Oct 28, 2008
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Estee Lauder profit up, but cuts outlook

Oct 28, 2008

By Aarthi Sivaraman

NEW YORK (Reuters) - Cosmetics maker Estee Lauder Cos Inc posted a better-than-expected quarterly profit on Tuesday on higher sales, but slashed its full-year outlook, citing a weak economy and stronger U.S. dollar.

Estee also noted that it had enough cash, available credit lines and access to credit markets to support its business. Shares rose nearly 1 percent in thin pre-market trading.

"In the near term, we see this as a time of extraordinary uncertainty," Chief Executive William Lauder said in a statement. "We believe the global economic challenges will be extensive and ongoing, and we are managing our business with these expectations in mind."

Cosmetics are seen as less susceptible to economic woes as consumers are slower to change personal care or makeup brand preferences, even if they buy fewer clothes or jewelry. But a financial market crisis and concerns the global economy is headed into a deep recession could accelerate that shift.

Net income for Estee, known for brands such as MAC and Clinique, rose to $51.1 million, or 26 cents per share, in the fiscal first quarter ended September 30, compared with $39.1 million, or 20 cents a share, a year earlier.

Analysts, on average, expected Estee to earn 22 cents per share, according to Reuters Estimates.

Sales rose 11 percent to $1.9 billion, or a 10 percent increase excluding the impact of currency translation.

Revenue rose 16.4 percent in its Europe, Middle East and Africa markets with the exception of Spain. Sales were 24.2 percent higher in its Asia Pacific market.

Sales rose 4.5 percent in its Americas segment, much weaker than its other markets. Weakness in department stores, where many of its products are sold, hurt some of its businesses, Estee said.

Estee now expects to earn between $2.20 per share and $2.50 per share for fiscal 2009, and sales to increase 3 percent to 5 percent.

The earnings forecast includes a negative impact of about 33 cents per share due to recent strength in the U.S. dollar, which hurts its conversion of overseas sales into dollars for accounting purposes.

Estee had previously expected per-share earnings of $2.57 to $2.72, and a sales rise of 6 percent to 8 percent.

The company expects sales in the Americas, consisting of North America, Latin America and Canada, to be flat to up 2 percent for fiscal 2009.

It forecast revenue growth of 4 percent to 6 percent in Europe, Middle East and Africa, but warned that sales could slow in some key countries in the region.

Estee expects sales in Asia Pacific markets to rise between about 13 percent to 15 percent for the year.

For the second quarter, it forecast sales to grow 2 percent to 3 percent and per-share earnings of 97 cents to $1.05, including an 11 cents-per-share negative impact from foreign currency translation.

(Reporting by Aarthi Sivaraman, editing by Dave Zimmerman)

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