UPDATE 3-Estee Lauder, Elizabeth Arden cut profit views

Fri Jan 16, 2009 1:49pm EST

Related Topics

* Estee cuts Q2 EPS view to 75cts-82cts, pvs 97cts-$1.05

* Sees '09 EPS $1.30-$1.60, pvs $2.20-$2.50

* Arden cuts Q2 EPS view to 72cts-76cts, pvs $1.00-$1.10

* Sees '09 EPS 94cts-$1.07, pvs $1.50-$1.75

* Estee shrs off 10 pct, Arden off 40 pct, Avon off 7 pct (Adds more details, analyst estimates, comments, byline)

By Martinne Geller

NEW YORK, Jan 16 (Reuters) - Cosmetics makers Estee Lauder Cos Inc (EL.N) and Elizabeth Arden Inc (RDEN.O) warned of disappointing quarterly profits and slashed their full-year outlooks, citing weak sales over the holiday shopping period.

The forecast results, which fell short of already-lowered expectations, sent Estee Lauder shares down 10 percent and Elizabeth Arden shares down 40 percent. Other cosmetics makers were also hurt, with Avon Products Inc (AVP.N) shares off 7 percent and Nu Skin Enterprises Inc (NUS.N) shares off 3 percent.

The warnings come on the heels of the weakest holiday sales season in nearly four decades as a yearlong U.S. recession crimped consumer demand. This week, high-end department stores Saks Inc SKS.N and Neiman Marcus [NMRCUS.UL] said they would slash hundreds of jobs in response to diminishing sales.

Elizabeth Arden and Estee Lauder were both hurt by weak customer traffic at department stores, where they have cosmetics counters, and the recent strengthening of the U.S. dollar, which lessened the value of overseas sales.

Arden, which makes Prevage anti-aging products and celebrity fragrances by Britney Spears and Hilary Duff, also cited a slowdown at its duty-free shops and a decision to ship less merchandise to certain distressed retailers. It did not identify the retailers.

JP Morgan analyst Dara Mohsenian said it was not surprising that Arden cut its outlook, given the weakening economy, though the magnitude of the cut was much worse than expected.

For its fiscal second quarter, which ended Dec. 31, Elizabeth Arden forecast earnings of 57 cents to 61 cents per share, excluding expenses. That compares with its prior forecast of 89 cents to 99 cents.

Net sales are expected to range from $365 million to $370 million, which falls far short of analysts' average estimate of $433.1 million, according to Reuters Estimates.

Estee, which makes Clinique, Origins and M.A.C. cosmetics aside from its namesake brand, said it expects to report a 6 percent sales decline in its fiscal second quarter, which is in sync with Arden's, versus expected growth of 2 to 3 percent.

As a result, Estee expects quarterly earnings of 75 cents to 82 cents per share, down from a prior forecast of 97 cents to $1.05.

MORE WEAKNESS AHEAD

Estee forecast fiscal 2009 earnings of $1.30 to $1.60 per share, down from its previous forecast of $2.20 to $2.50 per share.

Analysts on average had been expecting Estee to earn 99 cents per share in the second quarter and $2.23 per share for the full year, according to Reuters Estimates.

Estee Lauder said a high degree of global economic uncertainty would continue to weigh on consumer confidence, demand and spending, making definitive forecasting difficult.

However it said current retail trends in North America are expected to continue for the rest of the fiscal year, which ends in June. The company also expects sales rates to slow in certain key markets of Europe, the Middle East and Africa, and a softening in certain retail environments in the Asia/Pacific region.

Estee expects 2009 sales to be flat to down 3 percent, excluding the currency impact, versus prior expectations for growth of 3 to 5 percent.

Elizabeth Arden said it expects full-year earnings of 94 cents to $1.07 per share, excluding a currency impact of 23 cents per share. This is down from a prior forecast of $1.50 to $1.75 per share, excluding an 8 cent-per-share hit from currency.

Arden sees full-year sales falling 4 percent to 5 percent, including a negative impact from currency fluctuations.

Estee Lauder shares were down $3.06 at $25.97 in early afternoon trade on the New York Stock Exchange, where Avon shares were down $1.62 at $20.32 and Nu Skin shares were down 33 cents at $9.96. Elizabeth Arden shares were down $4.70 at $6.86. (Reporting by Martinne Geller, editing by Dave Zimmerman and Gunna Dickson)

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