The Estée Lauder Companies Inc. reported net sales of $3.35 billion for its third quarter ended 31st March, 2020, a decrease of 11% from $3.74 billion in the prior-year period.
Excluding the impact of currency translation, net sales decreased 9%. The net sales decline was driven by retail store closures as a result of the global spread of COVID-19 that was partially offset by the inclusion of net sales from the company’s recent acquisition of Have&Be Co. Ltd., which contributed approximately 2 percentage points to reported net sales growth.
The company reported a net loss of $(6) million, compared with net earnings of $555 million last year. Diluted net loss per common share was $(.02), compared with diluted earnings per common share of $1.51 reported in the prior-year period. Excluding the negative impact of currency translation, adjusted diluted earnings per common share, which excludes items detailed on page 5, fell 45% to $.86.
Fabrizio Freda, President and Chief Executive Officer said, “While the terrific double-digit momentum in sales growth from the first half of our fiscal year carried into January, the dynamics in the quarter changed significantly as COVID-19 spread beyond Asia. By early March, consumers around the world began social distancing which resulted in lower traffic in retail locations. As March evolved, most retail stores temporarily closed and consumers increasingly stayed home. In this very complex and unprecedented environment, there were several bright spots across our portfolio which drove global prestige beauty share expansion in the quarter. The Estée Lauder, Darphin, and Le Labo brands grew, global online sales rose strong double-digits, sales in mainland China and global travel retail increased, and skin care sales grew internationally, including Dr. Jart+. The surge in our online business worldwide, coupled with the recovery we are seeing emerge in China, confirm consumers’ passion for our prestige beauty portfolio.”
The company recorded a $346 million, or $.83 per diluted share, impairment charge across Too Faced, GLAMGLOW, BECCA, Smashbox and certain of its freestanding stores, reflecting the recent actual and estimated potential future financial impacts of COVID-19.
With the exception of GLAMGLOW, the impairment of goodwill is not tax deductible, which negatively impacted the fiscal 2020 third quarter tax rate. A higher effective rate on the company’s foreign operations also resulted in a higher tax rate. The overall higher tax rate contributed to the net loss for the quarter.