Estee Lauder 2013 Annual Report Download - page 122

In order to meet the demands of consumers, we continu-
ally introduce new products, support new and established
products through advertising, merchandising and sam-
pling and phase out existing products that no longer meet
the needs of our consumers or our objectives. The eco-
nomics of developing, producing, launching, supporting
and discontinuing products impact our sales and operat-
ing 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 busi-
ness planning.
We operate on a global basis, with the majority of our
net sales generated outside the United States. Accord-
ingly, fluctuations in foreign currency exchange rates can
affect our results of operations. Therefore, we present cer-
tain net sales information excluding the effect of foreign
currency rate fluctuations to provide a framework for
assessing the performance of our underlying business
outside the United States. Constant currency information
compares results between periods as if exchange rates
had remained constant period-over-period. We calculate
constant currency information by translating current year
results using prior year weighted-average foreign currency
exchange rates.
OVERVIEW
We believe that the best way to continue to increase
stockholder value is to provide our customers and con-
sumers with the products and services that they have
come to expect from us in the most efficient and profit -
able manner while recognizing consumers’ changing
shopping habits. To be the global leader in prestige
beauty, we continued to implement a long-term strategy
that is guiding us through fiscal 2016. The strategy has
numerous initiatives across geographic regions, product
categories, brands and functions that are designed to
leverage our strengths, make us more productive and
grow our sales.
We have a strong, diverse and highly valuable brand
portfolio with global reach and potential, and we plan to
continue building upon and leveraging our history of
outstanding creativity, innovation and entrepreneurship.
We have succeeded in expanding our distinctive
“High-Touch” service model and will continue to look for
ways to further evolve it within our channels of distribu-
tion and geographic regions. As an example, we continue
to develop capabilities to deliver superior retailing experi-
ences, particularly in freestanding stores. We continue to
increase brand awareness by expanding our efforts to
evolve our online strategy into a multi-pronged digital
strategy encompassing e-commerce and m-commerce, as
well as digital and social media. We are leveraging our
regional organization in an effort to assure that we are
locally relevant with our products, services, marketing and
visual merchandising.
As part of our strategy, we are positioning ourselves to
capitalize on opportunities in the fastest-growing areas in
prestige beauty. Skin care, our most profitable product
category, continues to be a strategic priority for our inno-
vation and investment spending, particularly in the Asia/
Pacific region. We are also focusing our attention on
luxury consumers across all product categories and have
seen continued strength in the net sales of many of our
higher-end prestige products. We will also continue to
build our makeup product category through the introduc-
tion of new product offerings, re-emphasize our focus on
fragrance innovation to drive profitable growth and
expand our hair care brands both in salons and in other
retail channels.
We are strengthening our geographic presence by
seeking share growth in large, image-building cities within
core markets such as the United States, the United King-
dom, France, Italy and Japan. In addition, we continue to
prioritize efforts to expand our presence and accelerate
share growth in emerging markets such as China, the
Middle East, Eastern Europe and Brazil and focus on con-
sumers who purchase in the travel retail channel, in stores
at their travel destinations or when they return to their
home market. We also continue to expand our digital
presence which has resulted in growth in the net sales of
our products sold online. In North America, we continue
to implement programs to drive profitable growth in our
traditional department store channel. At the same time,
we are also expanding our presence in other channels,
such as specialty retailers, freestanding stores and online.
Internationally, we continue to take actions to grow in
European perfumeries and pharmacies and in department
stores in Asia. In addition, we are emphasizing our skin
care and makeup initiatives to boost our travel retail busi-
ness and continuing efforts to grow our freestanding
store, online, specialty retailer and prestige salon busi-
nesses. The travel retail business continues to be an
important source of sales growth and profitability. Our
business in this channel has benefited from the implemen-
tation of programs we designed to target consumers in
distinct travel corridors, enhance consumers’ “High-Touch”
experiences and convert travelers into purchasers.
120 THE EST{E LAUDER COMPANIES INC.