Estee Lauder Companies (EL) has reported 4.25 percent fall in profit for the quarter ended Dec. 31, 2016. The company has earned $428 million, or $1.15 a share in the quarter, compared with $447 million, or $1.19 a share for the same period last year. On an adjusted basis, earnings per share were at $1.15 for the quarter compared with $1.19 in the same period last year. Revenue during the quarter went up marginally by 2.69 percent to $3,208 million from $3,124 million in the previous year period. Gross margin for the quarter contracted 100 basis points over the previous year period to 80.14 percent. Total expenses were 80.77 percent of quarterly revenues, up from 79.83 percent for the same period last year. That has resulted in a contraction of 93 basis points in operating margin to 19.23 percent.
Operating income for the quarter was $617 million, compared with $630 million in the previous year period.
Fabrizio Freda, president and chief executive officer, said, "Our second quarter sales growth accelerated as planned, reflecting the benefits of our portfolio diversity by brand, channel, product category and country. Our small, mid-sized and luxury brands continued to lead growth, contributing strong sales increases, and recent acquisitions added incremental sales. Additionally, among our large brands, Estée Lauder and M•A•C each grew in constant currency. We achieved strong double-digit growth in our most profitable channels including travel retail, online and specialty-multi. Sales growth accelerated in most product categories and every geographic region in constant currency. We have strategically invested in these growth engines to produce strong results, as well as position us for continued future success. For the quarter, our profits were higher than expected, reflecting our ability to leverage sales growth and manage expenses.
For the third-quarter, Estee Lauder Companies forecasts revenue to grow in the range of 5 percent to 6 percent. Estee Lauder Companies forecasts revenue to grow in the range of 4 percent to 5 percent for the fiscal year 2017. The company expects diluted earnings per share to be in the range of $0.60 to $0.67 for the third-quarter. For fiscal year 2017, the company expects diluted earnings per share to be in the range of $3.07 to $3.14.
Debt increases substantially
Estee Lauder Companies has witnessed an increase in total debt over the last one year. It stood at $4,033 million as on Dec. 31, 2016, up 104.82 percent or $2,064 million from $1,969 million on Dec. 31, 2015. Total debt was 35.97 percent of total assets as on Dec. 31, 2016, compared with 22.94 percent on Dec. 31, 2015. Debt to equity ratio was at 1.06 as on Dec. 31, 2016, up from 0.54 as on Dec. 31, 2015. Interest coverage ratio deteriorated to 28.05 for the quarter from 37.06 for the same period last year.
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