Estée Lauder (NYSE:EL) recently announced its Q1 results with 18% sales growth, broad-based across geographies and its leading brands, Estée Lauder, Clinique and M-A-C. It continued its growth momentum in the prestige beauty segment, growing in double digits much ahead of the market and expanding market share. It also continued to strengthen its bottom line, well on its way towards its revised operating margin target of 14.5-15% by 2014. Estee Lauder’s enviable double-digit revenue growth amid a weak macro backdrop and corresponding earnings growth is responsible for the stock’s impressive run over the past few quarters. Estee Lauder, one of the leading cosmetics and beauty care players globally, competes with others such as Revlon (NYSE:REV), L’Oreal (PINK:LRLCY) and Avon Products (NYSE:AVP).
Luxury Segment Blooms Despite Mass Segment Gloom
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Globally, the luxury sector remained very strong with sales growth looking to exceed 13% this year. The affluent consumers remained more resilient than the lower income shoppers. Last year’s trend of prestige beauty sales outpacing mass segment sales further accelerated this year. For example, according to NPD research, from July to September, prestige beauty sales for U.S. department stores and online retailer Sephora rose 11%, compared to barely 2% for mass brands. This helped Estée Lauder achieve 18% growth last quarter given its strong prestige beauty and luxury products portfolio. It also grew its market share in its top priority Skin Care category by 1.3%, the division that contributes over 53% of Estée Lauder’s stock price.
We have a revised $116 Trefis price estimate for Estee Lauder stock, which is almost in line with its current market price.