What Are The Key Drivers Of Growth For Estee Lauder?

+5.02%
Upside
155
Market
163
Trefis
EL: Estee Lauder logo
EL
Estee Lauder

Focus on the online sales channel, digital initiatives, and revival of its travel retail channel, will be the key drivers for Estee Lauder‘s (NYSE:EL)  growth in the future.  While travel retail showed tremendous growth in 2014, the slowdown in China and natural calamities had a negative impact in 2015.  Estee Lauder feels this setback is temporary and we believe new product launches and initiatives in this segment will boost its revival, and will be a key driver of growth for the company. With booming e-commerce and mobile internet penetration, we believe focus on online sales will be another driver of growth for the company, especially in emerging economies such as China.

See Our Full Analysis for Estée Lauder

Revival Of The Travel Retail Channel

Relevant Articles
  1. What’s Next For Estée Lauder Stock After 10% Gains Post Q2 Results?
  2. What’s Next For Estee Lauder Stock After A 19% Fall Yesterday?
  3. Will Estee Lauder Stock Rebound To Its Pre-Inflation Shock Highs?
  4. Cross-Sector Comparison: Is Estee Lauder A Better Pick Over LLY Stock?
  5. What’s Next For Estee Lauder Stock After A 17% Fall In A Month?
  6. Should You Buy Estee Lauder Stock After A 36% Decline Since 2021?

In the fiscal year 2014, Travel Retail was one of the highest growth channels for Estee Lauder contributing to 13% of its product distribution. Global Airport retailing information reveals that by 2016, airport retail spending will be $23.2 billion for Asia Pacific, whereas for the Americas and Europe the figures will be $10.1 billion and $12.4 billion. Estee Lauder is leveraging this trend primarily to capture the Asian market. In May 2014, the company launched a flagship boutique at the Detroit Metro Airport, a primary gateway to Asia, via Delta Airlines. This boutique offers a collection of all its luxury brands, High-Touch services, along with other facilities such as a first-class lounge area, free Wi-Fi, and updated information on the flights. Growth in the travel retail channel slowed down in Q4 2015 due to the macroeconomic slowdown in China and spread of MERS virus in Korea, but the company believes this setback is temporary. It is continuing to emphasize  skincare, its most profitable product category, to boost travel retail sales. Estee Lauder recently launched a vast array of products under several brands including Clinique, Bobbi Brown, Jo Malone, Tom Ford, and M.A.C., at the Tax-Free World Association (TFWA) Exhibition, held at Cannes in October. The products include face contouring, eye makeup, lipstick, serums, treatment creams, and fragrances. These new products will be available across Estee Lauder’s travel retail channel. [1].We believe revival of the travel retail channel will be a key driver of Estee Lauder’s revenues in the future.

Focus on Online Channels And Digital Initiatives

The shift towards online shopping is evident from the tremendous growth in e-commerce.  New York based research agency, L2 ThinkTank.com found that while the global beauty industry grew at 6% in 2013, sales through the e-commerce channel witnessed a 29.1% growth during the same period. To leverage this trend, Estee Lauder is selling 14 of its brands directly to consumers online through approximately 120 of its own e-commerce and mobile commerce sites.  The company also launched  “Forecast,” a mobile application under its Clinique brand, which provides weather information and skin care tips based on weather conditions.  To expand in the Chinese market, Clinique opened its  flagship store on Alibaba’s Tmall. According to the National Bureau of Statistics cited in Statista, the online transaction value of cosmetics retailing in China is forecast to grow by 123% in 2015. Given the market potential, we believe Estee Lauder’s focus on online sales and digital initiatives, around the use of social media and mobile apps for promotion, will be key drivers of its revenue in the future.

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap

Notes:
  1. The Estee Lauder Company Prepares For Key Launches At Cannes []