Delaying expenses helps Estee Lauder's Q3 profit, hurts forecast

Tue May 3, 2016 2:32pm EDT
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By Ramkumar Iyer

(Reuters) - Cosmetics maker Estee Lauder Cos Inc (EL.N: Quote) reported a better-than-expected profit in the third quarter as it shifted some expenses into the current quarter, analysts said, a move that limited the company's ability to raise its forecast.

Also, Estee Lauder's quarterly sales, excluding the effect of currency, did not rise as much as analysts expected, helping send the company's shares down as much as 3.7 percent on Tuesday.

The company earned 73 cents per share on an adjusted basis in the third quarter, handily beating analysts' estimates of 61 cents, according to Thomson Reuters I/B/E/S.

Estee Lauder raised its full-year profit forecast to $3.09-$3.14 per share from $3.07-$3.12, attributing the increase only to a smaller impact from the dollar. Analysts were expecting a profit of $3.15 per share.

"They've had some advertising and marketing costs and store openings pushed from the third quarter into the fourth quarter. So you have lower SG&A, marketing, and fixed costs, which drove the beat in the quarter," Jefferies analyst Kevin Grundy said.

The cosmetics maker also said it would cut 900 to 1,200 jobs, or 2.5 percent of its workforce, as part of a new restructuring plan aimed at cutting costs and improving R&D, supply chain and e-commerce.

Estee Lauder said it expects to incur restructuring charges of $600-$700 million, but did not say when it would record the charges.

The company's results in the third quarter was also hurt by the declining fortunes of its core skin care business, which houses the Estee Lauder and Clinique brands.   Continued...

Lipstick is displayed in the M.A.C flagship store in Paris, February 28, 2013.  REUTERS/Philippe Wojazer