* Q3 adj EPS 34 cents vs Wall St view 32 cents
* Revenue $1.86 bln, Wall St view was $1.88 bln
* Sees FY shr $2.65-$2.75 before items, Wall St view $2.79
* U.S. department store problems may still pressure sales
* Shares fall 5.8 percent
(Adds company and analyst quotes, byline, updates stock move)
By Jessica Wohl
CHICAGO, April 27 Estee Lauder Cos Inc's (EL.N)
quarterly results and full-year forecast disappointed
investors, and the company said weakness at U.S. department
stores could dampen sales of its cosmetics in the near term,
sending its shares down nearly 6 percent.
The maker of Clinique, M.A.C. and other cosmetics raised
its forecast for full-year earnings, but the projection fell
short of heightened Wall Street expectations.
Recent data such as strong March U.S. retail sales have led
many to become more optimistic about shoppers' buying habits.
France's L'Oreal (OREP.PA) said last week that it saw a "clear
return to growth" in its latest quarter. [ID:nLDE63K2BF]
But Estee Lauder Chief Executive Fabrizio Freda is still
not ready to call a recovery when it comes to U.S. shoppers.
"I think it will be a gradual and slow recovery," Freda
said in an interview. "As the employment rate improves and as
the economy improves overall, I think the consumer will come
back to normal levels."
Estee Lauder has seen some signs that U.S. shoppers are
more open to buying prestige and luxury goods after switching
to lower-priced products during the recession. Its La Mer skin
care line, priced at more than $100 per bottle, posted its
first U.S. sales gain since October 2008, Freda said.
"The fact that La Mer is again growing means that the more
affluent consumers are now emotionally more open to go back
toward the luxury habits," he said.
Still, he expects sales for the Mother's Day holiday next
month to be only "moderately better" than last year and said
women remain focused on value and quality.
Shares of Estee Lauder were down 5.8 percent at $65.92
after falling as low as $64.65. A year ago, they traded around
"Given the stock's recent run, we believe investors may
perceive these results and guidance, although solid, as mildly
disappointing," said Oppenheimer analyst Joseph Altobello.
SALES WOULD HAVE BEEN HIGHER WITHOUT EUROPE RETURNS
Estee Lauder's profit rose to $57.5 million, or 28 cents
per share, in its fiscal third quarter that ended on March 31,
up from $27.2 million, or 14 cents per share, a year earlier.
Adjusted earnings per share of 34 cents topped analysts'
average forecast of 32 cents, according to Thomson Reuters
I/B/E/S. In the first two quarters of the year, earnings were
51 cents and 7 cents better than Wall Street anticipated.
For the full year, Estee Lauder expects to earn $2.65 to
$2.75 per share before items, versus January's forecast of
$2.55 to $2.73 a share. Analysts expected earnings of $2.79 per
Sales rose for the second consecutive quarter, up 9.6
percent to $1.86 billion, or 5 percent excluding the impact of
foreign currency translation. But they fell short of analysts'
expectation of $1.88 billion.
Sales rose in every region, with the biggest jump in
Asia/Pacific. Sales at airport duty-free shops were strong as
more people traveled, and March was the best month ever.
A shutdown in air travel because of an ash cloud produced
by a volcanic eruption in Iceland earlier this month cut sales
by $5 million to $7 million, Chief Financial Officer Richard
Kunes said on a conference call.
Still, Estee Lauder expects travel retail sales to jump in
a 20s percentage range this year, barring further disruptions.
Sales of skin care products, Estee Lauder's biggest
category, rose 10.3 percent in local currencies, aided by new
products such as Hydrationist Maximum Moisture Creme.
Estee Lauder has begun a cash tender offer for up to $200
million in senior notes due in 2012 and 2013. If the maximum
amount of notes are tendered, it expects a fourth-quarter
pre-tax charge of 8 cents to 10 cents per share.
It now expects constant-currency sales to rise 4 percent to
5 percent rather than 3 percent to 5 percent. The company
predicted that skin care and makeup sales would rise, while
fragrance sales are likely to fall slightly and hair care
product sales should be flat.
Estee Lauder expects to realize $300 million to $330
million in savings this year, after raising the projection to
$275 million to $300 million back in January.
(Reporting by Jessica Wohl, editing by Maureen Bavdek, Derek
Caney and Robert MacMillan)