Except For The Currency Headwinds, Estee Lauder Is Expected To Enter Fiscal 2017 On A Strong Note
Estee Lauder is slated to release its Q1 FY2017 (fiscal year ends in June) results on November 2nd. The company delivered a successful fiscal 2016 where its growth surpassed that of the industry growth, despite being impacted by macroeconomic and internal challenges. Its initiatives to lure the millennial beauty users within its purview, its digital progress, along with its adaptability to changing market conditions, were some of the secret ingredients behind last fiscal year’s success. The company’s net sales growth was 9% in constant currency terms. The company’s current growth channels include: the makeup segment, the luxury brands, the Europe, Middle East and Africa regions, and the online and specialty multi channels. The company’s focus on reviving flagship brands such as Clinique so that they resonate with younger buyers, along with its constant endeavors to launch new products have both been successful in reaping growth for the company.
Looking Forward To 2017
Estee Lauder’s target for FY2017 includes expanding its reach among target users and enhancing the level of customer engagement through tools like digital marketing, in-store merchandising, creativity, and omni-channel offerings. It expects a 6% to 7% constant currency growth in its top line and a double digit EPS growth in FY2017.
Reviving Older Brands
Though Estee Lauder is the most important premium beauty seller, some of its flagship brands, such as Clinique and Estee Lauder had been struggling to resonate with the millennial clientele. As a result the company’s skincare segment in particular had been lagging behind. Clinique with its plain image and its 48 year old legacy, was being seen as a dermatological and functional brand. Clinique’s Global Brand Chief, Jane Lauder, took several measures to revive the brand image of Clinique among the younger beauty users. As a result of these initiatives she became AdWeek’s 2016 Brand Genius winner for health and beauty. Clinique’s Face Forward campaign, its launch of an online magazine called The Wink, fresh product lineups such as the Pep-Start skincare, and the Pop Lip collection were some of the initiatives that helped revive Clinique’s brand appeal among the younger beauty users.
Bringing In Newer Brands Under Its Umbrella
The company doesn’t depend solely on its powerful brands for growth and constantly focuses on acquiring innovative brands that will help in expanding its product portfolio and client reach. To give a context, almost 25% of Estee Lauder’s net sales were contributed by new brands in fiscal 2016. Towards that end, in October, Estee Lauder signed an agreement to acquire Becca Cosmetics. This is its first acquisition in the color cosmetics department post 2010, when it had acquired Smashbox. Color cosmetics seem to be a growth generating segment for the beauty company with fiscal 2016 net sales in this segment reaching~ $5 billion with a 9% year-on-year growth. Becca’s unique selling points are its primers, foundations, blush, highlights, and concealers instead of the traditional lipsticks and eyeliners. Also, the brand is known for its products catering to a rich diversity of skintones. Along with the rise of social media, and in particular Youtube tutorials, the market for such complexion related products has surged. Since one of the most important focuses for Estee Lauder is the millennial clientele who are the top followers of the Youtube channels, Estee Lauder is sure to win a significant chunk of this audience through Becca which is already popular among this age group.
Focus On Multi-Channel Growth Opportunities
Estee Lauder customizes its distribution strategy for its different products and brands. The company’s constant channel expansions and diversification will continue into 2017 as well. Other than retail, department, and freestanding stores, Estee Lauder is also focused on travel retail and the digital e-commerce and m-commerce channels. In fiscal 2016, its online sales exceeded $1 billion through both the company’s and the retailer’s e- and m-commerce platforms, reflecting around 27% growth in constant currency.
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