Estee Lauder 2007 Annual Report Download - page 44

THE EST{E LAUDER COMPANIES INC. 43
Hair Care Hair care net sales increased 16%, or $44.8
million, to $318.7 million, primarily due to sales growth
from Bumble and bumble and Aveda products. Bumble
and bumble sales benefi ted from sales growth due to new
points of distribution, increases in sales of core products
and the launches of Shine and Powder products. Aveda
net sales increases benefi ted from the fi scal 2006 launch
of Damage Remedy hair care products, strong demand
for color products and from the acquisition of a distribu-
tor. Excluding the impact of foreign currency translation,
hair care net sales increased 17%.
Geographic Regions
Net sales in the Americas increased 3%, or $95.3 million,
to $3,446.4 million. The increase was led by growth in the
United States of approximately $190 million from our
makeup artist and hair care brands, our internet distribu-
tion, and the introduction of the Unforgivable fragrance
by Sean John. Partially offsetting this growth was approxi-
mately $122 million related to weaknesses in certain of
our core brands as a result of challenges from competitive
pressures and business disruptions at certain key retailers,
and lower sales from our BeautyBank brands, which
completed their initial rollout during fi scal 2005. Net sales
growth in Canada, Latin America and Mexico contributed
an additional $48 million to the increase.
In Europe, the Middle East & Africa, net sales increased
2%, or $38.6 million, to $2,147.7 million, refl ecting higher
net sales of approximately $64 million from our travel
retail and distributor businesses, Russia and the United
Kingdom, with all benefi ting from the success of the
DKNY Be Delicious franchise and the sale of M.A.C
products. These increases were partially offset by
decreases of approximately $26 million in Spain and Italy.
Spain’s net sales were adversely affected by changes to
our distribution policy and a diffi cult retail environment.
Net sales in Italy were negatively impacted by changes to
our distribution policy and, to a lesser extent, the balanc-
ing of inventory levels at its retailers. On a local currency
basis, net sales in Europe, the Middle East & Africa
increased 5%.
Net sales in Asia/Pacifi c increased 6%, or $49.9 million,
to $869.7 million. Strategic growth in China combined
with positive results in Korea and Hong Kong, contributed
approximately $57 million to sales growth in this region.
These increases were partially offset by decreases in Japan
and Australia of approximately $18 million. Japan’s results
were negatively impacted due to the strengthening of the
U.S. dollar against the Japanese yen. The decrease in
Australia refl ected slower sell-through in a diffi cult retail
environment, particularly in the fragrance category, as
Excluding the impact of foreign currency translation, net
sales increased 4%.
Product Categories
Skin Care Net sales of skin care products increased 2%,
or $48.7 million, to $2,400.8 million primarily due to new
product launches. The fi scal 2006 launches of Resilience
Lift Extreme Ultra Firming Cremes and Re-Nutriv Ultimate
Lifting Serum by Estée Lauder, and Turnaround Concen-
trate Visible Skin Renewer and Turnaround 15-Minute
Facial by Clinique generated incremental sales of approxi-
mately $123 million, combined. Perfectionist [CP+] by
Estée Lauder and products in Clinique’s 3-Step Skin Care
System, bolstered by the introduction of Liquid Facial
Soap, contributed approximately $78 million to the
increase. These improvements were offset by approxi-
mately $157 million of decreases in sales of existing prod-
ucts in certain of our core brands as well as declines in
our BeautyBank brands, which completed their initial roll-
out during fi scal 2005. Excluding the impact of foreign
currency translation, skin care net sales increased 3%.
Makeup Makeup net sales increased 6%, or $137.4
million, to $2,504.2 million refl ecting growth from our
makeup artist brands of approximately $179 million. This
growth was partially offset by approximately $72 million
of lower sales from certain existing products, refl ecting
challenges experienced by certain of our core brands, and
declines in our BeautyBank brands, which completed
their initial rollout during fiscal 2005. Excluding the
impact of foreign currency translation, makeup net sales
increased 7%.
Fragrance Net sales of fragrance products decreased 4%,
or $47.3 million, to $1,213.3 million as we continued to be
challenged in this product category, particularly in the
Americas region. Estée Lauder Beyond Paradise and
various fragrances from Clinique and Tommy Hilfi ger
generated approximately $106 million of lower sales. Also
contributing to the decrease were lower sales of approxi-
mately $28 million of True Star by Tommy Hilfi ger and
Lauder Beyond Paradise Men by Estée Lauder as we anni-
versaried the initial shipments of those products in
fi scal 2005. These decreases were partially offset by
the fi scal 2006 launches of True Star Men by Tommy
Hilfi ger and Unforgivable by Sean John, which collectively
contributed approximately $49 million to the category,
and higher sales of approximately $47 million of DKNY
Be Delicious and Estée Lauder pleasures. Excluding the
impact of foreign currency translation, fragrance net sales
decreased 2%.