Shop Talk

Check Out Line: Jobless claims rise, again

Check out the latest batch of grim data about the U.S. jobs market.

As if the consumer sector wasn’t nervous enough about a sputtering U.S. economy, the number of people filing new claims for unemployment insurance unexpectedly rose in the latest week to its highest level in close to six months.

Labor Department data showed the number of new claims for jobless benefits up 2,000 at 484,000 in the week ended August 7, the second straight increase. Economists polled by Reuters had expected claims to fall to 465,000 from the previously reported 479,000.

The news brings more pain to already angst-ridden retailers, who are hoping to pass on rising input costs to consumers with higher prices as companies try to guard margins in a tepid sales environment.

In July, retailers posted weaker-than-expected sales despite cutting prices to lure back shoppers, suggesting a rough back-to-school season.

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Check Out Line: April showers bring strong earnings

Check out the latest wave of strong quarterly earnings from the consumer world.

Under Armour, Coca-Cola Enterprises, Estee Lauder, Ford Motor, Energizer Holdings and Group 1 Automotive were among the consumer-focused companies reporting stronger-than-expected profits, supporting the view that a corner has been turned in the economy.

Athletic clothing and shoe maker Under Armour posted higher-than-expected quarterly profit fueled by strong apparel and online sales, and raised its earnings outlook for the full year. The largest bottler of Coke beverages, Coca-Cola Enterprises, with growth in European markets, did the same.

Estee Lauder, the maker of Clinique, M.A.C. and other cosmetics, saw its profit more than double as women treated themselves to small luxuries such as new skin creams. It also raised its full-year outlook.

Ford posted a big profit as North American sales picked up and raised its 2010 outlook to “solidly profitable.”  The U.S. automaker cited market share and pricing gains and also raised its second-quarter North American production plan.

Energizer, which makes batteries, Schick razors and Playtex tampons, reported stronger-than-expected earnings but its sales came in below analysts’ forecasts as the battery market remained challenging.

Group 1 Automotive, the No. 4 U.S. dealership group, beat expectations as auto sales rebounded from last year’s slide.

Check Out Line: The slow return of the splurge

Check out signs that consumers are getting more comfortable with spending and, at times, even splurging.

Estee Lauder reported a far better-than-expected 62 percent jump in quarterly profit and boosted its full-year forecast as consumers began to splurge on cosmetics after a year-long slide in sales. Results were helped by strong growth in Asia, new products, and a better-than-expected performance in airport stores and in the United States.

Under Armour, the maker of athletic clothing and footwear, reported an 83 percent rise in its holiday-quarter profit helped by gains in its apparel business. It said it now expects 2010 revenue and earnings to grow 10 percent to 12 percent, up from its prior range that called for a rise in the high-single to low-double-digits.

Meanwhile, Procter & Gamble and Colgate-Palmolive posted better-than-expected quarterly results and boosted sales of their brand name products in the last few months by convincing consumers to spend a little more with a bigger investment in advertising. Profit at P&G, the maker of Tide laundry detergent and Pampers diapers, fell less than anticipated.  A higher profit at toothpaste and dish-soap maker Colgate was even stronger than analysts expected.

But consumers don’t feel comfortable spending across the board. Ethan Allen reported a wider than expected loss in its quarter as cost cuts failed to offset weak demand for its higher-priced furniture.

And Estee Lauder Chief Executive Fabrizio Freda said the company is taking nothing for granted:

“While certain businesses have shown signs of improvement, and the economic challenges and some external uncertainties have abated, we remain mindful that they have not completely disappeared,” he said in a statement.

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.

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Lipstick advice from a Lauder

Looking for beauty advice?  Try an annual meeting.   At Friday’s Estee Lauder Cos Inc event, a female shareholder asked management why one of the company’s long-lasting lipsticks is dry.

“I personally don’t use long last lipstick,” Executive Chairman William Lauder joked.   To get to the heart of the matter, he called upon Clinique President Lynne Greene, who said she loves wearing the lipstick in question.  The dryness of the lipstick actually helps give the benefit of lasting long, she said.

Apparently, that wasn’t enough advice.  A few minutes later, Evelyn Lauder — William’s mother and a senior corporate vice president at the company — addressed the shareholder and the crowd with a little more of a lipstick lesson.

Remember, Evelyn Lauder has a bit of experience in the business, working for the company her mother-in-law started.  She even helped to create and name the Clinique brand, which debuted in 1968.

“All long-lasting lipsticks,” she said, “have dry formulas in order to keep them that way.  However, if you do experience it, you should use a lip gloss over it.  And if you’re over 40 years old, only use it in the center of your mouth, otherwise it may go up into the tiny little lines.  Now you know I started behind the counter.”

“Who says you need to go onto the Clinique web site to get makeup lessons from an expert?” William Lauder joked.   No word on whether Clinique Long Last lipstick was among the goodies distributed in gift bags after the short morning meeting adjourned.

(Reuters photo)

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 …

Check Out Line: Define “significantly”

Check out Estee Lauder’s profit coming in well ahead of raised expectations.

Sure, we should have expected that.  After all, the cosmetics maker said two weeks ago that its fiscal first-quarter profit would be “significantly higher than previous guidance” due to a variety of factors.

Apparently Estee Lauder management, including CEO Fabrizio Freda, has a different understanding of “significantly” than Wall Street.

The company’s old forecast was 23 to 30 cents per share.  So, after the brighter tone came on Oct. 16, analysts’ average forecast ticked up from 25 cents to 34 cents, based on Thomson Reuters I/B/E/S data.

How did Estee Lauder do?  Try 85 cents.  That’s what the company posted on Friday.

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from Summit Notebook:

Your skin care for the cost of a cup of coffee

Estee Lauder is doing its best to ensure its customers' skin routines are not falling victim to the recession.

The makeup and skin care maker is offering more products at its cheapest prices, and having its sales people pitch the value of its merchandise to the customers that visit its makeup counters in department stores. 

For instance, its top-selling Clinique three-step skin care regimen (Cleanse. Exfoliate. Moisturize.) costs about $40.

The company is making sure that customers who at buy the regime know it lasts three months.

"You can get the best of your skin care routine with 50 cents per day, which is much less than a cup of coffee," Fabrizio Freda, President and Chief Operating Officer of The Estée Lauder Companies told the Reuters Global Luxury summit.

"This simple explanation to the consumer, in this moment, is very telling. We have educated our consultants to be able to speak intrinsic value of the brands when they have conversation with people at the counter -- beyond giving the normal suggestions on skin care routines."

(Photo: Reuters)

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.

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