What To Expect From Estee Lauder’s Q4 2018

by Trefis Team
Estee Lauder
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Estee Lauder (NYSE:EL) is scheduled to release its fourth quarter fiscal 2018 results on August 20. During the previous Q3 earnings the company continued with its growth momentum reporting a 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. This growth was driven by strong performance in the skin care segment, online and travel retail segments, and emerging markets particularly Asia (China). This performance 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 has forecast its net sales to increase for Full Year Fiscal 2018 between 15% and 16% and reported diluted net earnings per share to be in between the band of $2.78 and $2.86.  The continued emphasis on a digital-first approach and on fast-growing markets and channels is also expected to contribute to this growth. Please refer to our dashboard analysis on What To Expect From Estee Lauder’s Q4 2018 Earnings.

Listed below are key drivers that we believe will continue to steer Estee Lauder’s growth this fourth quarter and for full year 2018 earnings:

Skin care and Make up segments will continue to drive sales – These segments will likely continue to post strong performance in the coming earnings in line with the last quarter where their sales advanced by 31% and 9% y-o-y, respectively. The main driver for the skin care segment were some of its existing products along with new launches from brands like Estee Lauder, La Mer, and Glamglow. The star performers for the Makeup segment, along with Becca and Too Faced, included Tom Ford and Estee Lauder.

Growth in online & travel retail –  Estee Lauder is expected to further benefit from ongoing strong passenger traffic growth in the emerging markets. Driven by rising income levels and increasing disposable income in these markets, passengers in these markets are increasingly turning into buyers. This trend is likely to keep the company’s travel retail sales soaring for Q4 and further in 2019. In addition, given the company’s strong online business and growing popularity of online purchases, mobile sales are likely to continue to contribute to Estee Lauder’s growth in the coming quarter.

Asia-Pacific region to continue to boost the sales – In the previous Quarter, sales from the Asia-Pacific region led top line growth by rising 38%. Europe, Middle-East and Africa also saw sales rise by 26%. We anticipate rising disposable incomes in the emerging markets of Asia-Pacific (especially China) to continue to boost sales growth from the Asia-Pacific region as it constitutes a growing share of Estee Lauder’s top line. Management thus anticipates continued strength from sales of luxury products  prompting it to continue to invest in these regions.

In all, we expect Estee Lauder to continue its growth momentum in the coming earnings and in FY 2019.


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