Estee Lauder 2009 Annual Report Download - page 101

100 THE EST{E LAUDER COMPANIES INC.
Makeup Makeup net sales decreased 6%, or $169.5 mil-
lion, to $2,830.9 million, primarily refl ecting lower net
sales from our heritage brands of approximately $162 mil-
lion. Lower net sales in the makeup product category also
refl ected a net decrease from our makeup artist brands of
approximately $14 million, driven by the Americas region,
partially offset by additional points of distribution interna-
tionally. These declines were mitigated in part by recent
product launches of reformulated Superfi t Makeup and
High Impact Lip Colour SPF 15 from Clinique, as well as
Estée Lauder Signature Blush, which contributed incre-
mental sales to the category of approximately $82 million,
combined. Excluding the impact of foreign currency trans-
lation, makeup net sales decreased 1%.
Fragrance Net sales of fragrance products decreased
20%, or $281.1 million, to $1,150.9 million. This decline
was largely due to lower sales of designer fragrances, of
which approximately $181 million was attributable to
certain DKNY, Tommy Hilfi ger and Sean John fragrances.
Also contributing to the decrease were lower sales of
certain Estée Lauder and Clinique fragrances of approxi-
mately $132 million, combined. The recent launches of
Estée Lauder Sensuous, Hilfi ger Men, the new DKNY Men
fragrance and I Am King Sean John partially offset these
declines by collectively contributing sales of approxi-
mately $88 million to the category. Excluding the impact
of foreign currency translation, fragrance net sales
decreased 14%.
Hair Care Hair care net sales decreased 6%, or $24.7
million, to $402.4 million, primarily refl ecting a soft salon
retail environment and a reduction in points of distribu-
tion in the United States. Net sales were also negatively
impacted as a result of the conclusion of a hotel amenities
program in the third quarter of fi scal 2008. These declines
were partially offset by incremental sales of approximately
$13 million from new products, such as Dry Remedy
Shampoo and Conditioner and the Sun Care line of
products from Aveda. The category also benefi ted from
improved sales of hair color products, as well as an
increase in points of distribution outside of the United
States, including the acquisition of an independent
distributor in Australia. Excluding the impact of foreign
currency translation, hair care net sales decreased 3%.
Geographic Regions
Net sales in the Americas decreased 8%, or $290.3 mil-
lion, to $3,421.2 million. Lower net sales in the United
States from our heritage and makeup artist brands as well
as our hair care businesses contributed approximately
$275 million to the decrease. Net sales declines in Canada
of approximately $36 million were partially offset by
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 2009 AS COMPARED WITH FISCAL 2008
NET SALES
Net sales decreased 7%, or $587.0 million, to $7,323.8
million, refl ecting declines in each of our major product
categories. Net sales decreases in Europe, the Middle East
& Africa and the Americas refl ected customer destocking
in all of our major product categories. These declines
were partially offset by growth in Asia/Pacifi c. Excluding
the $389.4 million impact of foreign currency translation,
net sales decreased 2%. The following discussions of Net
Sales by Product Categories and Geographic Regions
exclude the impact of returns associated with restructur-
ing activities of $8.1 million incurred in fi scal 2009. We
believe the following analysis of net sales better refl ects
the manner in which we conduct and view our business.
Product Categories
Skin Care Net sales of skin care products decreased 4%,
or $110.8 million, to $2,886.0 million, primarily refl ecting
declines in net sales from our heritage brands. Despite the
difficult economic environment and the unfavorable
impact of foreign currency translation, we continued
to enhance select product lines to address the needs of
our consumers. The recent launches of Perfectionist
[CP+] Wrinkle Lifting Serum and the new Time Zone
line of moisturizing products from Estée Lauder and
Superdefense SPF 25 Age Defense Moisturizer and Youth
Surge SPF 15 Age Decelerating Moisturizer from Clinique
contributed incremental sales of approximately $181
million, combined. While these new product launches
contributed favorably to the category, they were partially
offset by lower sales from other existing products in the
Perfectionist, Idealist and Re-Nutriv lines from Estée Lauder
and the Superdefense and Repairwear lines from Clinique
of approximately $163 million, combined. Net sales of
most other product lines in this category also experienced
declines, particularly in Europe, the Middle East & Africa
and the Americas, partially offset by double-digit growth
in Asia/Pacifi c. Excluding the impact of foreign currency
translation, skin care net sales increased 2%.