Estee Lauder 2011 Annual Report Download - page 108

106 THE EST{E LAUDER COMPANIES INC.
Serum from La Mer, of approximately $88 million, com-
bined. Higher sales from existing products in Clinique’s
3-Step Skin Care System and the Re-Nutriv line of
products from Estée Lauder contributed approximately
$31 million to the increase. These increases were partially
offset by approximately $92 million of lower sales from
existing products in the Advanced Night Repair and
Perfectionist lines from Estée Lauder and in the Super-
defense line from Clinique. Excluding the impact of foreign
currency translation, skin care net sales increased 9%.
Makeup Makeup net sales increased 5%, or $147.3 mil-
lion, 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 fiscal 2010 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, contributed approximately $74 million, com-
bined, 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 million, combined. During fiscal 2010,
we undertook an initiative to identify certain underper-
forming SKUs for the purposes of evaluating their rele-
vance 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 approximately
$15 million, combined. These declines were partially
offset by incremental sales from the fiscal 2010 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%.
Hair Care Hair care net sales increased 3%, or $11.5
million, to $413.9 million, primarily reflecting an increase
in net sales of certain styling and hair color products,
the fiscal 2010 launches of Smooth Infusion Glossing
Straightener and Control Force from Aveda and sales gen-
erated 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 environ-
ment and the closing of certain underperforming free-
standing retail stores. Excluding the impact of foreign
currency translation, 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 distribu-
tion 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, eco-
nomic conditions in the Americas region, particularly in
the department store channel, have negatively impacted
our business. To address these concerns, we introduced
new “High-Touch” concepts and worked 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 fiscal 2009.
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 ben-
efited from the favorable impact of foreign currency trans-
lation. Net sales increases of approximately $250 million
were driven by our travel retail business, the United King-
dom, Russia, South Africa, Germany and Turkey, reflecting
an improved retail environment, successful launches of