What To Watch For In Estee Lauder’s Q1 Earnings

by Trefis Team
Estee Lauder
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Estee Lauder (NYSE:EL) is scheduled to release its Q1 fiscal 2019 results on October 31st. It has had a robust 2018, primarily driven by strong performance in its Skin care and Makeup segments and we expect the growth momentum to continue in its Q1 earnings. During the previous quarter, the company reported a 14% jump in sales to $3.30 billion and a 20% rise in its diluted net earnings to $0.61 per share. This growth was driven by strong performances in the skin care, online and travel retail segments, and emerging markets, particularly Asia (China). This reflects robust global demand across its portfolio, with virtually all its brands posting sales growth. Each of the three biggest brands grew globally, with exceptional growth in Estée Lauder.

Driven by the strong fourth quarter and FY2018 performance, Estee Lauder expects its full year fiscal 2019 net sales to increase between 7% and 8% and diluted net earnings to be in the range of $4.62-$4.71 per share. The continued emphasis on a “digital-first” approach and on fast-growing markets and channels is also expected to contribute to the company’s growth. Please refer to our dashboard analysis on What To Expect From Estee Lauder’s Q1 2018 Earnings.

Listed below are key drivers that we believe will continue to steer Estee Lauder’s growth this Q1 and for full year 2019:

Skin care and Make up segments will continue to drive sales – These segments will likely continue to post strong performance in the coming quarters. Skin care segment’s exceptional performance will be driven by strong innovations, increasing demand from younger consumers, and gains from its hero products: Estée Lauder, La Mer, Origins, and Clinique brands. Driven by continued success of the recent launches — Advanced Night Repair Eye Concentrate Matrix — the Estee Lauder brand is likely to witness strong growth from China and travel retail.

The makeup segment will witness increased sales as a result of the acquisitions of Too Faced and BECCA from the previous fiscal year. Its double-digit growth in the previous quarter was driven by strong performance from brands such as Estée Lauder and Tom Ford, Too Faced, BECCA, and La Mer.

Growth in online & travel retail –  Estee Lauder is expected to continue to 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 Q1 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 to a 29% rise in its top-line growth. Europe, Middle-East and Africa also saw sales rise by 19%. We anticipate rising disposable incomes in the Asia-Pacific markets (especially China) to continue to boost the company’s sales and contribute to its top-line. Management thus anticipates continued strength from sales of luxury products, prompting it to continue to invest in these regions.

EL’s growth drivers and aggressive growth strategies will help it in maintaining its dominance in the beauty market. Also, the company is on track with the implementation of the Leading Beauty Forward initiative, directed toward better-management of costs and operations, which will help it grow stronger in the coming years. In all, we expect Estee Lauder to continue its growth momentum in the coming earnings and in FY 2019.


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