Key Takeaways From Estee Lauder’s Strong Q2 Results

by Trefis Team
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Estee Lauder (NYSE: EL) continued its growth momentum in Q2 2018 (ended Dec. 2017) with a 17% jump in sales to $3.74 billion from $3.21 billion in the same period last year. The company’s earnings also beat consensus estimates rising by 23% in constant currency terms to $1.52 per share driven by strong performance in skin care segment, growth from online and travel retail segments, and emerging markets particularly China. Adjusted for one-time charges including impact from U.S. Tax Cuts and Jobs Act (TCJA) the company reported earnings of $0.33 per share.

Driven by this strong second quarter performance, Estee Lauder is forecasting double-digit growth in its full fiscal 2018 sales. Please refer to our dashboard analysis on Estee Lauder.

Skincare segment drives top line with 20% y-o-y growth

The skin care segment, which constitutes over one-third of Estee Lauder’s sales, posted 20% growth in sales in the second quarter. The company posted this exceptional performance driven by gains from Estée Lauder, La Mer, Origins and GLAMGLOW, and Clinique.

Driven by continued success of the recently launched Advanced Night Repair Eye Concentrate Matrix, the Estee Lauder brand saw strong growth from China and the travel retail segment. La Mer saw growth coming from new products in the Genaissance collection and launch of The Moisturizing Matte Lotion. In addition, Origins generated sales growth from every geographic region led by Asia.

Makeup segment follows in a close second with 16% jump in sales

Makeup segment of the company saw incremental sales from the second quarter acquisitions of Too Faced and BECCA in the last fiscal. Double-digit increases from Tom Ford and Estée Lauder supported gains from these acquisitions.

Asia-Pacific region leads sales increase

Geographically, sales from the Asia-Pacific region led top line growth by rising 33% to 874 million. Europe, Middle-East and Africa also saw sales rise by 20% to $1.56 billion. Sales from the Americas saw more modest growth at 5% to $1.3 billion. We anticipate rising disposable incomes in the emerging markets of Asia-Pacific to continue to boost sales growth from the Asia-Pacific region as it constitutes a growing share of Estee Lauder’s top line.

Outlook for third quarter and full fiscal 2018

The company forecasts its third quarter top line to grow by 12-13% from last year. Full fiscal 2018 sales are also forecast to rise in double-digits reflecting the strong momentum behind the company from solid performance in the first two quarters of the current fiscal year.

Net earnings per share are also projected by the company to be between 89-92 cents per share in the third quarter, and between $4.27-4.32 per share for fiscal 2018 after adjusting for one-time items. In all, we anticipate Estee Lauder to continue its strong performance in the remaining two quarters of the current year.

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