The company reported a 200 basis-point increase in operating margin, and net earnings for the quarter rose 28 per cent to US$272.1 million compared with US$213.2 million last year.
Diluted net earnings per common share increased 30 per cent to $0.71 compared with $0.54 in the prior year. For the quarter, the negative impact of foreign currency translation on diluted net earnings per common share was US$0.10. Excluding the impact of foreign currency translation, net sales increased eight per cent and diluted net earnings per common share rose 49 per cent.
During the fiscal 2015 and 2014 third quarters, the company recorded remeasurement charges of US$5.3 million and US$38.3 million, equal to approximately US$0.01 and US$0.10 per diluted share respectively, both before and after tax, related to changes in Venezuelan foreign currency exchange rate mechanisms. The fiscal 2014 third quarter also included adjustments associated with restructuring activities.
Excluding all charges, net earnings for the three months ended March 31 were $277.4 million, and diluted net earnings per common share rose 12 per cent to US$.72, versus US$.64 in the prior-year period.
Analysts expected 81 cents per share but they came in at 75 to 78 cents a share; this denotes a fall of 6.8 per cent after projected earnings in the current quarter.
Information about GAAP and non-GAAP financial measures, including reconciliation information, is included in this release.
Fabrizio Freda, president and CEO, said, “We posted an excellent third-quarter performance, exceeding our constant currency sales forecast that, combined with disciplined expense management, we leveraged into sharply higher earnings per share. Compelling product innovations, targeted advertising and marketing investments and selective distribution expansion drove double-digit constant currency sales growth in many of our brands. In our fiscal fourth quarter we expect continued strong top-line growth, and plan to increase investment spending to further propel momentum and strengthen our future business. The momentum and agility we have created with the execution of our strategy continues to give us the ability to leverage global opportunities in fast growing areas of prestige beauty, while managing changing market dynamics.”
Net sales and operating income in each of the company’s product categories were unfavorably impacted by the strength of the US dollar in relation to most currencies. Total operating income in constant currency increased 32 per cent.
Net sales for skincare decreased due to the negative impact of foreign currency translation and lower sales of significant products that were launched in the prior-year period. Incremental sales were generated from recent launches, such as Advanced Night Repair Eye Synchronized Complex II and Re-Nutriv Ultimate Diamond products from Estée Lauder, as well as the Clinique Smart custom-repair serum and the Clinique Sonic System Purifying Cleansing Brush.
Higher makeup sales primarily reflected strong growth from the company’s makeup artist brands and the recent launch of Beyond Perfecting foundation and concealer from Clinique. Also contributing was the Pure Color Envy line of lip products and Perfectionist Youth-Infusing Makeup from Estée Lauder. Sales from makeup artist brands benefited from new product offerings, as well as expanded distribution in a number of channels, including freestanding retail stores. Sales in the category also reflect strong double-digit growth from Smashbox and the Tom Ford line of cosmetics.
Fragrance sales decreased due to the negative impact of foreign currency translation and lower sales of certain designer, Estée Lauder and Clinique fragrances. Michael Kors and luxury brands Jo Malone London and Tom Ford recorded strong double-digit sales gains as a result of new product launches and expanded distribution. Fragrance operating income increased over 100 per cent, reflecting higher results from the company’s luxury fragrance brands as well as lower investment spending in certain brands compared to the prior year, which featured a higher level of launch activity.
Hair care growth benefited from expanded global distribution, primarily in salons and freestanding stores for Aveda and from specialty-multi brand retailers and salons for Bumble and bumble. Hair care net sales growth also reflects the recent launches of Smooth Infusion Naturally Straight by Aveda and the expansion of Bumble and bumble’s Hairdresser’s Invisible Oil line of products. Hair care operating income decreased, primarily reflecting higher investment spending to support new product launches and freestanding store expansion.