Reuters: Global Markets: Estée Lauder fourth-quarter forecast disappoints, shares fall

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Estée Lauder fourth-quarter forecast disappoints, shares fall May 4th 2012, 13:33 Fri May 4, 2012 9:33am EDT (Reuters) - Estée Lauder Cos Inc (EL.N) gave a profit forecast that disappointed Wall Street on Friday and flagged concerns about a potential slowdown of China's economy, a market that has helped fuel the high-end beauty company's sales. The red flags overshadowed large gains in sales of its skin-care products last quarter at U.S. department stores that helped mitigate declines in France and elsewhere in Europe, which the company called a "soft market." Estee Lauder said in a statement it is "cautious of macroeconomic factors that could slow the growth trend of the Chinese economy." Net sales rose 3.8 percent to $2.25 billion in the third quarter. For the current quarter, Estee Lauder expects net sales to rise 10 percent to 11 percent in constant currency terms. Despite the expectations of continued sales gains, Estée Lauder's current-quarter adjusted profit forecast of between 11 and 16 cents per share missed the 20 cents analysts were projecting, according to Thomson Reuters I/B/E/S. The company's shares fell 3.8 percent to $61.70 in premarket trading. Estée Lauder said it plans to ramp up its advertising expenses to support new product launches. In February, the company also gave a forecast that came in below analyst expectations, largely to a spike in ad spending. The company's torrid growth at home and abroad in the last year sent shares to a 52-week high last week, setting them up for a drop at even a small sign of trouble, one analyst said. "There is a lot a momentum priced into the stock," said Erin Lash, an analyst with Morningstar. Estée Lauder's shares are trading at a price to forward earnings ratio of 28.5, making them expensive compared to shares of Elizabeth Arden (RDEN.O) and Revlon (REV.N), at 18.6 and 11.27 respectively. The sales gains in the third quarter were led by Estee Lauder's skin care products, which include La Mer and Clinique moisturizers and were far above those of fragrances, makeup and hair care, categories that account for just over half of its revenue. Estee Lauder's products benefited from a "high single digit" percentage jump in sales at U.S. department stores which include high-end chains Saks Inc (SKS.N) and Macy's Inc's (M.N) Bloomingdale's. The maker of Bobbi Brown, MAC and other cosmetics, reported net profit rose 4.6 percent to $130.4 million, or 33 cents a share, in the third quarter ended March 31, up from $124.7 million, or 31 cents a share, a year earlier. Excluding one-time items, Estée Lauder earned 38 cents per share, beating Wall Street analysts' estimates by 5 cents. The company raised its full year adjusted earnings per share forecast to a range of $2.21 to $2.26 from an earlier $2.16 to$2.23. (Reporting By Phil Wahba; Editing by Gerald E. McCormick, Dave Zimmerman) Link this Share this Digg this Email Reprints

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