Executive Summary

• Estée Lauder reported that 2Q16 net sales rose by 2.6% year over year, to $3.1 billion, slightly above the consensus estimate and company guidance. Excluding currency and accelerated orders, net sales increased by 8% year over year.
• Diluted non-GAAP EPS was $1.22, above the consensus estimate of $1.09 and up 7.9% from the prior-year quarter. Excluding currency, adjusted EPS growth was 18%.
• The fastest growing segment was hair care, increasing by 9% year over year, to $149.0 million, versus consensus of $141.5 million. Sales were primarily driven by expanded global distribution, primarily in salons and freestanding stores. In terms of dollar contribution, makeup segments were the largest, more than offsetting the decline in skin care.
• Third-quarter guidance calls for revenues to increase by 2%–3% and for adjusted EPS of $0.53–$0.58, below analysts’ estimates of $0.76. The company lowered its full-year earnings guidance to $3.07–$3.12 per diluted share, compared to $3.10–$3.17 previously and below the consensus of $3.18.