Estee Lauder 2003 Annual Report Download - page 45

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THEEST{E LAUDER COMPANIES INC.
FISCAL 2003 AS COMPARED WITH FISCAL 2002
NET SALES
Net sales increased 8% or $373.9 million to $5,117.6 mil-
lion, reflecting growth in all product categories and each
of our geographic regions. Product category results were
led by skin care, and our regions were led by Europe, the
Middle East & Africa, where results benefited from
favorable foreign exchange rates to the U.S. dollar and
improvements in the travel retail business. Travel retail
improved during the middle of fiscal 2003 compared
with lower results during the middle of fiscal 2002 but
was adversely affected during the last quarter of fiscal
2003 by certain world events, including the lingering
effects of the war in Iraq and concerns relating to SARS.
Such events may affect our future sales and earnings.
Excluding the impact of foreign currency translation, net
sales increased 4%.
Product Categories
Skin Care Net sales of skin care products increased 11%
or $190.4 million to $1,893.7 million, which was primarily
attributable to the recent launches of Perfectionist
Correcting Serum for Lines/Wrinkles and Resilience Lift
OverNight Face and Throat Crème by Estée Lauder, and
the Repairwear line of products and Advanced Stop Signs
from Clinique. Additionally, the increase was supported
by strong sales of Comforting Cream Cleanser, Moisture
Surge Extra Thirsty Skin Relief and Moisture Surge Eye
Gel, and products in the 3-Step Skin Care System by
Clinique, as well as by Re-Nutriv Ultimate Lifting Creme
from Estée Lauder, and A Perfect World line of products
by Origins. Partially offsetting this increase were lower net
sales of certain existing products such as Stop Signs, Total
Turnaround Cream and Turnaround Cream by Clinique
and Idealist Skin Refinisher by Estée Lauder. Excluding the
impact of foreign currency translation, skin care net sales
increased 7%.
Makeup Makeup net sales increased 7% or $118.9 mil-
lion to $1,909.4 million due to strong sales of our makeup
artist lines and current year launches of Dewy Smooth
Anti-Aging Makeup and Colour Surge Lipstick by
Clinique, and MagnaScopic Maximum Volume Mascara
and Artist’s Lip and Eye Pencils from Estée Lauder. Also
contributing to growth were strong sales from Estée
Lauder brand products including So Ingenious Multi-
Dimension Liquid Makeup and Loose Powder, as well as
from new and existing products in the Pure Color line.
Offsetting this increase were lower net sales of certain
existing products such as Sumptuous Lipstick from
Estée Lauder, and Gentle Light Makeup and Powder and
High Impact Eye Shadow Duos by Clinique. Excluding the
impact of foreign currency translation, makeup net sales
increased 4%.
Fragrance Net sales of fragrance products increased 4%
or $42.3 million to $1,059.6 million, primarily reflecting
the effects of favorable foreign currency exchange rates
to the U.S. dollar. The fragrance industry continues to
experience a difficult environment. The travel retail busi-
ness, which depends substantially on fragrance products,
began to improve in the middle of the fiscal year relative
to the prior year, however the latter part of fiscal 2003
was adversely affected by international uncertainties
stemming from events in Iraq and concerns relating to
SARS.In fiscal 2003, we successfully launched Estée
Lauder pleasures intense, Tgirl by Tommy Hilfiger, Clinique
Happy Heart, Lauder Intuition for Men and Donna Karan
Black Cashmere. Net sales also benefited from strong
sales of Beautiful by Estée Lauder and Aromatics Elixir
from Clinique. Offsetting these increases and sales from
new product launches were lower net sales of certain
Tommy Hilfiger products, Intuition by Estée Lauder and
Estée Lauder pleasures. Excluding the impact of foreign
currency translation, fragrance net sales were relatively
unchanged from the prior year.
Hair Care Hair care net sales increased 6% or $13.1 mil-
lion to $228.9 million. This increase was primarily the
result of sales growth from Aveda and Bumble and
bumble products. We also increased the number of
Company-owned Aveda Experience Centers and strate-
gicallydecreased the number of salons that offer Aveda
products. Partially offsetting the increase were lower net
sales of Clinique’s Simple Hair Care System.
The introduction of new products may have some
cannibalizing effect on sales of existing products, which
we take into account in our business planning.
Geographic Regions
Net sales in the Americas increased 3% or $75.2 million
to $2,953.4 million primarily reflecting growth from our
newer brands as well as the success of new and recently
launched products. Despite the increase, we continue to
experience a soft retail environment in the United States.
In Europe, the Middle East & Africa, net sales increased
19% or $245.3 million to $1,506.4 million. Net sales in
the United Kingdom, Spain, Italy, France, Switzerland and
Greece experienced double-digit growth. Also contribut-
ing to the increase with double-digit growth was our
worldwide travel retail business, as sales recovered from
the levels experienced after September 11, 2001. How-
ever, our travel retail business was adversely affected at
44