Estee Lauder 2012 Annual Report Download - page 115

THE EST{E LAUDER COMPANIES INC. 113
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
fiscal 2011 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 fiscal 2011
launches of Repairwear Laser Focus Wrinkle & UV
Damage Corrector from Clinique and the Plantscription
line of products from Origins of approximately $88 mil-
lion, combined. The fiscal 2011 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 con-
tributed approximately $48 million to the increase. These
increases were partially offset by approximately $108 mil-
lion 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 mil-
lion, 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 approximately
$322 million, combined. The fiscal 2011 launches of Pure
Color eyeshadow products and Pure Color Long Lasting
Lipstick from Estée Lauder and Redness Solutions Makeup
from Clinique contributed approximately $57 million, to
the increase. The higher results also reflected the favor-
able comparison to fiscal 2010 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 Super-
fit Makeup from Clinique and Resilience Lift Extreme
Makeup from Estée Lauder of approximately $45 million,
combined. Excluding the impact of foreign currency trans-
lation, 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 fiscal 2011 launches of Estée Lauder pleasures
bloom and Hilfiger Loud for Her contributed approxi-
mately $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 reflected
the 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%.
Hair Care Hair care net sales increased 4%, or $18.4 mil-
lion, to $432.3 million, primarily reflecting the fiscal 2011
launches of Be Curly Style-Prep and Control Force from
Aveda. The category also benefited from net sales gener-
ated from expanded global distribution. These increases
were partially offset by the reformulation of Ojon brand
products, which was relaunched in the fourth quarter of
fiscal 2011. The impact of foreign currency translation on
hair care net sales was de minimis.
Geographic Regions
Net sales in the Americas increased 10%, or $354.2 mil-
lion, to $3,796.3 million. The increase in fiscal 2011 was
primarily attributable to growth in the United States and
Canada from our heritage and makeup artist brands,
which benefited from an improved retail environment,
new skin care and makeup product offerings and
an increase in sales of higher-end prestige skin care
products. Net sales also reflected the addition of the
Smashbox brand to our portfolio. While partially offset by
the exit from the global wholesale distribution of the
Prescriptives brand and the fiscal 2011 reformulation of
Ojon brand products, all of these factors contributed to
higher net sales in the United States and Canada of