(Reuters) - Cosmetics maker Estee Lauder Cos Inc (EL.N) 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.
Revenue from the business fell 3 percent to $1.07 billion, declining for the second straight quarter.
Consumers’ preference for “instant benefit” skin products such as face masks over anti-aging creams, which take longer to show effects, are hurting Estee Lauder, Sanford Bernstein analyst Ali Dibadj said.
However, sales at Estee Lauder’s makeup business surged 7 percent to $1.16 billion, primarily driven by the M.A.C. and Smashbox brands.
That helped net sales increase 3 percent to $2.66 billion, meeting analysts’ estimates.
Estee Lauder’s sales rose 6 percent on a constant currency basis, the low end of the company’s guidance of 6-7 percent growth. Grundy said Wall Street analysts were expecting an increase of about 7 percent.
The company’s shares were down 3.7 percent at a session low of $93.54 in afternoon trading.
Reporting by Yashaswini Swamynathan and Ramkumar Iyer in Bengaluru; Editing by Maju Samuel and Savio D'Souza