UPDATE 4-Estee Lauder profit tops view; tightens outlook

* Q3 adj EPS 16 cts tops Street view of 5 cts

* Sales fall 10 pct to $1.7 bln

* Now sees '09 EPS $1.32-$1.44; prior view $1.30-$1.60

* Shares up 15 percent (Adds more comments from analyst, company; updates stock)

By Martinne Geller

NEW YORK, May 4 (Reuters) - Estee Lauder Cos Inc (EL.N) reported a much higher-than-expected quarterly profit on Monday as it gained market share in U.S. stores, sending shares up 15 percent.

The maker of Clinique and M.A.C. makeup said there are early signs of U.S. economic improvement even though retail sales remain soft, particularly at high-end department and specialty stores.

But because retail sales have yet to pick up, the company gave a cautious outlook for the current quarter, and said it was running its business with the assumption that challenges will last for at least the next 12 months.

"Estee Lauder is in the thick of a major downturn that includes destocking in the U.S. for at least a few more quarters," wrote BMO Capital Markets analyst Connie Maneaty in a research note. She maintained her "market perform" rating on the shares.

Earlier this year Estee unveiled a four-year restructuring plan that includes cutting jobs, closing factories and revamping its purchasing department.

While many of those benefits will not be felt until fiscal 2010, which begins this summer, the company gained market share in U.S. department stores in the third quarter, helped by new skincare products that counter aging and redness and more services like free make-overs and skin consultations.

Sales of skin care items are holding up better than makeup, Estee said, since they are functional but not conspicuous.

"Everything which is more linked to performance ... which has a connotation of value, is holding up pretty well," Fabrizio Freda, Estee's chief operating officer and CEO-designate, said in an interview.

Sales of items seen as symbols of conspicuous consumption are falling "very rapidly," he added.

Estee's strong results bode well for rivals Avon Products Inc (AVP.N) and Elizabeth Arden Inc (RDEN.O), which both report earnings later this week. Both companies' shares were up more than 6 percent in midday trade.

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