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Estee Lauder reported net sales of $3.34 billion in Q3 '20, down from $3.74 billion in Q3 '19. Estee Lauder reported a net loss of $6 million in Q3 '20, compared to a net profit of $555 million in Q3 '19. EPS dropped to -$0.02 from $1.53. The COVID-19 outbreak and the resulting lockdown will likely hurt Estee Lauder's Q4 sales, across all segments, as the current lockdown situation will hurt cosmetic products sales, driving down demand for Estee Lauder's products. The Q4 '20 results in August will confirm this reality.
Estee Lauder's Skin Care Market Share: Estee Lauder's Skin Care Market Share expanded from 6.6% in 2008 to 8% in 2014. However, its share declined to ~7% in 2015 and 2016, partly due to cannibalization of its older products, and partly due to a shift in order realizations following its SMI implementation. However, in 2018 the skin care segment alone grew by 24% and we forecast Estee Lauder's skin care product market share is expected to gradually grow to over 10% by the end of our forecast period. There could be a marginal downside to our price estimate, if the market share were to remain flat throughout the forecast horizon.
Estee Lauder's Skin Care EBITDA margin: Estee Lauder's Skin Care EBITDA Margin increased from 20% in 2008 to 26.2% in 2012, before declining to 25.7% in 2013. The EBITDA margin grew to ~27% in 2014 and remained at almost the same level in 2015 before increasing to around 29% in 2016. We expect margins to remain near 40% by end of our forecast period. There could be almost 15% downside to our price estimate, if margins were to decline to the 2008 levels of 20% over our forecast period.
Estee Lauder's Makeup Market Share: We currently forecast Estee Lauder to gain share in the global makeup market from 14% in 2016 to 19.2% in 2018, it is expected to reach almost 20% by the end of our forecast period. There could be a marginal downside if Estee Lauder fails to gain market share over our forecast period.
Estee Lauder's Makeup EBITDA margin: Estee Lauder's Makeup EBITDA Margin increased from 19% in 2008, to 22% in 2016, and we expect it to gradually increase to 24% going forward. There could be close to 10% downside to our price estimate if margins were to decline to the 2008 levels of 19%.
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, M-A-C, 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 22%. The company's increased focus on the Asia-Pacific market is expected to further increase in the future.
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 ~50% of Estee Lauder's stock value, and Makeup contributes around 40%. The Skin Care segment is also the most profitable of all its beauty products, generating an EBITDA margin of 27%, compared to the company average of around 24%.
The Skin Care market grew by 7.4% in 2014, and 5% in 2015 and 2016. The Skin Care market is currently valued close to $130 billion and could cross $170 billion in the next five years.
In the Makeup category, Estee Lauder had a higher market share of around 14% in 2016 (that increased from 12% in 2010), but the overall market size of the Makeup segment is about half of skin-care. The overall Makeup market is currently valued around $70 billion and could exceed $80 billion by the end of our forecast period.
We estimate that Estee Lauder's skin care EBITDA margin was around 27% in 2018, compared to 24% for the Makeup business.
Global growth of the prestige beauty segment is outpacing growth in the mass beauty segment. We expect this to benefit Estee Lauder's premium brands which earn the company higher profit margins. The U.S. prestige beauty industry reached $16 billion in 2018, growing 7% in dollar sales, compared to 2015, according to the global information company The NPD Group. At 13%, the makeup segment experienced the healthiest growth, while fragrance grew 4%, and skincare increased by 3%.
Anti-aging creams and anti-cellulite skin care products are in high demand among aging populations in developed countries notably Japan (oldest demographic), the 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.
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.
Estee Lauder has capitalized on the strong growth in its 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 2017 and 2018. The main drivers to the travel retail segment growth were: the launch of new initiatives, an expanded distribution network, an increase in global airline passenger traffic, and accelerated orders.
In 2014, the global travel retail market was valued at ~64 billion and is estimated to reach at around $85 billion in 2020.(Link) Global travel retail has quickly become the fastest-growing retail channel for beauty, fashion, and accessory products. The market is driven by expanding passenger volumes, especially in emerging markets. Global Airport Retailing information for 2012 reveals that the Asia-Pacific airport retail spending stood at $12.2 billion, while spending in Europe was $10.6 billion and for the Americas $7 billion. By 2019, it is expected that the spending will reach $23.2 billion for Asia Pacific, whereas for the Americas and Europe the figures will be $10.1 billion and $12.4 billion, respectively.
Estee Lauder stock (NYSE: EL) is up 6% since the beginning of this year, but at the current price of around $218 per share, we believe that Estee Lauder stock has 10% potential downside. Why is that? Our belief stems from the fact that Estee Lauder stock is still up almost 70% from the low seen at the end of 2018, almost 2 years ago. ...More
After a 46% rise since its low in March, at the current price of around $211 per share we believe Estee Lauder stock (NYSE: EL) has reached its near term potential. The stock has crossed the level it was at before the drop in March but in reality, demand and revenues will likely be affected this year. ...More
Estee Lauder stock (NYSE: EL) is down around 7% since the beginning of this year, and at the current price of around $195 per share, we believe Estee Lauder stock has a significant downside. Why is that? Our belief stems from the fact that Estee Lauder’s stock remains about 54% higher than the low seen in early 2018. ...More
Based on a comparison of Estee Lauder's stock (NYSE: EL) trajectory over recent months with that around the 2008 recession, we believe that the stock can potentially gain 25% once fears surrounding the coronavirus outbreak are abated, to cross $220, from current levels of $178. A detailed comparison of Estee Lauder’s performance vs. ...More
Having already declined ~20% since the beginning of this year, at the current price of around $165 per share, we believe Estee Lauder (NYSE: EL) could see further downside. Why is that? The key is Estee Lauder’s stock is still up around ~30% since the beginning of 2018, a little over 2 years ago. ...More
The top players in the Beauty and Cosmetics space generated around $85.7 billion in revenues in 2019, up from $72.2 billion in 2015. L'Oreal (OTCMKTS: LRLCY) leads the market with about $33.4 billion in revenues in 2019, followed by Unilever (NYSE: UL) at $24.5 billion. ...More
Estee Lauder's (NSYE: EL) total expenses have grown from $10.57 billion in 2017 to $13.07 billion in 2019. However, as a percentage of total revenue, expenses dropped, going from 89.4% in 2017 to 87.9% in 2019. Selling, general & administrative (SG&A) expense is the biggest expense head for the company, with it being 63.1% of revenue in 2017, before dropping to around 59. ...More
Estee Lauder's (NYSE: EL) total revenue has grown from $11.82 billion in 2017 to $14.86 billion in 2019, and we expect this growth to continue, driving total revenue to $17.14 billion in 2021. ...More
Estee Lauder (NYSE: EL) and L'Oreal (EPA: OR) are two of the major cosmetic manufacturers, with a global presence, and a range of brands spanning across hair care, makeup, and skin care. ...More
Estee Lauder (NYSE: EL) strengthened its brand portfolio by acquiring By Kilian, Becca, and Too Faced in 2016. The year was marked by a staggering 52 acquisitions of beauty companies by traditional players, per McKinsey - aimed primarily at enhancing digital marketing capabilities. ...More
After its fiscal year 2019 earnings release recently, Estee Lauder (NYSE:EL) saw its stock jump 20% even as the overall market nudged lower due to the ongoing trade tensions between the U.S. and China. In this article, Trefis analyzes key trends in Estee Lauder’s earnings and highlights the reasons behind the surge in its stock price. ...More
Estee Lauder (NYSE: EL) reported its fiscal third quarter results earlier last week and the company did well to extend its winning streak for a third consecutive quarter. Net revenues for the quarter came in at $3.74 billion, growing by a solid 11% year-on-year despite the negative impact of a stronger U.S. dollar. ...More
Estee Lauder (NYSE: EL) has continued with its growth momentum the past few years, primarily driven by strong performance in its Skin Care and Makeup segments. Its Skin Care and Makeup Divisions account for 80% of the company's revenue. Recently, during the Q2 earnings for FY19, the company reported better-than-expected growth in sales growing by 11% y-o-y. ...More
Estee Lauder (NYSE: EL) continued with its growth momentum in Q2 2019 reporting a 11% jump in sales to $4.01 billion from $3.74 billion in the same period last year (first time exceed $4 billion in a quarter) and diluted net earnings per common share increased to $1.55. ...More
Estee Lauder (NYSE:EL) is scheduled to release its Q2 fiscal 2019 results on February 5. It has had a robust 2018, primarily driven by strong performance in its Skin Care and Makeup segments and the same growth momentum continued in its Q1 2019 earnings. ...More
Estee Lauder (NYSE: EL) has displayed progressive growth in the last few years. In FY 2018, the company's revenue grew by 16%, driven by meaningful organic growth in its Skin Care and Makeup segments. ...More
Estee Lauder (NYSE: EL) has displayed progressive growth in the last few years. In the latest 3 years the company's revenue grew from 4% in FY 2015 to 16% in FY 2018, driven by meaningful organic growth in its Skin care and Makeup segments. ...More
Estee Lauder (NYSE: EL) continued with its growth momentum in Q1 2019 reporting a 8% jump in sales to $3.52 billion from $3.27 billion in the same period last year, and diluted net earnings per common share increased 17% to $1.34. ...More
Estee Lauder (NYSE:EL) is scheduled to release its Q1 fiscal 2019 results on October 31st. It has had a robust 2018, primarily driven by strong performance in its Skin care and Makeup segments and we expect the growth momentum to continue in its Q1 earnings. ...More
Estee Lauder (NYSE: EL) has displayed progressive growth in revenue in the last few quarters. In the latest quarter, the company's revenue grew by 16% y-o-y, driven by meaningful organic growth in its Skin care and Makeup segments. ...More