Jun 9, 2009
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Estee sees easy-on-wallet holiday items

Jun 9, 2009

By Aarthi Sivaraman

NEW YORK (Reuters) - Estee Lauder Cos Inc (EL.N) is working to put more affordable products on store shelves for the 2009 holiday season and expects seasonal sales to be similar to those of a year earlier, the cosmetics and perfume company's COO said on Tuesday 9 June.

Estée Lauder

Estee's steps are geared toward attracting cash-strapped shoppers who are seeking cheaper items in the recession but still have an affinity for their favorite makeup or skin-care products.

Speaking at the Reuters Global Luxury Summit in New York, Chief Operating Officer Fabrizio Freda said gift items for 2009 will "include all the learnings we have" from last year's holiday season.

"Some SKUs (stock keeping unit) will have a lower entry price point ... then we will have more innovation that will be focused in the area of the entry price points," Freda said.

Estee is also making smaller sizes for some products, such as the 50 ml (1.7 oz) and 30 ml (1 oz) bottles of its Clinique Happy perfume. Its regular size is 100 ml (3.4 oz).

"The value per ml is still in the 100 (ml) but the absolute price point in the 30 ml size is much lower, and they are finding they are selling more at that 30 ml size," said CEO William Lauder at the summit in New York. "The consumer has some money to spend, she just doesn't have as much so she'd rather spend a little bit now."

The fresh focus on prices comes after the retail industry last year suffered one of its worst holiday periods in nearly four decades. Shoppers cut back on unnecessary items in the economic slump, and retailers in turn promoted deep discounts to attract customers back into stores.

While consumers are not prepared to return to full-priced shopping any time soon, higher-end companies are trying to maintain the balance between preserving their brand image and enticing consumers with lower prices.

Estee's higher-end brands include La Mer and Estee Lauder, while its Clinique and M.A.C brands are considered more affordable.

As consumers seek to save, they are turning to less expensive brands like Clinique and M.A.C, but not "trading out" of its brands, which it sells primarily in department stores such as Macy's Inc (M.N) and Saks Inc (SKS.N), Lauder said.

"In North America as well as in other parts of the world, a value proposition for the consumer is getting her attention in a more meaningful manner than it did in the past," Lauder said. "The whole concept of 'price is no object' has really gone away."

Freda will replace Lauder at Estee's helm on July 1, to become only the second person who is not a member of the Lauder family to serve as CEO.

The company's stock has dropped 26 percent in the past year, falling to $19.82 on March 9 -- its lowest in 12 months.

One issue for the stock is that analysts that follow Estee Lauder in North America did not have any U.S.-based companies similar to Estee for comparison, so they usually end up viewing it alongside consumer products companies like Procter & Gamble Co (PG.N) or Colgate-Palmolive Co (CL.N), Lauder said.

Estee is seeking acquisitions that fit its portfolio, but Lauder did not give further details.

(Reporting by Aarthi Sivaraman; Editing by John Wallace, Phil Berlowitz)

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