Estee Lauder 2009 Annual Report Download - page 104

THE EST{E LAUDER COMPANIES INC. 103
sales from certain other existing Idealist products and
Perfectionist products from Estée Lauder. Net sales of
other new and existing products also signifi cantly contrib-
uted to the growth. Excluding the impact of foreign cur-
rency translation, skin care net sales increased 10%.
Makeup Makeup net sales increased 11%, or $287.7 mil-
lion, to $3,000.4 million reflecting growth from our
makeup artist brands of approximately $194 million. Also
contributing to the growth were incremental sales from
the launches of Estée Lauder Signature Hydra Lustre
Lipstick, Double Wear Zero Smudge Mascara and Eyeliner
from Estée Lauder, Supermoisture Makeup and Superbalm
Moisturizing Gloss from Clinique, as well as higher sales
of Double Wear Stay-In-Place Makeup from Estée Lauder
of approximately $97 million, combined. Partially offset-
ting these increases were lower sales of approximately
$30 million of Pure Color Eyeshadow and High Gloss
from Estée Lauder and Colour Surge Lipstick from
Clinique. Excluding the impact of foreign currency transla-
tion, makeup net sales increased 7%.
Fragrance Net sales of fragrance products increased 9%,
or $123.4 million, to $1,432.0 million. The launches of
Sean John Unforgivable Woman, Dreaming Tommy
Hilfi ger, Estée Lauder Pure White Linen Light Breeze, Estée
Lauder pleasures delight and DKNY Delicious Night col-
lectively contributed approximately $95 million to the
growth in the category. Higher sales of approximately $62
million of DKNY Be Delicious, Jo Malone and Tom Ford
fragrances also contributed to the increase. Lower sales of
approximately $53 million of Tommy Girl by Tommy
Hilfi ger, DKNY Red Delicious Women and DKNY Be
Delicious Men partially offset the growth in this product
category. Excluding the impact of foreign currency trans-
lation, fragrance net sales increased 5%.
Hair Care Hair care net sales increased 13%, or $50.0
million, to $427.1 million, primarily due to the inclusion of
the Ojon brand which was acquired at the end of July
2007, as well as growth from Aveda and Bumble and
bumble. Aveda net sales increases benefi ted from the
launches of Smooth Infusion and Aveda Men Pure-
Formance products, as well as the fi scal 2008 acquisition
of an independent distributor. Bumble and bumble net
sales benefited from new points of distribution and
increases from its hotel amenities program, which con-
cluded in the fi scal 2008 third quarter. Excluding the
impact of foreign currency translation, hair care net sales
increased 11%.
geographical mix of earnings, enacted tax legislation, state
and local income taxes, tax audit settlements and the
interaction of various global tax strategies.
The effective rate for income taxes for the year ended
June 30, 2009 was 33.8% as compared with 34.9% in the
prior year. The decrease in the effective income tax rate of
110 basis points was primarily attributable to a favorable
settlement with the Appeals Division of the IRS (560 basis
points), partially offset by an increase in non-deductible
expenses and an increase in state and local income tax
expense (450 basis points).
NET EARNINGS
Net earnings as compared with fi scal 2008 decreased
54%, or $255.4 million, to $218.4 million and diluted net
earnings per common share declined 54% from $2.40 to
$1.10. These results include the impact of total charges
associated with restructuring activities of $61.7 million,
after tax, or $.31 per diluted common share.
FISCAL 2008 AS COMPARED WITH FISCAL 2007
NET SALES
Net sales increased 12%, or $873.3 million, to $7,910.8
million, refl ecting net sales growth in all of our product
categories within each geographic region. Skin care,
makeup and fragrance net sales increases were led by
Europe, the Middle East & Africa while most of the net
sales increase in hair care was achieved in the Americas.
The increase in net sales refl ected our efforts to capitalize
on growth opportunities internationally. Excluding
the impact of foreign currency translation, net sales
increased 8%.
Product Categories
Skin Care Net sales of skin care products increased 15%,
or $395.8 million, to $2,996.8 million. This growth
refl ected the launches of Idealist Pore Minimizing Skin
Refi nisher, Cyber White EX and Hydra Bright Skin Tone
Perfecting Moisturizers from Estée Lauder. Also contribut-
ing to the growth were the recent launches of products in
the Acne Solutions Clear Skin System, Redness Solutions
and Even Better Skin Tone Corrector from Clinique as well
as The Eye Concentrate and The Moisturizing Gel Cream
from La Mer. Collectively, these new products resulted in
incremental sales of approximately $215 million. Net sales
increases from Re-Nutriv and Resilience Lift Extreme Ultra
Firming products from Estée Lauder, products in Clinique’s
3-Step Skin Care System and Repairwear line, and
Tri-Aktiline™ Instant Deep Wrinkle Filler from Good Skin™
totaled approximately $80 million. These improvements
were partially offset by approximately $55 million of lower