Weakness for Estee Lauder

Weakness For Estee Lauder

1. Decline in Estee Lauder and Clinique Brands

Sales in the quarter rose 7.1 percent to $1.7 billion. Makeup and skin care sales increased in the quarter, but the company said there was weakness in sales of its core brands, and in the domestic market. Estee Lauder and Clinique are their largest brands. Worldwide, sales of each brand climbed by low single digits.

We will increase investment in Clinique in fiscal '07 to facilitate growth in the U.S. and build on the brand's momentum overseas. This year, we will invest in areas with the biggest payoff, skin care and foundation. Clinique will stress its key points of differentiation through smart compelling print ads, national TV commercials and the Internet and other technologies such as text messaging to reach consumers.

We continue to revitalize our two largest brands, and now have a season's worth of experience with national gift dates implemented by major U.S. department stores. We had anticipated the total gift sales would decline due to fewer department store doors than last year. For the Estee Lauder brand, gift sales were flat for the six-month period in like doors. For Clinique, where gift related sales in like doors for a six month decline, the business is more challenging.

Whilst there was an overall increase of 9.4% in the revenues of the company, its

brands, Estee Lauder and Clinique did not perform well in 2005. In fiscal 2005, the skin care products recorded a decline of approximately $52 million in sales of

Perfectionist Correcting Serum for Lines/Wrinkles, Idealist Micro-D Deep Thermal

Refinisher, and the White Light and LightSource lines of Estee Lauder. The makeup

segment recorded a decline of approximately $38 million in sales of the High Impact

Mascara, High Impact Eye Shadow collections, and the Glosswear line of products by

Clinique; and Pure Color Lip Vinyl by Estee Lauder.

2. Over dependence in US department stores

Estee Lauder derives 80% of