Estee Lauder Delivers A Beat in Q1 FY’19 Earnings With Growth In Skincare

by Trefis Team
Estee Lauder
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Estee Lauder (NYSE: EL) continued with its growth momentum in Q1 2019 reporting a 8% jump in sales to $3.52 billion from $3.27 billion in the same period last year, and diluted net earnings per common share increased 17% to $1.34. The company’s earnings were driven by strong performance in the skin care segment globally, growth from online and travel retail segments, and emerging markets particularly Asia / Pacific region (esp. China). The performance this quarter reflected robust global demand across their portfolio, with virtually all their brands posting sales growth. Each of its biggest brands: including MAC, La Mer, Tom Ford, and Origins grew globally, with exceptional growth in Estée Lauder. Performance among the US region department stores has also turned positive recently.

Driven by this strong Q1 performance and exciting upcoming launches and programs, Estee Lauder has forecast growth in its Q2 2019 sales to increase between the band of 8% – 9% (Excluding a 2% impact from currency translation and a 2% impact from the adoption of ASC 606) net earnings per share between $1.47 and $1.50. Please refer to our dashboard Key Takeaways from Estee Lauder’s Q1 results.

Skincare segment drives top line with 17% y-o-y growth

The skin care segment, which constitutes over one-third of Estee Lauder’s sales, posted 17% growth in sales in the Q1. 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 Clinique brands.

Driven by continued success of the recent launches — 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 2% jump in sales

The makeup segment of the company continued to see increased sales from the 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,  Too Faced, BECCA, and La Mer. Net sales for the Fragrance grew marginally due to strong double-digit gains across all geographic regions from luxury brands. Hair care segment also increased by 5% primarily due to the successful launch of new Aveda products, continued growth from the Invati Advanced line of products, and the launch of Cherry Almond Softening Shampoo and Conditioner.

Asia-Pacific region leads sales increase

Geographically, sales from the Asia-Pacific region led top line growth by rising 24%. Europe, Middle-East and Africa also saw sales rise by 14%. Sales from the Americas saw a modest growth. 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.  In the Asia region, China and Japan accelerated while Hong Kong continued its strong growth.

Outlook for the full fiscal 2019

The company forecasts the full fiscal 2019 sales to rise between 7% to 8% (excludes a 2% impact from currency translation and 1% impact from the adoption of ASC 606) versus the prior-year period, reflecting the strong momentum behind the company from solid performance in 2018. The continued emphasis on a digital-first approach and on fast-growing markets and channels is also expected to contribute to this growth.


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