Estee Lauder shares fall after profit disappoints

NEW YORK (Reuters) - Cosmetics maker Estee Lauder Cos. Inc. (EL.N) reported lower-than-expected quarterly profit on Thursday and forecast earnings for the current quarter and fiscal year well below Wall Street estimates, sending its shares down more than 7 percent.

For the current quarter, which is the first quarter of fiscal 2008 for the New-York based company, Estee Lauder said it expects earnings from continuing operations of 5 cents to 11 cents a share. That was well below analysts' average forecast of 33 cents a share, according to Reuters Estimates.

A tough retail environment, weak U.S. department store sales that could persist through the first half of fiscal 2008 and the impact of a retail calendar change that would push one week of sales into the second quarter, would all pressure current quarter earnings, the company said.

Net sales in the quarter are expected to increase 5 percent to 7 percent, Estee Lauder said.

It also forecast fiscal 2008 earnings from continuing operations of $2.28 to $2.40 per share on a 7 percent to 9 percent sales increase. Analysts expected $2.48 per share.

"They are not just lowering the bar on (the first quarter of 2008), they are nearly obliterating it," Bear Stearns analyst Justin Hott wrote in a research note.

Noting that U.S. department store sales would remain weak, Hott, who rates Estee Lauder "peer perform," said that an open of around $40 (for Estee shares) is a fair price given the reduction in earnings.

Estee Lauder shares were down 7.5 percent at $39.90. They fell as low as $39.39 earlier on the New York Stock Exchange.

EARNINGS FAIL EXPECTATIONS

Net income in the fiscal fourth quarter that ended June 30 nearly doubled to $88.6 million, or 45 cents a share, but fell short of analysts' average forecast of 50 cents a share, according to Reuters Estimates.

In the year-earlier quarter, Estee Lauder earned $44.5 million, or 21 cents a share, including a charge of 28 cents per share on cost-saving initiatives and a tax-related matter.

Fourth-quarter sales rose 10 percent to $1.76 billion, boosted by higher sales in Europe and Asia and in its hair-care, perfumes, makeup and skin-care businesses.

The company, which expects strong international growth in fiscal 2008, said sales are expected to be highest in Europe, the Middle East and Africa, and added that hair care and skin care would be the highest growth categories.

Estee Lauder also said it would look to invest more in distributing its brands in several international markets, such as Russia, Brazil and India.