Estee Lauder 2007 Annual Report Download - page 41

40 THE EST{E LAUDER COMPANIES INC.
AIDS-related charities. Higher sales of Double Wear Foun-
dation and the recent launch of Resilience Lift Extreme
Ultra Firming Makeup SPF 15 by Estée Lauder contributed
approximately $56 million to the growth in this product
category. Lower sales of approximately $35 million of
Pure Color Gloss and Individualist Natural Finish Makeup
by Estée Lauder, and Repairwear Anti-Aging Makeup
SPF 15 by Clinique partially offset this growth. Excluding
the impact of foreign currency translation, makeup net
sales increased 6%.
Fragrance Net sales of fragrance products increased 8% ,
or $95.3 million, to $1,308.6 million, primarily driven by
incremental international sales from newer fragrance
offerings. DKNY Red Delicious, Pure White Linen from
Estée Lauder, Sean John Unforgivable, DKNY Red
Delicious Men and Donna Karan Gold collectively
contributed approximately $128 million to the category.
Lower sales of approximately $67 million of True Star and
True Star Men by Tommy Hilfi ger, and Estée Lauder
pleasures partially offset the growth in this product
category. While current year sales levels compared favor-
ably to the prior year, we anticipate continued challenges
in this product category due in part to competitive
dynamics, particularly in the United States. Excluding the
impact of foreign currency translation, fragrance net sales
increased 5%.
Hair Care Hair care net sales increased 18%, or $58.4 mil-
lion , to $377.1 million, primarily due to sales growth from
Aveda and Bumble and bumble products. Aveda net sales
increases were primarily due to sales of professional color
products, the recent launch of Be Curly shampoo and
conditioner and the acquisition of an independent dis-
tributor. Bumble and bumble sales benefi ted from a new
hotel amenities program, sales growth in its existing salon
distribution and new points of distribution. Excluding the
impact of foreign currency translation, hair care net sales
increased 17%.
Geographic Regions
Net sales in the Americas increased 3%, or $114.5 million,
to $3,560.9 million. The increase was led by growth in the
United States of approximately $152 million from our
makeup artist brands, our hair care business, our internet
distribution, and the recent launch of the Unforgivable
fragrance by Sean John. Partially offsetting this growth
was approximately $90 million related to weaknesses in
our core brands as a result of competitive pressures and
retailer consolidations. Net sales growth in Canada, Latin
America and Mexico contributed an additional $31 million
to the increase. The prior year results refl ected an incre-
mental provision of approximately $16 million for returns
In order to meet the demands of consumers, we continu-
ally introduce new products, support new and established
products through advertising, sampling and merchandis-
ing and phase out existing products that no longer meet
the needs of our consumers. The economics of develop-
ing, producing, launching and supporting products
infl uence our sales and operating performance each
period. The introduction of new products may have some
cannibalizing effect on sales of existing products, which
we take into account in our business planning.
FISCAL 2007 AS COMPARED WITH FISCAL 2006
NET SALES
Net sales increased 9%, or $573.7 million, to $7,037.5
million, refl ecting net sales growth in all product catego-
ries and geographic regions. The increases in our skin
care, makeup and fragrance product categories were led
by Europe, the Middle East & Africa while the increase in
hair care net sales was predominantly in the Americas.
Excluding the impact of foreign currency translation, net
sales increased 7%.
Product Categories
Skin Care Net sales of skin care products increased 8%,
or $200.2 million, to $2,601.0 million. Most of this growth
was fueled by new product launches which made their
most signifi cant impact in our Europe, the Middle East &
Africa and Asia/Pacifi c regions. The recent launches of
Advanced Night Repair Concentrate Recovery Boosting
Treatment and Idealist Refi nisher from Estée Lauder, and
Repairwear Lift Firming Night Cream, Continuous Rescue
Antioxidant Moisturizer, All About Eyes Rich and Repair-
wear Contour Firming Formula from Clinique contributed
incremental sales of approximately $95 million, combined.
Net sales increases from our fast-growing La Mer brand,
Resilience Lift Extreme Ultra Firming products and other
existing Advanced Night Repair products from Estée
Lauder, along with products in the Clinique 3-Step Skin
Care System and Superdefense from Clinique, totaled
approximately $97 million. These improvements were
partially offset by approximately $35 million of lower
sales from certain other Resilience Lift products and
Perfectionist [CP+] from Estée Lauder. Excluding the
impact of foreign currency translation, skin care net sales
increased 6%.
Makeup Makeup net sales increased 8%, or $208.5 mil-
lion, to $2,712.7 million, reflecting growth from our
makeup artist brands of approximately $191 million. This
increase was supported by new points of distribution and
new product launches as well as M.A.C Viva Glam lip
products, the proceeds of which are donated to