Estee Lauder (NYSE:EL) is due to announce its Q3 results this Friday. The prestige beauty company has benefited strongly from the prestige beauty market growth last year, with overall market size finally surpassing pre-recession levels. It continued to expand its Skin Care and Makeup market share last year as well as beat its own operating margin targets. Riding on excellent growth momentum, we expect to see further market share expansion and operating margin growth for Estee Lauder this quarter. Estée Lauder is one of the leading cosmetics and beauty care players globally and competes with Revlon (NYSE:REV), L’Oreal (PINK:LRLCY) and Avon Products (NYSE:AVP).
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Last year was a fabulous one for the prestige beauty company as it saw consistent double-digit growth way ahead of the overall market, that grew at over 8% in 2011, outpacing mass beauty segment sales. It showed strong growth in the U.S. and Chinese markets, as well as capitalized impressively on the high growth in the airport travel retail and online channels. In particular, its airport travel retail channel performed very well within Europe, Asia-Pacific, Middle East & Africa, generating double-digit net sales growth in fiscal 2011. This quarter, we expect the prestige beauty growth momentum to continue.
With strong international growth, it has gradually expanded its market share in the Skin Care category, which is its largest business. Last year, it also exceeded its operating margin target of 12%-13% by fiscal 2013 two years in advance. It plans on further operating margin expansion by 80-100 bps this year and cross 14% in 2-3 years.
We have a $69.70 Trefis price estimate for Estee Lauder stock, 8% ahead of the current market price.