This site requires a more recent version of Adobe Flash Player to function properly.
Go here to get Flash.
Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:
Investment Overview for Estee Lauder (NYSE:EL)
${header:potential}
Skin Care
Estee Lauder's Skin Care Market Share: We currently forecast Estee Lauder to grow its market share in the Skin Care market from 7.5% in 2012 to 8.5% by the the end of our forecast period. There could be a 6% downside if the market share were to remain flat throughout the forecast horizon.
Estee Lauder's Skin Care EBITDA margin: Estee Lauer's Skin Care EBITDA Margin increased from 19.7% in 2007 to 26% in 2012 and we expect it to stay flat going forward. There could be a 13% downside to our price estimate, if margins were to decline to the 2007 levels of 20% over our forecast period.
Makeup
Estee Lauder's Makeup Market Share: We currently forecast Estee Lauder to gain share in the global makeup market from 13.7% in 2012 to about 14.5% by 2019. There could however be a 1% downside if Estee Lauder fails to gain market share over the 2012-18 period.
Estee Lauder's Makeup EBITDA margin: Estee Lauer's Skin Care EBITDA Margin increased from 20% in 2007 to 22.6% in 2012 and we expect it stay flat going forward. There could be a 4% downside to our price estimate if margins were to decline to the 2007 levels of 20%.
${header:summary}
Estee Lauder manufactures and markets premium makeup, skin care, fragrance and hair care products in the personal and beauty care segment of the market. Estee Lauder's main competitors consist of cosmetics companies such as L’Oreal, Shiseido Company, LVMH Moet Hennessey Louis Vuitton, Revlon, Coty, and Procter & Gamble Company.
Estee Lauder's major brands include Estee Lauder, Aramis, Clinique, MzAzC, Bobbi Brown, La Mer and Aveda, along with fragrance and cosmetics sold under brands such as Donna Karan, Tommy Hilfiger, Micheal Kors and Sean John.
Premium priced products that are not branded, yet relatively expensive, are sold through limited distribution channels consisting primarily of upscale department stores, specialty retailers, upscale perfumeries, pharmacies, prestige salons and spas, free standing company owned stores and spas, company websites, authorized retailer websites, stores on cruise ships, direct response television and in flight and duty free shops.
Despite a global presence, about 40% of Estee Lauder's net sales come from the Americas, with Europe, Middle East and Africa contributing 38% and Asia-Pacific constituting the remaining 23%. The company's increased focus on the Asia-Pacific market is expected to further increase
${header:sourcesofvalue}
The Skin Care and Makeup segments have the highest contributions to Estee Lauder's value. Skin Care forms the priority category for the company, contributing more than 55% of Estee Lauder's stock value and Makeup contributes around 35%. The Skin Care segment is also the most profitable of all its beauty products, generating an EBITDA margin of 26%, compared to the company average of 22.4%.
Market sizes and market shares in Skin Care Vs Makeup
The Skin Care category grew its market share in 2012 to 7.5% from 7.4% in 2011 and we expect it to increase to 8.5% over the next few years. The Skin Care market is currently valued close to $100 billion and could cross $130 billion in the next five years.
In the Makeup category, Estee Lauder had a higher market share of 13.7% in 2012 (that increased from 13.5% in 2011), but the overall market size of the Makeup segment is about half that of skin-care. The overall Makeup market is currently valued around $49 billion and could exceed $60 billion by 2019.
Higher margins in Skin Care compared to Makeup
We estimate that Estee Lauder's skin care EBITDA margin was over 26% in 2012, compared to 23% for the Makeup business.
${header:trends}
Strong prestige beauty sales growth in 2012
The global prestige beauty market grew in 2012 with the United States leading with sales growth of 7%, which significantly outpaced the mass segment sales growth. The prestige beauty segment generated sales of over $10 billion in the U.S. in 2012, compared to $9.5 billion in 2011. The growth was a favorable mix of more unit sales and pricing growth. The report also estimated that all beauty categories now have almost surpassed the pre-recession levels.
Booming Skin Care due to anti-aging creams
Anti-aging creams and anti-cellulite skin care products are in high demand among aging populations in developed countries notably Japan (oldest demographic), US and Western Europe. Half of Estee Lauder's skin-care business comes from anti-aging products. The anti-aging market comprises of those products that can treat multiple signs of skin aging at one time, and is a fast-growing segment under the anti-aging beauty products. Estée Lauder launched its first global anti-aging cream in Europe in February 2012 and a China specific skin care brand Osiao in October 2012.
Growth of natural products categories and "Masstige" segment as well as male product lines
There is a growing demand for natural / organic products in most countries, a trend led by the developed markets in the US and Western Europe. Additionally, there is an increased preference for less synthetic, eco-friendly and more natural products and packaging.
There is a growing trend towards the so-called "Masstige", or premium brands sold at lower prices through mass distribution. In addition, beauty care products focused on men is the latest niche being targeted by most players globally. In developed markets, particularly in the US and Western Europe, the introduction and extension of the men’s product lines is a major source of growth.
Focus on travel retail
Estee Lauder has strongly capitalized on the strong growth in the travel retail channel to capture the attention of travelers from emerging markets, who either buy in the channel, in stores at their destination or when they return to their homes. The channel has performed particularly well for Estee Lauder within Europe, Asia-Pacific, Middle East & Africa, generating double-digit net sales growth in fiscal 2011.
According to a recent report from Verdict, the global travel retail has quickly become the fastest-growing retail channel for beauty, fashion and accessory products. It is likely to grow sharply by 60% to $44 billion by 2015, driven by expanding passenger volumes, especially in emerging markets. In particular, beauty sales are likely to grow by more than 80% in the next five years. In 2011, Europe was the largest airport retailing market, but it could be overtaken by Asia Pacific in 2012, which could grow by 75% by 2015.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on:
DCF MethodologyView All Help Topics