Estee Lauder Cos Inc. (EL) Thursday posted a 10-percent higher quarterly profit, led by sales of hair-care, make-up and skin-care products, but concern about its fragrance business reined in its shares.

Profit rose to $138.3 million, or 60 cents per share, in the fiscal second quarter ended Dec. 31, from $126.3 million, or 54 cents, a year earlier. Analysts' average profit forecast was 57 cents per share, according to Reuters Estimates.

New York-based Estee Lauder, whose brands include Clinique and Aveda, said sales climbed 8 percent to $1.75 billion, helped by products like a new antiwrinkle cream and new hair-care products. Excluding gains from foreign currency translation, sales rose 5 percent.

The company backed its prior outlook for the 2005 fiscal year ending in June, saying it could reach full-year targets of around 7 percent sales growth excluding the impact of foreign exchange rates, and earnings per share in the range of $1.88 to $1.93.

Analysts' forecasts range from $1.89 to $1.95 per share, with an average of $1.92, according to Reuters Estimates. A year-ago Estee Lauder posted a profit of $1.62 a share. full-year estimate by 4 cents to $1.94 a share.

William Schmitz at Deutsche Bank Equity Research said that by sticking to its full-year EPS forecast, Estee Lauder "effectively lowers Street and our expectations for the balance of the fiscal year."

He added the company needed to improve its fragrance business in a "lousy operating environment."

Shares in Estee Lauder were off 0.7 percent at $45.03 on the New York Stock Exchange by early afternoon.

The company forecast net sales for the second half of 2005 to grow around 9 percent, including a benefit of about 2 percentage points from the weak dollar, and said it expected earnings per share of between 87 and 92 cents for the period.

Full-year 2005 net sales were forecast to grow between 9 percent and 10 percent in dollars.

Prudential Equity Group analysts said Estee Lauder's second quarter earnings per share beat its estimate by 4 cents. The company's second-half EPS "guidance is slightly lower than our 93-cent estimate but close enough that we're sticking with it," the analysts said in a note, adding they would raise their full-year estimate by 4 cents to $1.94 a share.

Fragrance sales rose 3 percent, to $458.6 million, but fell 1 percent excluding currency effects. The business was hit by consumers' preference for celebrity perfumes, such as the line recently launched under the name of pop star Britney Spears (search), and a scramble for attention amid a boom in the number of new products.

"While Christmas is a large fragrance season the category continued to be challenged. The trend toward celebrity fragrances took the spotlight over the holiday, drawing the consumer to the appeal of star-studded products," President and CEO William Lauder told a conference call.

Skin care was still the top-earning product range in the second quarter, with net sales up 8 percent to $617.4 million helped by the recent launch of products like Future Perfect Anti-Wrinkle Radiance Creme SPF15 (search).

Sales of hair-care products and services jumped 14 percent, to $71.6 million, due mainly to a strong performance at Aveda after the launch of new products like Pure Abundance and Air Control Hair Spray, as well as good sales at Bumble and Bumble (search).

Make-up sales rose 12 percent, to $592.4 million.

The company's U.S. business led global sales growth, up 9 percent to $877.7 million. Sales in Europe, Middle East and Africa gained 7 percent to $628.9 million while Asia/Pacific net sales rose 7 percent to $243.7 million.