What Are The Key Factors Driving Estee Lauder’s Current Growth?

by Trefis Team
Estee Lauder
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Estee Lauder (NYSE: EL) has been delivering extremely successful performance over the last three quarters. Not only are its 2016 acquisitions such as Becca and Too Faced boosting its growth, but the company’s organic growth has also been really impressive. The company was suffering from a slump in its sales last year due to a decline in footfall in the U.S. brick and mortar stores, a lack of healthy demand in its travel retail business, lesser demands in important markets such as Korea and China, and an overall, lack of user enthusiasm for its skincare products. Here we discuss, the main drivers that finally helped Estee Lauder in making a turn around in its performance. We have a $96 price estimate for Estee Lauder which is around 20% lower than its current market price.

  • Travel Retail

Estee Lauder’s various initiatives to boost its travel retail sales are finally bearing fruit. The strong passenger traffic growth and the increased conversion of the passengers into buyers, especially in the emerging markets, are the main drivers for the boost in its travel retail sales. It plans on further increasing its investments in China and other developing countries where its products are a huge success.

  • Emerging Markets

Emerging markets such as China and South Korea have been crucial for the growth of the company’s sales. These markets are important for most global beauty players right now, and Estee Lauder is no exception to the rule. China’s skincare market is expected to grow by 25% to around $34 billion by 2021. Estee Lauder’s sales in China are growing at an impressive rate and this has been a major driver to the company’s current streak of healthy performance. Not only in the domestic market but even in travel retail, Chinese users are one of its main segment of buyers and hence, domestically or overseas, Chinese users seem to be an important factor impacting Estee Lauder’s current growth.

  • Online Sales 

Estee Lauder’s strong online sales are mainly driven by the third-party and retailer sites. Each of its metrics, traffic, conversions, and orders, are growing at a healthy pace. China’s Tmall recently witnessed a surge in sales especially since the launch of its makeup brand MAC in May. MAC has further launched an online platform in South East Asia called Lazada, which is owned by the Alibaba Group. With a Tmall-like model, this store might be a further catalyst for the company’s growth in the region. The company’s effort to expand its online footprints continued with the launch of 100 new websites in the quarter. Around 70% of its online sales were contributed by mobile and hence this medium is a prime focus in Estee Lauder’s digital initiatives.

  • Specialty Multi Channels
Estee Lauder is also growing its position by pushing more of its brands through the specialty-multi retail channels across the world. This channel is specifically attractive to the younger beauty users, a coveted segment for most beauty companies these days. For example, even in the U.S. where the footfall decline in the brick-and-mortar stores is a concern for the company, its sales through pure play cosmetic companies such as Ulta Beauty and Sephora continues to grow.
  • Recovery Of Its Skincare Segment

As mentioned earlier, Estee Lauder’s skincare segment had been struggling mostly due to its lack of appeal among the millennial beauty users. The traditionally successful brands such as Estee Lauder and Clinique were not being able to connect with younger users. However, in its recent Q1 fiscal 2018 release, the skincare segment showed significant recovery. The main drivers for this were some of its existing products along with new launches from brands like Estee Lauder, La Mer, and Glamglow. It is noteworthy to mention that the skincare segment has been witnessing an industry-wide recovery, so that must have also helped the company. However, some of its recent acquisitions, which are extremely popular among millennials, are also expected to boost its skincare and makeup segments even more in the future.


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1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Estee Lauder

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