NEW YORK (Reuters) - Estee Lauder Cos Inc (EL.N) reported a higher quarterly profit and stood by its 2008 outlook on Friday, counting on international sales and other measures to offset tighter consumer spending at home.
Shares of the cosmetics and perfume company, with brands like MAC, Aveda, Clinique and Sean John, rose as much as 7.8 percent following the news.
"We see the result as a positive fundamentally as the affirmation of sales and profit targets should help to assuage investor fears about the impact of a slowing U.S. consumer," Goldman Sachs analyst Amy Low Chasen said in a client note.
Estee's profit was boosted by a revenue increase of more than 20 percent in markets like the Middle East, Africa and the Asia Pacific region.
In contrast, its U.S. sales in the quarter, which included the key holiday period, grew at a rate of 8.9 percent, highlighting persistent weakness in department stores.
Rival Elizabeth Arden (RDEN.O) also reported similar troubles on Thursday, saying weak U.S. sales would hound it through its fiscal year.
Still, Estee affirmed its fiscal 2008 profit forecast of $2.28 to $2.40 a share, and sales growth of 7 percent to 9 percent.
"We believe our international business overall will remain solid, more than compensating for slower domestic growth," Chief Executive William Lauder said during a conference call. "We're prepared to keep a tight lid on expenses in order to achieve our profit objectives," he added.
Analysts on average were expecting earnings of $2.38 a share for the year, according to Reuters Estimates.
Estee expects third-quarter sales to rise 8 percent to 10 percent, with earnings per share at 43 cents and 49 cents. Analysts were expecting profit of 50 cents a share for the quarter.
EARNINGS, CLINIQUE ON QVC
In the second quarter that ended on December 31, net profit rose 8 percent to $224.4 million, or $1.14 a share, from $208.4 million, or 99 cents a share, a year earlier.
The results matched analysts' expectations, according to Reuters Estimates.
Just meeting Wall Street's expectations may be good news, Bear Stearns analyst Justin Hott wrote in a client note.
"Given the poor data points from U.S. department stores over the past month, we think meeting and reiterating guidance is positive for Estee Lauder shareholders," he said.
In November 2007, Estee appointed Procter & Gamble (PG.N) veteran Fabrizio Freda as president and chief operating officer and said he could succeed Lauder as CEO within two years.
The appointment of an outsider as a possible heir-apparent comes as Estee battles higher operating costs and limp U.S. department store sales.
Quarterly sales at Estee rose 16 percent to $2.3 billion, led by its skin-care and makeup categories and strength in the Middle East, Africa, China, Australia and Korea.
The company expects those categories and markets to continue to add to its sales growth for the rest of fiscal 2008.
Estee also announced plans to debut its Clinique line on television shopping channel QVC on February 17.
The news follows on the heels of its deal with Botox-maker Allergan Inc (AGN.N) to sell a line of Clinique-branded products exclusively through physicians in the United States.
Estee shares were up 4.6 percent at $44.60 after rising as high as $45.85 earlier on the New York Stock Exchange trade. Its shares trade at 15.9 times 2009 earnings estimates, a premium to Arden, which has a trading multiple of 9.9.
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