Cosmetics company Estee Lauder Cos Inc (EL.N) forecast quarterly earnings far below Wall Street estimates, saying it suffered because of foreign exchange rates and would increase investments in advertising, sending its shares down as much as 8 percent.
This would be the first profit miss in more than a year for the company, whose full-year outlook also fell short of analysts' expectations.
Estee Lauder said on Friday that it expected to earn between 28 cents and 32 cents a share after taking a restructuring charge in the third quarter, while analysts on average were expecting the company to earn 41 cents a share, according to Thomson Reuters I/B/E/S.
The maker of Bobbi Brown, MAC and Clinique brands of beauty products said it would raise global advertising spending by about $80 million, or 14 cents a share, as it introduces new products during the quarter.
"While some of this step-up was likely already anticipated in guidance, we note significant reinvestment in the second half of the year has led to strong first half sales results in recent years, a trend we expect to continue," said Stifel Nicolaus analyst Mark Astrachan.
Chief Executive Fabrizio Freda said on a conference call that Clinique makeup sales in North America grew 13 percent in the second quarter, confirming that its advertising was able to draw new consumers.
For the full year, New York-based Estee Lauder forecast earnings of $2.16 to $2.23 a share, while analysts were expecting $2.26.
"We recommend that investors buy on any weakness tied to the third-quarter guidance, as investment spending in this quarter should lead to stronger sales and earnings growth in the future," BMO Capital Markets analyst Connie Maneaty wrote in a note to clients.
For the second quarter ended December 31, the company posted a higher profit as strong demand for its makeup and skin-care products lifted sales.
Net income at the company, which competes with L'Oreal SA (OREP.PA) and Avon Products Inc (AVP.N) among others, rose to $396.7 million, or $1.00 a share, from $343.9 million, or 86 cents a share, a year earlier.
Excluding special items, the profit of $1.01 a share was in line with the analysts' average forecast.
Estee Lauder shares were trading down 4 percent at $56.41 Friday morning on the New York Stock Exchange.
(Reporting by Phil Wahba in New York and Nivedita Bhattacharjee in Chicago; Editing by John Wallace, Lisa Von Ahn, Phil Berlowitz)