Case Study

1 Estée Lauder Companies, I n c . —2 0 0 8 Sharynn To m l i n Angelo State University

E L www.ELCompanies.com

Based in New York City, Estée Lauder is a manufacturer and marketer of four cos- metic product lines: 1) skin care, 2) makeup, 3) fragrances, and 4) hair care products. These products are sold in over 130 countries and territories under brand names that include Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, MAC, Bobbi B r own, La Mer, Aveda, Jo Malone, Bumble and Bumble, Darphin, Rodan + Fields, American Beauty, Flirt!, Good Skin and Grassroots. Estée Lauder also has global licenses for fragrances and cosmetics sold under brand names that include Tommy Hilfiger, Donna Karan, Michael Kors, Donald Trump, Sean John, Missoni, and Daisy Fuentes. Estée Lauder announced in June 2007 that it might acquire skin care company Murad Inc., based in El Segundo, California. Murad sells skin care products and dietary supplements on the Internet and via infomercials, and also in spas and stores such as Sephora and Bath and Body Works. Estée Lauder’s final 2007 sales increased 7 percent to $7.037 billion.

E s tée Lauder sells its products mainly through upscale department stores, specialty retailers, upscale perfumeries and pharmacies, and prestige salons and spas. In addition, its products are sold in freestanding company - owned stores and spas as well as its own and other authorized retailers’ Web sites. You can also find Estée Lauder products for sale at stores on cruise ships, on television direct marketing channels, and at in-flight and duty-free shops.

Estée Lauder’s range of skincare products for women and men include moisturizers, creams, lotions, cleansers, sunscreens, and self-tanning products, a number of which are developed for use on particular areas of the body, such as the face, the hands, or around the eyes. Skincare products account for about 37 percent of net sales as compared to makeup products that account for about 39 percent of sales.

The company ’s makeup products include lipsticks, lip glosses, mascaras, foundations, eye shadows, nail polishes, and powders, as well as related items such as compacts, brushes, and other makeup tools. Fragrances for women and men comprise about 19 percent of sales. Fragrances are sold in perfume sprays and colognes, as well as lotions, powders, creams, and soaps.

Finally, Estée Lauder sells hair care products in salons and freestanding retail stores. These products include hair color and styling products, shampoos, conditioners, and fin- ishing sprays. In fiscal 2006, hair care products accounted for about 5 percent of sales. Each of the company’s brands has a single global image that is promoted with consistent logos, packaging, and advertising designed to differentiate it from other brands.

H i s t o r y B e a u t y, youth, and being forever young are common themes in the personal products industry. A young entrepreneur named Estée Lauder felt that she could provide a product that espoused those qualities. Estée Lauder Company was founded in 1946 by Estée Lauder and her husband Joseph Lauder. Estée was always interested in beauty and began her business selling the skin care products her chemist uncle, John Schotz, developed. Her first products were sold to beauty salons and hotels.

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CASE 1 • ESTÉE LAUDER COMPANIES, INC. — 2008 3

In the early years, Estée was unable to convince Madison Avenue to carry her prod- ucts. Facing this rejection, she began to market her products directly to customers. With that success, the Lauders began targeting high-class customers by selling products exclu- s ively through boutiques and department stores. In 1948, Estée Lauder established their first department store account with Saks Fifth Avenue in New York. During the next 15 years, the products were selectively distributed in other stores in the United States. In 1960 the company globalized their operations with the introduction of Estée Lauder products at Harrods in London, with the Hong Kong market opening the following year.

The first Estée Lauder products sold were Super Rich All Purpose Creme, Creme Pack, Cleansing Oil, and Skin Lotion. Additional brands such as Aramis, a line of prestige fragrance and grooming products for men was launched in 1964, and Clinique, the fi r s t dermatologist-guided, allergy-tested, fragrance-free cosmetics brand was launched in 1968. Prescriptives and Origins Natural Resources were early brands too. Estée Lauder acquired more brand licensing of names such as Tommy Hilfiger, MAC, Bobbi Brown, La Mer, Kiton fragrances, Donna Karan, and Aveda.

Mrs. Estée Lauder was named one of ten Outstanding Women in Business in the United States by business and financial editors in 1967. A year later she received the Spirit of Achievement Award from Albert Einstein College of Medicine at Yeshiva University. This was the same year that the company expanded again by opening Clinique Laboratories, Inc. In 1983, their products were introduced in the Soviet Union.

In 1998, Estée Lauder began selling a variety of products over the Internet and was one of the first major cosmetics firms to offer online shopping. A new division called ELC Online was created to manage all online strategies and activities for all of its brands. During this same time frame other acquisitions included Jo Malone, Stila Cosmetics, and Gloss.com. New York-based Bumble and Bumble LLC was acquired. In 2003, Darphin and Rodan + Fields were acquired and a license with Michael Kors was signed shortly afterward. In 2004, the company’s teen-oriented Jane business was sold and Estée Lauder launched Beauty, Flirt, and Good Skin through its BeautyBank division, followed by Grassroots in 2005 and Daisy Fuentes in 2006.

The year 2006 also saw license agreements with Sean John, Missoni, and Donald Trump, and the Stila brand was sold. Today Estée Lauder Companies has 26 brands, sells products in over 130 countries and territories, and employs over 22,000 people worldwide. Although Mrs. Estée Lauder passed away in April 2004, she witnessed the growth of a small home operation into a worldwide corporation with annual revenues of more than $5 billion. She was very proud that her company went public in 1995 and today is led by Estée and Joseph’s children and grandchildren.

Mission Statement In a short, succinct statement, Estée Lauder Companies, Inc. states that their vision is “bringing the best to everyone we touch.”1 Furthermore, the company is committed to uncompromised ethics and integrity. For all employees domestically and globally, and the board of directors, the highest standard of ethics is a condition of employment. The com- pany’s official home page elaborates by stating the following:

We are a family company committed to working together with uncompromising ethics and integrity. We strive to always:

1. Provide customers with innovative cosmetic products of the highest quality. 2. D e l iver outstanding service by treating each individual as we ourselves wo u l d

like to be treated. 3. Create an environment that fosters personal growth and well being. 4. Build partnerships with our suppliers, retailers and colleagues based on fairness

and trust. 5. Enhance our reputation of image, style and prestige. 6. Pursue profit, but never at the expense of quality, service or reputation.

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EXHIBIT 1 Organizational Chart

7. Eliminate waste and reduce inefficiencies in order to provide maximum value to our customers.

8. Be responsible citizens in every community we serve.2

O rganizational Structure As illustrated in Exhibit 1, it is not clear whether Estée Lauder uses a traditional functional structure or some type of divisional structure. It is managed primarily by Lauder family mem- bers as both the chief exe c u t ive officer (CEO) and chairman of the board are Lauders. There are

Source: Adapted from http://www.elcompanies.com

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CASE 1 • ESTÉE LAUDER COMPANIES, INC. — 2008 5

four group presidents who report to the CEO, but it is not clear whether these four persons have authority over the four product lines or four geographic areas of the world. The management systems at all Estée Lauder manufacturing operations conform to the ISO 14001 standards. Estée Lauder has offices, stores, and facilities all over the world as indicated in Exhibit 2.

Financial Po s i t i o n As indicated in Exhibit 3, Estée Lauder’s 2006 sales increased 3 percent to $6,463.8 mil- lion due to growth in their makeup, skin care, and hair care product categories, which was partially offset by lower sales in the fragrance product category. The net increase reflects

EXHIBIT 2 F i r m ’s Facilities

Facility Location Manufacturing

15 focused factories United States, Belgium, Switzerland, United Kingdom

and Canada Research and Development

400 scientists Melville, New York; Oevel, Belgium; Tokyo, Japan;

Markham, Ontario; Blaine, Minnesota; Shanghai, China; Kobe, Japan

Business Offices 43 worldwide

North America, South America, Central America, Asia, Europe, Middle East, Australia, New Zealand, Africa

Source: http://www.elcompanies.com

EXHIBIT 3 Consolidated Statements of Earn i n g s

Year Ended June 30

(In millions, except per share data) 2007 2006 2005 2004

Net Sales $ 7,037.5 6,463.8 6,280.0 5,741.5 Cost of sales 1,774.8 1,686.6 1,602.8 1,464.3 Gross Profit 5,262.7 4,777.2 4,677.2 4,277.2 Operating expenses:

Selling, general and administrative 4,511.7 4,065.5 3,950.4 3,609.5 Special charges related to cost savings

initiative 1.1 92.1 – – Related party royalties – – – 18.8

– 4,157.6 3,950.4 3,628.3 Operating Income 749.9 619.6 726.8 648.9

Interest expense, net 38.9 23.8 13.9 27.1 Earnings before Income Taxes, Minority

Interest and Discontinued Operations 711.0 595.8 712.9 621.8 Provision for income taxes 255.2 259.7 293.7 234.4 Minority interest, net of tax (7.1) (11.6) (9.3) (8.9)

Net Earnings from Continuing Operations 448.7 324.5 409.9 378.5 Discontinued operations, net of tax .5 (80.3) (3.8) (36.4) Net Earnings $ 449.2 244.2 406.1 342.1 Basic net earnings per common share:

Net earnings from continuing operations 1.51 1.82 1.66 Discontinued operations, net of tax (.37) (.02) (.16) Net earnings 1.14 1.80 1.50

Diluted net earnings per common share: Net earnings from continuing operations 1.49 1.80 1.64

continued

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sales growth in all geographic regions. Note that cost of sales as a percentage of total sales increased to 26.1 percent as compared with 25.5 percent in the prior year. Operating income decreased 15 percent to $619.6 million, and the operating margin was 9.6 percent of sales in fiscal 2006 as compared with 11.6 percent in the prior year. Note in Exhibit 4 that Estée Lauder’s long-term debt decreased 4.6 percent to $431 million in 2006.

EXHIBIT 3 Consolidated Statements of Earn i n g s — c o n t i n u e d

Year Ended June 30 (In millions, except per share data) 2007 2006 2005 2004

Discontinued operations, net of tax (.37) (.02) (.16) Net earnings 1.12 1.78 1.48

Weighted average common shares outstanding: Basic 215.0 225.3 228.2 Diluted 217.4 228.6 231.6

Cash dividends declared per share .40 .40 .30

Source: http://www.elcompanies.com

EXHIBIT 4 Consolidated Balance Sheets

All Amounts in Millions Except Share Data (Year Ended June 30)

2007 2006 2005

ASSETS

Current Assets Cash and cash equivalents $ 253.7 368.6 553.3 Accounts receivables, net 860.5 771.2 776.6 Inventory and promotional merchandise 855.8 766.3 768.3 Prepaid expenses and other current assets 269.4 270.8 204.4

Total Current Assets 2,239.4 2,176.9 2,302.6 Property, Plant, and Equipment, net 880.8 758.0 694.2 Other Assets Investments, at cost or market value 22.2 13.4 12.3 Goodwill 651.3 635.8 720.6 Other intangible assets, net 113.4 77.0 71.8 Other assets, net 218.6 123.0 84.3

Total Other Assets 1,005.5 849.2 889.0 Total Assets $ 4,125.7 3,784.1 3,885.8

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities Short-term debt 60.4 89.7 263.6 Accounts payable 1,440.3 264.5 249.4 Accrued income taxes – 135.5 109.9 Other accrued liabilities – 948.5 874.8

Total Current Liabilities 1,500.7 1,438.2 1,497.7 Noncurrent Liabilities Long-term debt 1,028.1 431.8 451.1 Other noncurrent liabilities 376.6 266.4 228.4

Total Noncurrent Liabilities $ 1,404.7 698.2 679.5

continued

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CASE 1 • ESTÉE LAUDER COMPANIES, INC. — 2008 7

EXHIBIT 4 Consolidated Balance Sheets

All Amounts in Millions Except Share Data (Year Ended June 30)

2007 2006 2005

Commitments and Contingencies

Minority Interest 21.3 25.4 15.8 Total Liabilities 2,926.7

Stockholders’ Equity

Common stock, $.01 par value; 650,000,000 shares Class A authorized; shares issued: 164,837,563 at June 30, 2006 and 159,837,545 at June 30, 2005; 240,000,000 shares Class B authorized; shares issued and outstanding: 85,305,915 at June 30, 2006 and 87,640,901 at June 30, 2005 2.6 2.5 2.5 Paid-in capital (capital surplus) 801.7 581.0 465.2 Retained earnings 2,731.5 2,361.9 2,203.2 Accumulated other comprehensive income 54.7 64.7 9.4

3,590.5 3,010.1 2,680.3 Less: Treasury stock, at cost; 38,382,458 Class A shares at June 30, 2006 and 27,174,160 Class A shares at June 30, 2005 (2,391.5) (1,387.8) (987.5)

Total Stockholders’ Equity 1,199.0 1,622.3 1,692.8

Total Liabilities and Stockholders’ Equity $4,125.7 3,784.1 3,885.8

Source: http://www.elcompanies.com

Finances by Pro d u c t As indicated in Exhibit 5, the company’s sales of skin care products increased 2 percent or $48.7 million to $2,400.8 million primarily due to new product launches. Makeup net sales increased 6 percent or $137.4 million to $2,504.2 million, reflecting growth from the m a keup artist brands of approximately $179 million. Net sales of fragrance products decreased 4 percent or $47.3 million to $1,213.3 million as the company continue to strug- gle in this product categ o r y, particularly in the Americas region. Hair care net sales increased 16 percent or $44.8 million to $318.7 million, primarily due to sales growth from Bumble and Bumble and Aveda products.

Finances by Geographic Region Exhibit 5 also reveals that Estée Lauder’s sales in the Americas increased 3 percent to $3,446.4 million, led by growth in the United States of about $190 million, primarily attributable to makeup artist and hair care brands, Internet distribution, and the introduc- tion of new fragrances. Net sales growth in Canada, Latin America, and Mexico con- tributed an additional $48 million to the increase.

In Europe, the Middle East, and Africa, net sales increased 2 percent to $2,147.7 mil- lion. Markets in Russia and the United Kingdom benefited from the success of the DKNY Be Delicious franchise and the sale of MAC products. These increases were partially off- set by decreases of approximately $26 million in Spain and Italy. Spain’s and Italy’s sales were adversely affected by changes in the distribution policy and a difficult retail environ- ment. Net sales in Europe, the Middle East, and Africa increased 5 percent.

The company’s 2006 sales in the Asia/Pacific region increased 6 percent to $869.7 million. Strategic growth in China combined with positive results in Korea and Hong Kong, contributed about $57 million to sales growth of this region. These increases were partially offset by decreases in Japan and Australia of about $18 million. Japan’s results were negatively impacted due to the strengthening of the U.S. dollar against the Japanese yen. The decrease in Australia reflected a slower and difficult retail environment, particu- larly in the fragrance category. Net sales in Asia/Pacific increased 7 percent.

— c o n t i n u e d

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M a r k e t i n g

P ro d u c t Estée Lauder markets more than 9,000 quality products under its portfolio of brands. Exhibit 6 summarizes the various products and dates of product launch or acquisition. Estée Lauder was the first major prestige cosmetics firm to offer shopping via the Internet. Department stores remain the best venue for high service and great brands since $7.6 bil- lion in beauty sales were generated in U.S. department stores in 2006, representing 18 per- cent of the total beauty market in the United States. Dan Brestle, COO of Estée Lauder, stated that distribution channels in North America, sales on TV, and sales in doctors’ offices are growing. However, the major shift has been in mall-based specialty stores. In Europe, the skincare business continues to migrate to pharmacies. While there is growth in perfumeries in Asia, the Asian department store continues to dominate that channel.3

P ro m o t i o n Estée Lauder was the first cosmetics company to offer free samples and gift-with-purchase and continues this strategy today. The company was also the first in the industry to intro- duce consistent brand imagery around the world. For this purpose, the company uses celebrities as endorsers in testimonial advertising for commercials on TV, as well as in magazines. Elizabeth Hurley, Carolyn Murphy, Liya Kebede, Gwyneth Paltrow, and Anja Rubik have been signed by the company, as well as Hilary Rhoda, who was named the new face of Estée Lauder in January 2007.

EXHIBIT 5 Financial Data per Segment for 2004–2007 (In Thousands)

Revenues

2007 2006 2005 2004 Skin Care $2,601,000 $2,400,800 $2,352,100 $2,140,100 Makeup 2,712,700 2,504,200 2,423,100 2,148,300 Fragrance 1,308,600 1,213,300 1,260,600 1,221,100 Hair Care 377,100 318,700 273,900 249,400 Other 38,100 26,800 26,600 31,500 Total $7,037,500 $6,463,800 $6,336,300 $5,790,400

Operating Income

2007 2006 2005 2004 Skin Care $341,500 $346,400 $365,800 $336,300 Makeup 339,300 329,400 294,900 257,700 Fragrance 28,100 7,700 35,800 24,800 Hair Care 42,500 26,500 22,800 23,600 Other (1,500) 1,700 1,300 1,600 Total $749,900 $711,700 $720,600 $644,000

Geographic Revenues Analysis

2007 2006 2005 2004 Asia/Pacific $ 983,200 $ 869,700 $ 835,500 $ 771,400 Europe/Middle

East/Africa 2,493,400 2,147,700 2,118,600 1,870,200 Americas 3,560,900 3,446,400 3,382,200 3,148,800 Total $7,037,500 $6,463,800 $6,336,300 $5,790,400

Source: Mergentonline.com

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CASE 1 • ESTÉE LAUDER COMPANIES, INC. — 2008 9

P r i c e Estée Lauder prices vary from product to product and from brand to brand, but tend to be in the mid-high to high range of the industry. Prestige pricing appears to be an effective strategy given their target markets.

Industry Fa c t o rs Much of the expected growth in the personal products industry will be fueled by the rising demand from emerging and developing markets. Estimates have shown that in “the next 20 years . . . 70 million people across the globe [will] reach an income level that allows pur- chasing of cosmetic products.”4 The U.S. Census Bureau predicts that by the year 2030, Americans over the age of 65 will represent one-fifth of the population, which is expected to devote a substantial part of their discretionary income to anti-aging products. Younger consumers, age 20–30 years old, are choosing to invest their purchasing dollars in preven- tive cosmetics to battle the effects of aging, and even teens are spending money on these types of products.

The world’s aging population will multiple by 2.5 times in the next 40 years, repre- senting over 33 percent of the total population. All geographic regions will be impacted by this increase, including high growth countries such as China and India. Additionally, the

EXHIBIT 6 Estée Lauder Brands

Brand Name Acquired Year

Estée Lauder 1946 Aramis 1964 Clinique 1968 Prescriptives 1979 Lab Series Skin Care for Men 1987 Origins 1990 MAC 1994 La Mer 1995 Bobbi Brown 1995 Tommy Hilfiger 1993 Kiton 1995 Donna Karan 1997 Aveda 1997 Jo Malone 1999 Bumble and Bumble 2000 Michael Kors 2003 Darphin 2003 Rodan + Fields 2003 American Beauty 2004 good skin™ 2004 Flirt! 2004 Donald Trump, The Fragrance 2004 grassroots™ 2005 Sean John Fragrances 2005 MISSONI 2005 Daisy Fuentes 2006

Source: http://www.elcompanies.com

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life ex p e c t a n cy of the aging population will continue to improve, with the diff e r e n c e between men and women gradually diminishing.

Companies will continue to devote substantial sums to research and development of new and appealing products. However, given the competitive pricing at megastores such as Wal-Mart, companies may be challenged to continue their patterns of innovative research. A d d i t i o n a l l y, there have been consumer complaints and inquiries into the use of animal testing for new products and many personal care product companies are dropping this form of product testing for more humane and creative testing techniques.

Though the federal Food and Drug Administration does not require testing of cos- metics, the agency has notified manufacturers that it would start to enforce labeling that included the statement “Warning—the safety of this product has not been determined.”5

However, these issues are not new, having affected the industry for more than 100 years. Concerns about the use of aerosols and fluorocarbons which first emerged in the

mid-1960s still remains an issue, especially as the need for decreasing damaging environ- mental pollutants continues to be debated by governments, companies, and consumers. Recent restrictions on products that can be carried in-flight have created uncertainty in the outlook for the travel retail business. In fiscal 2006, the travel retail business comprised approximately 7 percent of total net sales, and accounted for approximately 20 percent of operating income.

C o m p e t i t o rs Top competitors in the cosmetics business are dive r s i fied with many brand names and a wide range of products. A summary of key financial data on Estée Lauder and competitors is shown in Exhibit 7.

L’ O re a l L’Oreal is one of the worldwide leaders in cosmetics and distributes products in 130 coun- tries with 19 global brands and offices in 58 countries. In 2006, the company statements reflected €15.7 billion in consolidated sales, operating profits of €2.5 billion, and a com- mitment of 3.4 percent of the annual sales to research and development.

P rocter & Gamble Procter & Gamble has consistently pursued globalization with over 135,000 employ e e s working in over 80 countries and distribution of consumer products in 140 countries. The P&G brand portfolio includes Pampers, Tide, Ariel, Always, Pantene, Bounty, Fo l g e r s , Pringles, Charmin, Downy, Iams, Crest, Actonel, and Olay. While probably the most diver- sified, with a greater depth of product lines, Procter & Gamble continues to show strong growth and profitability. For the 2006 fiscal year, the company saw their fifth consecutive

EXHIBIT 7 Info on Competitors (2006) (in millions; amounts in US$ unless denoted otherwise)

Company Revenues EBITDA Net Income Total Assets Total

Liabilities PE Ratio

Alberto-Culver $ 3,772 378.9 205.3 2,582.5 823.6 20.80 Avon Products 8,763.9 477.6 917.0 5,238.2 4,447.8 28.91 Colgate-Palmolive 12,237.7 2,489.2 1,353.4 9,138 7,727 22.98 Estée Lauder 6,463.8 818 244.2 3,784.1 2,136.4 23.25 L’Oreal (euros) 15,729.3 3,157.4 2,062.1 24,783 10,158.8 NA Procter & Gamble 68,222 16,159 8,684 135,695 72,787 20.11 Revlon 1,331.4 60.5 –251.3 931.9 2,161.7 –2.62 Unilever (euros) 39,642 4,687 5,015 37,072 25,400 NA

Source: Mergentonline.com

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CASE 1 • ESTÉE LAUDER COMPANIES, INC. — 2008 11

year of sales growth and free cash flow productivity. P&G reported $68.2 billion of rev- enues with a net income of $8.6 billion in 2006.

U n i l e v e r U n i l eve r, the Anglo-Dutch food and personal products group, has 400 brands that span over 14 categories of home, personal care, and food products. Examples of their brands include Sunsilk, Suave, Dove, Lipton, and Hellman’s. With a sales growth of 3.8 percent, increased operating margins, and net profits increasing 10 percent (€5.4 million) since 2005, the company remains a strong competitive player. The growing financial health of the company enabled Unilever to return €750 million to shareholders as a one-off div i- dend. The personal care products division continues to represent an impressive share of their growth, showing an increase of 6.3 percent in 2006.

The percentage of Unilever’s U.S. research conducted online has more than doubled to 80 percent in five years. While the U.S. is its most advanced market, Unilever envisages similar trends in countries where Internet access is widely available, such as the United Kingdom and Japan. The shift to Internet projects by Unilever, which spends an estimated €400 million a year (2006) on research, reflects the We b ’s accelerating impact on the global market research industry.

C o l g a t e - Pa l m o l i v e Colgate-Palmolive, who marks their 200th year in 2006, markets a variety of products in the oral, personal, and home care segments. The company had industry-leading revenues of $11.3 billion in 2006 with a gross margin of 54.4 percent and a price earnings ratio of 26.77. The company reported a net income of $1,351,400,000 in 2006. Colgate-Palmolive also has a strong and supportive relationship with professional and trade groups that has increased with the introduction of new dental products.

Av o n Avon Products Incorporated sells beauty and related products consisting of cosmetics, fra- grances, skin care, and toiletries. Their principal offices are located in New York City near Estée Lauder. As the world’s largest direct seller of personal products (primarily cosmet- ics), Avon markets their products in over 100 countries through over 5 million independent sales representatives. Avo n ’s product line includes beauty products, fashion jew e l r y, and apparel. Their top-selling products include brand names such as Avon Color, Anew, Skin- So-Soft, Avon Solutions, Advance Techniques, Avon Naturals, Mark, and Avon Wellness. Despite 2006, considered a transition year in the company ’s restructuring efforts, Avo n Products had total revenues of $8.7 billion, with a gross margin of 60.80, a price earning ratio of 34.07, and net income of $477,600,000. Committed to their restructuring efforts, advertising increases by 83 percent, new market development such as China, and product and brand innovation, Avon continues to be a formidable competitor. Avon now has more than 700,000 saleswomen in China alone.

A l b e r t o - C u l v e r A l b e r t o - C u l ver Company operates a beauty supply distributio n network and deve l o p s , m a n u factures, and sells consumer beauty products with a strong presence in the profes- sional salon market. The company is led by Carol L. Bernick as chairman and V. James Marino as chief exe c u t ive officer and president with headquarters in Melrose Pa r k , Illinois. Alberto-Culver Company had $3.5 billion worth of revenues in 2006 with a gross margin of 50.22 percent, a price earnings ratio of 10.27, and a net income of $ 2 1 0 , 9 0 1 , 0 0 0 .

R e v l o n R evlon Worldwide Corporation offers a variety of cosmetic and beauty products under mul- tiple brands. Revlon is one of the best known brand names in the world and the company excels at mass marketing. The company is led by Wade H. Nichols, III as senior vice p r e si d e n t and general counsel and Howard Gittis as chairman, with principal offices in New York, New York. Revlon Worldwide Corporation had $2.1 billion in total revenues in 2006

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with a gross margin of 66.51 percent. The company ’s net income was $94,600,000 for 2006. International markets showed an increase in the first quarter of 2007 of 6.4 percent to $135.3 million, compared with net sales of $127.2 million in the first quarter of 2006.

C o n c l u s i o n At a recent meeting of the Estée Lauder stockholders, William Lauder stated about the c o m p a ny ’s future plans that “we expect to enhance our leadership in prestige beauty around the world. We will continue to deliver innovative, cutting-edge products and build strong global brands. We will target and reach diverse consumers by leveraging numerous distribution channels in key markets all over the world. Our goal is to optimize, diversify, and grow the business over the long term.”6 With these goals in mind, Estée Lauder has developed a long-term strategy based on five imperatives:

• Optimization of brand portfolio • Strengthening of product categories • Strengthening and expansion of global markets • Diversification and strengthening of channels of distribution • Operational and cost excellence.7

Acknowledgments: Joshua Colyar, Anna Flores, Pauline Gullett, Logan Mueller, Daniel Nichols, and Jasmine Reimann for their valued input.

E n d n o t e s 1. http://www.elcompanies.com 2. http://www.elcompanies.com 3. www.lexisnexis.com/EsteeLauder 4. http://www.researchandmarkets.com/reports 5. “Toiletries and Cosmetics.” Encyclopedia of Global Industries. Online Edition,

Thomson Gale, 2006. 6. www.lexisnexis.com/esteelauder 7. www.elcompanies/el2006-10K

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