Estee Lauder Companies (EL) has reported 4.85 percent fall in profit for the quarter ended Sep. 30, 2016. The company has earned $294 million, or $0.79 a share in the quarter, compared with $309 million, or $0.82 a share for the same period last year. Revenue during the quarter went up marginally by 1.06 percent to $2,865 million from $2,835 million in the previous year period. Gross margin for the quarter contracted 45 basis points over the previous year period to 79.20 percent. Total expenses were 85.41 percent of quarterly revenues, up from 84.02 percent for the same period last year. That has resulted in a contraction of 139 basis points in operating margin to 14.59 percent.
Operating income for the quarter was $418 million, compared with $453 million in the previous year period.
Fabrizio Freda, president and chief executive officer, said, "Our first quarter sales grew in line with our expectations, while disciplined expense management delivered earnings per share that exceeded our guidance. Our small to mid-sized brands were strong contributors to sales as were the travel retail channel and many developed and emerging markets. As expected, this growth was partially offset by continued macro challenges, a decline in retail traffic in U.S. mid-tier department stores, the results of the slowdown in the Middle East, continued softness in Hong Kong, and difficult comparisons with the prior year in the United States and France.
For the second-quarter, Estee Lauder Companies projects revenue to grow in the range of 3 percent to 4 percent. Estee Lauder Companies projects revenue to grow in the range of 6 percent to 7 percent for the financial year 2017. The company forecasts diluted earnings per share to be in the range of $1.03 to $1.10 for the second-quarter. For financial year 2017, the company forecasts diluted earnings per share to be in the range of $3.20 to $3.30.
Working capital declinesEstee Lauder Companies has witnessed a decline in the working capital over the last year. It stood at $1,689 million as at Sep. 30, 2016, down 12.44 percent or $240 million from $1,929 million on Sep. 30, 2015. Current ratio was at 1.62 as on Sep. 30, 2016, down from 1.79 on Sep. 30, 2015. Cash conversion cycle (CCC) has decreased to 54 days for the quarter from 143 days for the last year period. Days sales outstanding were almost stable at 45 days for the quarter, when compared with the last year period.
Days inventory outstanding has decreased to 100 days for the quarter compared with 191 days for the previous year period. At the same time, days payable outstanding was almost stable at 91 days for the quarter, when compared with the previous year period.
Debt moves up
Estee Lauder Companies has witnessed an increase in total debt over the last one year. It stood at $2,500 million as on Sep. 30, 2016, up 21.71 percent or $446 million from $2,054 million on Sep. 30, 2015. Total debt was 26.74 percent of total assets as on Sep. 30, 2016, compared with 24.38 percent on Sep. 30, 2015. Debt to equity ratio was at 0.68 as on Sep. 30, 2016, up from 0.59 as on Sep. 30, 2015. Interest coverage ratio deteriorated to 19.90 for the quarter from 26.65 for the same period last year.
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