Estee Lauder 2010 Annual Report Download - page 95

94 THE EST{E LAUDER COMPANIES INC.
Hair Care Hair care net sales increased 3%, or $11.5 mil-
lion, to $413.9 million, primarily reflecting an increase in
net sales of certain styling and hair color products, the
recent launches of Smooth Infusion Glossing Straightener
and Control Force from Aveda and sales generated from
expanded distribution outside the United States. This
increase was partially offset by lower net sales in North
America resulting from a soft salon retail environment and
the closing of certain underperforming freestanding retail
stores. Excluding the impact of foreign currency transla-
tion, hair care net sales increased 2%.
Geographic Regions
Net sales in the Americas increased 1%, or $20.9 million,
to $3,442.1 million. This increase was primarily attribut-
able to higher net sales of approximately $39 million in
Canada and Latin America, reflecting a better-than-
expected holiday selling season, new points of distribution
and the favorable impact of foreign currency translation.
In the United States, net sales increases of Clinique skin
care products, various designer fragrances and from our
makeup artist brands were partially offset by lower sales
of various Estée Lauder fragrances and from our hair care
brands. Together with the impact of the exit from the
global wholesale distribution of the Prescriptives brand, all
of these factors resulted in lower net sales in the United
States of approximately $10 million. Despite restocking
to more normal levels by certain retailers, economic
conditions in the Americas region, particularly in the
department store channel, have negatively impacted our
business. Ongoing challenges faced by certain of
our department store customers in the United States may
continue to affect our net sales for the short and medium
term. To address these concerns, we are introducing new
High-Touch concepts and working with retailers in the
channel to improve consumer traffic. Excluding the impact
of foreign currency translation, net sales in the Americas
were flat as compared with the prior year.
In Europe, the Middle East & Africa, net sales increased
9%, or $248.0 million, to $2,859.3 million, reflecting
growth from travel retail and from virtually all countries in
the region and in each product category. This reflects our
strategy to strengthen our geographic presence and to
succeed in the travel retail channel. The region also
benefited from the favorable impact of foreign currency
translation. Net sales increases of approximately $250 mil-
lion were driven by our travel retail business, the United
Kingdom, Russia, South Africa, Germany and Turkey,
reflecting an improved retail environment, successful
launches of skin care products and higher combined sales
from our makeup artist brands. The net sales improvement
in our travel retail business also reflected a favorable
Clinique. Excluding the impact of foreign currency transla-
tion, skin care net sales increased 9%.
Makeup Makeup net sales increased 5%, or $147.3
million, to $2,978.2 million, primarily reflecting an increase
of approximately $135 million from our makeup artist
brands, driven by higher net sales outside the United
States. The recent launches of Even Better Makeup SPF 15
and Superbalanced Powder Makeup SPF 15 from Clinique
and Resilience Lift Extreme Radiant Lifting Makeup SPF 15
from Estée Lauder, as well as higher sales of Double
Wear Foundation from Estée Lauder and Vitamin C Lip
Smoothie Antioxidant Lip Colour from Clinique, contrib-
uted approximately $74 million, combined, to the increase.
These increases were partially offset by lower sales of
Prescriptives products due to the exit from the global
wholesale distribution of the brand, as well as lower sales
of High Impact Lip Color SPF 15 from Clinique and Artist’s
Eye Pencils from Estée Lauder of approximately $50 mil-
lion, combined. During the current year, we undertook an
initiative to identify certain underperforming stock keep-
ing units (“SKU”) for the purposes of evaluating their rel-
evance to our long-term perfumery strategy in the Europe,
the Middle East & Africa region. Based on this evaluation,
we decided to discontinue certain of these products in
perfumeries and recorded a charge of approximately $27
million to reflect the anticipated returns of makeup prod-
ucts from participating retailers, subject to our returns
approval policy. Excluding the impact of foreign currency
translation, makeup net sales increased 4%.
Fragrance Net sales of fragrance products decreased 1%,
or $14.0 million, to $1,136.9 million. This decline was
largely due to lower sales of certain designer fragrances,
of which approximately $54 million was attributable
to DKNY Delicious Night, Hilfiger Men, Sean John
Unforgivable Woman, Sean John Unforgivable and DKNY
Men. Also contributing to the decrease were lower sales
of Estée Lauder Sensuous and Clinique Happy of approxi-
mately $15 million, combined. These declines were par-
tially offset by incremental sales from the recent launches
of pure DKNY, Very Hollywood Michael Kors and DKNY
Delicious Candy Apples, as well as higher sales of
DKNY Be Delicious Fresh Blossom, of approximately $53
million, combined. The decrease in net sales was due
in part to a more strategically focused approach to
investment spending in this category. Excluding the
impact of foreign currency translation, fragrance net sales
decreased 2%.