Key Takeaways And Trends From Estee Lauder’s Q3 Results

by Trefis Team
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Estee Lauder (NYSE: EL) continued with its growth momentum in Q3 2018 reporting an 18% jump in sales to $3.37 billion from $2.86 billion in the same period last year and Diluted net earnings per common share increased 24% to $.99. The company’s earnings were driven by strong performance in the skin care segment, growth from online and travel retail segments, and emerging markets particularly Asia (China). The performance this quarter reflected robust global demand across their portfolio, with virtually all their brands posting sales growth. Each of the three biggest brands grew globally, with exceptional growth in Estée Lauder.

Driven by this strong third 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 31% y-o-y growth

The skin care segment, which constitutes over one-third of Estee Lauder’s sales, posted 31% growth in sales in the third quarter. The company posted this exceptional performance driven by strong innovations, increasing demand from younger consumers, and gains from its hero products: Estée Lauder, La Mer, Origins, and GLAMGLOW.

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 saw 9% jump in sales

The makeup segment of the company saw incremental sales from the second quarter acquisitions of Too Faced and BECCA in the last fiscal year. Double-digit increases were driven by strong double-digit increases from Estée Lauder and Tom Ford and solid gains from M•A•C and Clinique. Net sales for the Fragrance segment also increased 14%, primarily due to strong double-digit gains from luxury brands.

Asia-Pacific region leads sales increase

Geographically, sales from the Asia-Pacific region led top line growth by rising 38%. Europe, Middle-East and Africa also saw sales rise by 26%. Sales from the Americas saw more modest growth at 1%. 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 the full fiscal 2018 sales to rise in double-digits between 15% and 16% versus the prior-year period reflecting the strong momentum behind the company from solid performance in the first three quarters of the current fiscal year. The continued emphasis on a digital-first approach and on fast-growing markets and channels is also expected to contribute to this growth.

Net earnings per share are also projected by the company to be between  $4.38 and $4.42 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 quarter of the current year.

 

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