||||||||||||
|
Six Months Ended December 31, 2015 |
Six Months Ended
December 31, 2014 |
|||||||||||||||||||
As |
Charges |
Before |
Impact of |
Constant |
As |
SMI |
Before |
% Change |
% Change |
||||||||||||
Net Sales | $5,959.5 | $— | $5,959.5 | $365.6 | $6,325.1 | $5,675.5 | $178.3 | $5,853.8 | 2% |
|
8% | ||||||||||
Cost of sales | 1,166.2 | — | 1,166.2 | 1,109.7 | 35.1 |
|
1,144.8 | ||||||||||||||
Gross Profit | 4,793.3 | — | 4,793.3 | 4,565.8 | 143.2 | 4,709.0 | 2% | ||||||||||||||
Gross Margin | 80.4% | 80.4% | 80.4% | 80.4% | |||||||||||||||||
Operating expenses | 3,710.7 | (18.5 | ) | 3,692.2 | 3,585.0 | 16.0 | 3,601.0 |
3% |
|||||||||||||
Operating Expense Margin | 62.2% | 61.9% | 63.1% | 61.5% | |||||||||||||||||
Operating Income | 1,082.6 | 18.5 | 1,101.1 | 980.8 | 127.2 | 1,108.0 | (1)% | ||||||||||||||
Operating Income Margin | 18.2% | 18.5% | 17.3% | 18.9% | |||||||||||||||||
Provision for income taxes | 295.5 | 6.1 | 301.6 | 289.5 | 45.3 | 334.8 | |||||||||||||||
Net Earnings Attributable to The | |||||||||||||||||||||
Estée Lauder Companies Inc. | 755.5 | 12.4 | 767.9 | 663.8 | 81.9 | 745.7 | 3% | ||||||||||||||
Diluted net earnings attributable | |||||||||||||||||||||
to The Estée Lauder Companies | |||||||||||||||||||||
Inc. per common share | 2.00 | .03 | 2.03 | .22 | 2.25 | 1.71 | .21 | 1.93 | 6% | 17% | |||||||||||
Amounts may not sum due to rounding.
______________
The impact on net sales and operating results of the accelerated orders
from certain retailers associated with the Company’s implementation of
SMI by product category and geographic region is shown below.
Additionally, excluding the impact of the shift in orders, net sales and
operating results for the six months ended
Six Months Ended |
Six Months Ended December 31, 2015 | |||||||||||||||
(Unaudited; In millions) | Accelerated Sales Orders | Net Sales As Adjusted |
Operating |
|||||||||||||
Net Sales |
Operating |
Reported |
Constant |
|||||||||||||
Product Category: |
||||||||||||||||
Skin Care | $ | 91 | $ | 72 | (5 | )% | 1 | % | (12 | )% | ||||||
Makeup | 65 | 41 | 7 | 14 | 7 | |||||||||||
Fragrance | 21 | 14 | 5 | 12 | 19 | |||||||||||
Hair Care | 1 | — | 7 | 10 | 2 | |||||||||||
Other | — | — | 29 | 42 | 100 | + | ||||||||||
Total | $ | 178 | $ | 127 | 2 | % | 8 | % | (1 | )% | ||||||
|
||||||||||||||||
Geographic Region: |
||||||||||||||||
The Americas | $ | 84 | $ | 53 | 4 | % | 7 | % | (14 | )% | ||||||
Europe, the Middle East & Africa | 68 | 53 | 3 | 12 | 9 | |||||||||||
Asia/Pacific | 26 | 21 | (4 | ) | 3 | (9 | ) | |||||||||
Total | $ | 178 | $ | 127 | 2 | % | 8 | % | (1 | )% | ||||||
Total operating income in constant currency for the six months ended
THE ESTÉE LAUDER COMPANIES INC. |
||||||||||||
December 31 |
June 30 |
December 31 |
||||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 868.1 | $ | 1,021.4 | $ | 1,241.2 | ||||||
Short-term investments |
546.1 | 503.7 | 130.8 | |||||||||
Accounts receivable, net | 1,410.6 | 1,174.5 | 1,399.0 | |||||||||
Inventory and promotional merchandise, net | 1,077.4 | 1,215.8 | 1,112.3 | |||||||||
Prepaid expenses and other current assets | 573.6 | 553.1 | 542.7 | |||||||||
Total Current Assets | 4,475.8 | 4,468.5 | 4,426.0 | |||||||||
Property, Plant and Equipment, net | 1,496.8 | 1,490.2 | 1,434.2 | |||||||||
Other Assets | 2,609.5 | 2,280.5 | 1,996.4 | |||||||||
Total Assets | $ | 8,582.1 | $ | 8,239.2 | $ | 7,856.6 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current Liabilities | ||||||||||||
Current debt | $ | 374.4 | $ | 29.8 | $ | 68.5 | ||||||
Accounts payable | 527.4 | 635.4 | 495.0 | |||||||||
Other accrued liabilities | 1,577.6 | 1,470.4 | 1,480.7 | |||||||||
Total Current Liabilities | 2,479.4 | 2,135.6 | 2,044.2 | |||||||||
Noncurrent Liabilities | ||||||||||||
Long-term debt | 1,607.3 | 1,607.5 | 1,320.7 | |||||||||
Other noncurrent liabilities | 879.9 | 841.8 | 662.4 | |||||||||
Total Noncurrent Liabilities | 2,487.2 | 2,449.3 | 1,983.1 | |||||||||
Total Equity | 3,615.5 | 3,654.3 | 3,829.3 | |||||||||
Total Liabilities and Equity | $ | 8,582.1 | $ | 8,239.2 | $ | 7,856.6 | ||||||
SELECT CASH FLOW DATA |
||||||||
Six Months Ended |
||||||||
2015 | 2014 | |||||||
Cash Flows from Operating Activities | ||||||||
Net earnings | $ | 759.2 | $ | 666.9 | ||||
Depreciation and amortization | 201.6 | 198.6 | ||||||
Deferred income taxes | (32.0 | ) | (32.8 | ) | ||||
Other items | 148.6 | 112.3 | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in accounts receivable, net | (276.8 | ) | (109.8 | ) | ||||
Decrease in inventory and promotional merchandise, net | 101.8 | 107.1 | ||||||
Decrease (increase) in other assets, net | (32.5 | ) | 2.9 | |||||
Increase in accounts payable and other liabilities | 92.4 | 48.5 | ||||||
Net cash flows provided by operating activities | $ | 962.3 | $ | 993.7 | ||||
Capital expenditures | $ | 223.4 | $ | 187.4 | ||||
Acquisition of businesses | 19.3 | 104.2 | ||||||
Purchase of investments, net | 401.5 | 499.3 | ||||||
Payments to acquire treasury stock | 627.8 | 478.6 | ||||||
Dividends paid | 201.2 | 168.9 | ||||||
Increase in short-term debt, net | 346.9 | 49.5 | ||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160205005143/en/
Source: The Estée
Investor Relations:
Dennis D’Andrea, 212-572-4384
or
Media
Relations:
Alexandra Trower, 212-572-4430