Shop Talk
Retailers, consumers and prices
Check Out Line: Estee Lauder had a beautiful holiday season
Check out Estee Lauder’s much better-than-expected end to 2009.
The cosmetics maker said fiscal second-quarter results, due next week, will fly past its forecast and Wall Street’s predictions. Sound familiar? That’s because the company did the same thing back in October, before it released results for the first quarter of its fiscal year.
Analysts noticed the similarity. JP Morgan’s John Faucher entitled his research note “Deja Vu” and many said with the stock’s nice run already (up about 56 percent in 2009), big gains from here are likely limited.
In the latest quarter, U.S. holiday season sales came in better than anticipated. So did sales in Asia and at airports. Another big benefit came from spending cutbacks. Don’t expect such frugality during the second half of the fiscal year. Estee Lauder, led by CEO Fabrizio Freda (seen here), said it would step up investment behind its brands and key priorities “well above” first-half levels.
Does the company’s optimism mean that beauty is back for good? Or was it just a holiday gift? We’ll find out more when Estee Lauder and Elizabeth Arden issue their results on Jan. 28 and Avon follows in early February.
Also in the basket:
Who likes to stop at the duty free shop?
Apparently, travelers looking for some new cosmetics. Sales at duty free stores — those airport emporiums for everything from perfume to cigarettes and extra-large Toblerone bars – boosted results at both Elizabeth Arden and Estee Lauder. Elizabeth Arden posted stronger sales than anticipated and an unexpected quarterly profit on Thursday. A day later, Estee Lauder said that travel retail accounted for about 9 percent of sales in its latest quarter, up from the usual range of about 7 percent. Its higher profit came in well ahead of expectations.
There may be fewer passengers traveling these days, but those that are seem to be willing to buy. Still, the market is a volatile one, Estee Lauder CEO Fabrizio Freda told Reuters.
Sales at duty free shops boost the bottom line since they are more profitable than typical sales. That’s partly because companies spend little, if anything, to advertise. Shoppers already know the brands from traditional outlets and marketing.
And now, for a little duty free comedy …
Where Macy’s goes, Estee and Arden follow?
It must have been a rough Monday for Estee Lauder and Elizabeth Arden.
One of their top clients, department store operator Macy’s Inc, announced a sweeping measure to consolidate its divisions into a single unit and slash about 7,000 jobs in an effort to cut costs.
A mere three days later, Estee and Arden both posted sharp declines in quarterly profits, and also announced job cuts. While Estee, known for the Clinique and Bobbi Brown brands, said it would shed about 2,000 jobs, Arden did not specify a number.
Both companies pointed to Macy’s reorganization plan during their conference call, but mum was the word when it came to revealing if their job cuts were in any way linked to the Macy’s news.
An Elizabeth Arden spokesman, Michael Fox, told us that the company was not inclined to share more.
Well, then it must be a coincidence.
In other news, Elizabeth Arden, famous for its Britney Spears perfume, said that while sales of her line of perfumes were down “as planned,” sales of the Britney brands have exceeded the company’s projections over the last few months. The company is hoping the trend continues over the next six months or year “as she has taken a more active role in her career.”
Check Out Line-Retail sector racks up more bad news
Check out the not-so-chipper news in the retail world.
Restaurant chain Burger King reported lower profits and cut its full-year forecast due to the currency fluctuations, while cosmetics and perfume companies Estee Lauder and Elizabeth Arden rang up lower, albeit better-than-expected, profits and said they would cut jobs.
Indeed, retailers overall posted the second weakest monthly same-store sales performance since Thomson Reuters began tracking the data in 2000 as heavy job losses, weakness in the U.S. housing sector and the still-tight credit markets have many consumers closing their wallets.
In the mixed-bag camp, apparel retailer Gap saw same-store sales fall more than expected, but raised its full-year profit outlook.
There is some good news out there, however.
Discount giant Wal-Mart posted a better-than-expected increase in sales at U.S. stores open at least a year, almost double what analysts had expected. Meanwhile, Kellogg’s quarterly profit rose and the cereal maker stood by its 2009 profit outlook, and department store operator Macy’s saw a smaller-than-expected decline in same-store sales and raised its fourth-quarter profit forecast.
Also in the basket:
Overall scenario is Not positive at Present. Though some stores are doing well, But that may be due to their Own Image and clientage.
This Junbo stimulus package may hopefully help revive the economy. However,it may be too soon to think that Bad days are over.
Still,we need to remain positive in such odd times.
Check Out Line: The lipstick recession
Check out the dismal economy trumping consumers’ desire (or ability) to put on a pretty face.
Both Elizabeth Arden and Estée Lauder warned of lower-than-expected second-quarter results in the wake of a disappointing holiday sales season.
“The unprecedented global economic crisis produced one of the worst holiday seasons in decades, with many U.S. retailers experiencing double-digit sales declines in nearly all categories,” said William P. Lauder, Estee Lauder’s chief executive officer, in a statement.
“Our business was no exception to the downturn in consumer spending and our second quarter results will come in lower than we expected.”
And this is from E. Scott Beattie, chief executive officer of Elizabeth Arden: “The performance of our U.S. Elizabeth Arden prestige department store business was much weaker than we had anticipated, though consistent with overall trends experienced in this channel. Additionally, economic conditions in our higher margin travel retail and distributor markets worsened considerably in November and December, which negatively impacted our international results.”
Elizabeth Arden also said that in order to limit credit risk it cut down on shipments to certain customers “due to credit constraints at those customers.”
Looks like the company was trying to limit its risk to retail bankruptcies, which rose in 2008 as the credit markets froze and consumers cut back on spending. Department store operator Boscov’s filed for bankruptcy protection, while Mervyn’s held going-out-of-business sales.
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