Fabrizio Freda, President and Chief Executive Officer, said, “We concluded another outstanding fiscal year with a strong fourth quarter that saw high-single-digit sales gains and exceptional double-digit earnings per share growth. Fiscal 2013 marked another record year in which our Company achieved a number of historic milestones: $10 billion in net sales, 15.2% operating margin and $1 billion in net earnings. We also delivered record earnings per share and operating cash flow.
“Looking at a broader picture, we once again posted sales growth that we believe was greater than global prestige beauty, and achieved strong across-the-board sales gains in each of our geographic regions and major product categories. This year we also advanced our strategic priorities, including enhancing our business in skin care, emerging markets and fast-growing distribution channels.
“We expect our strong momentum to extend into fiscal 2014. We will support our sales growth by launching outstanding products, further penetrating fast-growing emerging markets, expanding our distribution in fast growing prestige channels and reigniting our fragrance category. Consistent with our strategy, we intend to support our business with targeted investments aimed at enhancing the global reach of our brands and further building long-term brand equity. Finally, we expect to benefit from the investments we’ve made in capabilities and technology. We believe all of these factors should enable us to grow local currency sales 6% to 8% and achieve constant dollar double-digit earnings per share growth this year, and help progress us towards reaching our new long-term operating margin target of 16.5% in fiscal 2016.”
During the fiscal year, sales growth was particularly strong in the Company’s luxury brands, online and travel retail channels and overall in emerging markets, along with solid gains in several developed countries. The Company made meaningful progress on its strategic goals and realized an improvement in cost of sales and operating expenses as a percentage of net sales. In connection with the long-term strategic plan and certain initiatives, the Company realized savings of $73 million during the year and closed its restructuring program, achieving cumulative savings of $781 million. As planned, the Company increased global advertising spending versus the prior year to build momentum and gain share in its key markets and product categories. As a percentage of net sales, advertising, merchandising and sampling expenses increased modestly to support the Company’s biggest innovations, while certain other significant operating expenses were lower.