Estée Lauder profit soars on robust Asia sales

By

Erin Floyd

Published
May 1, 2019

US beauty company Estée Lauder Cos Inc beat on profit in its latest quarter as it benefited from high demand for skincare products and robust sales in the Asia Pacific region.

The group, whose portfolio comprises over 25 brands including Estée Lauder, La Mer, Clinique and MAC, said on Wednesday net sales rose 11% to $3.74 billion in the three months to March 31, its fiscal third quarter. Net earnings were up 49% to $555 million.

“We delivered terrific performance in our fiscal third quarter, driven by strategic investments in our best opportunities combined with creativity and data-driven insights that fueled exciting innovations,” commented president and CEO Fabrizio Freda. “These drivers strengthened loyalty to our brands and hero franchises and attracted new consumers globally.”

The company has also reinvested the savings from its Leading Beauty Forward initiative into targeted advertisements, ramping up support for new product launches as the group tightens its focus on expanding its hero product franchises and creating "fewer but bigger" launches.  

Skincare was the top-performing category during the quarter with a 21% increase in net sales. The group recorded growth across most regions, led by brands La Mer and Estée Lauder, whose hero franchises such as Advanced Night Repair and Nutritious continued to chime with consumers.

Makeup sales rose 7% in the quarter to $1.46 billion, led by demand for prestige beauty in Asia and strength in the travel retail channel. Brands that delivered the most growth were Tom Ford Beauty, Estée Lauder, La Mer and MAC, while Clinique and Smashbox reported lower sales.

Geographically, the Asia/ Pacific region was overall the strongest growth engine for the company. Net sales were up 27% to $966 million, helped by double-digit net sales growth in “virtually every major product category and channel,” the group said. The company added that it had previous factored in a slowdown due to factors including U.S. economic slowdown; trade tensions relating to China and Brexit-related uncertainty affecting consumer spend. However, it noted that no moderation in Chinese demand or softening in travel retail occurred.

“We had anticipated a gradual moderation of growth in China and travel retail starting in the quarter, which didn’t happen, and that contributed to our overachievement,” said Freda.

The Europe, the Middle East and Africa region, up 20%, brought in $1.63 billion. In the US, which represents 25% of the group’s business, sales were down by 6% to $1.15 billion. Weakness in North America, where half the company’s business is in department stores and faces continuing headwinds, was in line with major market trends, Freda said in a post-earnings call.

Estée Lauder raised its full-year guidance, forecasting sales growth of 10-11% and EPS growth of 18-19%.