Estee Lauder 2011 Annual Report Download - page 104

102 THE EST{E LAUDER COMPANIES INC.
existing negative margins, the market approach was
deemed not applicable. These impairment charges were
reflected in the hair care and skin care product categories
and in the Americas region.
Although our financial performance reflected
improved economic conditions, we expect global eco-
nomic uncertainties to continue to impact our business.
As the duration and magnitude of the volatility of the
current economic conditions remain uncertain, we will
continue to monitor and evaluate the potential impact on
our business and on our interim and annual impairment
testing. Accordingly, it is possible that we would recog-
nize an impairment charge in the future with respect to
goodwill, other intangible assets and long-lived assets.
FISCAL 2011 AS COMPARED WITH FISCAL 2010
NET SALES
Net sales increased 13%, or $1,014.2 million, to $8,810.0
million, reflecting increases in all geographic regions and
product categories. Excluding the impact of foreign cur-
rency translation, net sales increased 12%. During fiscal
2010, we undertook an initiative to identify certain under-
performing stock keeping units (“SKUs”) for the purposes
of evaluating their relevance 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 $31 million to reflect then -
anticipated returns of products from participating retailers .
This resulted in a favorable comparison with fiscal 2010.
The following discussions of Net Sales by Product
Categories and Geographic Regions exclude the impact
of returns associated with restructuring activities of $4.6
million and $15.7 million recorded during fiscal 2011 and
fiscal 2010, respectively. We believe the following analysis
of net sales better reflects the manner in which we
conduct and view our business.
Product Categories
Skin Care Net sales of skin care products increased 15%,
or $491.5 million, to $3,718.6 million, reflecting the suc-
cess of our strategic focus on growing this category. The
recent launches of the Re-Nutriv Ultimate Lift Age-
Correcting and Hydrationist Collections, Idealist Even
Skintone Illuminator and Idealist Cooling Eye Illuminator
from Estée Lauder contributed incremental sales of
approximately $102 million, combined. Also contributing
incremental sales to the category were the recent
launches of Repairwear Laser Focus Wrinkle & UV
Damage Corrector from Clinique and the Plantscription
line of products from Origins of approximately $88
million, combined. The recent launches of The Eye Balm
Intense and The Radiant Serum from La Mer contributed
additional sales of approximately $25 million, combined.
Increased sales of Advanced Night Repair Eye Synchro-
nized Complex from Estée Lauder and Even Better Clinical
Dark Spot Corrector from Clinique, which were launched
in fiscal 2010, contributed approximately $232 million to
the net sales growth. Higher sales of the Time Zone line
of products from Estée Lauder, Derma White Clinical from
Clinique and The Regenerating Serum from La Mer
contributed approximately $48 million to the increase.
These increases were partially offset by approximately
$108 million of lower sales from existing products in the
Advanced Night Repair line from Estée Lauder and Cyber
White EX from Clinique. Excluding the impact of foreign
currency translation, skin care net sales increased 13%.
Makeup Makeup net sales increased 13%, or $392.6
million, to $3,370.8 million. The increase in makeup net
sales primarily reflected higher net sales from our makeup
artist brands and the inclusion of Smashbox of approxi-
mately $322 million, combined. The recent launches of
Pure Color eyeshadow products and Pure Color Long
Lasting Lipstick from Estée Lauder and Redness Solutions
Makeup from Clinique contributed approximately $57 mil-
lion, to the increase. The higher results also reflect the favor-
able comparison to the prior year which included a charge
related to our long-term perfumery strategy, as previously
discussed, of approximately $27 million. These increases
were partially offset by lower sales of Prescriptives prod-
ucts due to the exit from the global wholesale distribution
of the brand in fiscal 2010, as well as lower sales of Superfit
Makeup from Clinique and Resilience Lift Extreme Makeup
from Estée Lauder of approximately $45 million,
combined. Excluding the impact of foreign currency
translation, makeup net sales increased 12%.
Fragrance Net sales of fragrance products increased 9%,
or $99.1 million, to $1,236.0 million. Incremental sales
from the recent launches of Estée Lauder pleasures bloom
and Hilfiger Loud for Her contributed approximately $34
million to the category. Higher sales of Coach Poppy,
pureDKNY and various Jo Malone and Tom Ford
fragrances contributed approximately $63 million to the
increase. Partially offsetting these increases were lower
sales of DKNY Delicious Candy Apples, Estée Lauder
Sensuous and I Am King Sean John of approximately
$18 million, combined. While results in fiscal 2011 reflect
implementation of our long-term strategy for the
category, we continue to expect challenges due to
competitive dynamics. Excluding the impact of foreign
currency translation, fragrance net sales increased 8%.