Estee Lauder beats earnings expectations on strong skin care sales, but provides downbeat outlook

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Estee Lauder Companies reported a fiscal first-quarter profit and sales that beat expectations, as a strong performance in skin care sales offset weakness in makeup, but provided a downbeat earnings outlook for the current quarter. The stock was still inactive in premarket trading. Net income for the quarter to Sept. 30 fell to $523 million, or $1.42 a share, from $595 million, or $1.61 a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share of $1.44 was well above the FactSet consensus of 90 cents. Sales declined 9% to $3.56 billion, but topped the FactSet consensus of $3.46 billion. Skin care sales rose 10% to $2.04 billion, above the FactSet consensus of $1.89 billion; makeup sales fell 32% to $978 million to miss expectations of $1.24 billion; fragrance sales dropped 12% to $406 million to fall shy of expectations of $408.3 million; and hair care sales were flat at $136 million to beat expectations of $124.7 million. “The COVID-19-related closures of offices, retail stores and other businesses and the significant decline in social gatherings have also influenced consumer preferences and practices,” the company stated. “Demand for skin care and hair care products has been more resilient than the demand for makeup and overall fragrance.” For the second quarter, the company expects adjusted EPS of $1.45 to $1.60, below the FactSet consensus of $1.73. Earlier, the company said it raised its dividend by 10%. The stock has gained 6.4% year to date through Friday, while the S&P 500 has tacked on 1.2%.
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