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By
Reuters
Published
Aug 14, 2009
Reading time
2 minutes
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Lauder, Arden forecast weak 2010 profit

By
Reuters
Published
Aug 14, 2009

LOS ANGELES/SEATTLE, Aug 13 (Reuters) - Estee Lauder Cos Inc (EL.N) and Elizabeth Arden Inc (RDEN.O) forecast weaker-than-expected 2010 profits as frugal shoppers think twice before buying pricey face cream, lipstick and perfume.


Prevage Body anti-ageing from Elizabeth Arden - Photo: elizabetharden.com

The companies, two of the biggest U.S. cosmetic and fragrance sellers, are grappling with weak demand for makeup, perfume and skincare items amid the longest recession in recent memory.

Shares in Estee Lauder, which reported before the stock market opened, closed up 0.4 percent, at $37.80, but fell in after-hours trading. Elizabeth Arden, which reported after the market close, fell 3.4 percent to $10.09 in extended trade.

Estee Lauder, which owns the Clique, Bobbi Brown and M.A.C brands, posted a quarterly profit that met analysts' views, but said its 2010 full-year profit could miss Street expectations.

Elizabeth Arden, seller of Prevage anti-aging cream and perfumes by celebrities such as Britney Spears and Mariah Carey, issued a 2010 profit forecast that missed analysts' forecasts after posting a smaller-than-expected loss.

"(Estee Lauder) continues to struggle through a very challenging consumer and retail environment, and it appears these challenges remain formidable," said Oppenheimer analyst Joseph Altobello in a note to clients.

Department stores and mass retailers have been working through stocks of cosmetics and fragrances for nearly a year and have been reluctant to carry excess inventory because the consumer spending recovery, when it comes, could be anemic.

Estee expects to earn $1.55 to $1.70 per share in fiscal 2010, which began last month. It said uncertain consumer spending, the financial strength of some of its retail customers and their efforts to cut inventories made it difficult to pinpoint an exact forecast.

Analysts, on average, expected a profit of $1.70, according to Reuters Estimates.

The company plans to put more affordable products on store shelves for the holidays, in an effort to lure shoppers who want cheaper items, but still want to stick to their favorite brand of makeup.

Elizabeth Arden forecast 2010 earnings of 50 cents to 65 cents per share, compared with a Street view of 72 cents.

Both companies said an overall drop in air travel has hurt travel retail sales, which include airport shops.

(By Lisa Baertlein and Aarthi Sivaraman. Additional reporting by Jessica Wohl in Chicago; Editing by Derek Caney, Lisa Von Ahn, Bernard Orr and Robert MacMillan)

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