How Could Estee Lauder’s Revenue and EBITDA Grow Over the Next 3 Years?

by Trefis Team
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Estee Lauder (NYSE: EL) has displayed progressive growth in the last few years. In the latest 3 years the company’s revenue grew from 4% in FY 2015 to 16% in FY 2018, driven by meaningful organic growth in its Skin care and Makeup segments. Estee Lauder’s Skin Care segment constituted one-third of its sales, driven by strong innovations, increasing demand from younger consumers, and gains from its hero products – Estée Lauder, La Mer, Origins, and Clinique brands. Further, EL’s makeup segment continued to see strong sales, & increase in the revenue driven by strong growth from its brands viz. Estée Lauder and Tom Ford, Too Faced, BECCA, and La Mer. Moreover, the Fragrance segment grew primarily due to double-digit gains across all geographies, and the Hair care segment revenue rose owing to the successful launch of new Aveda products. In all, EL is focused towards its new strategies, made successful value enhancing acquisitions, and executed well on its productivity initiatives.

EL’s margins have also improved from 14.9% in FY 2015 to 16.9% in FY 2018, with growth reported in each of the years. Despite entering into new emerging markets, and shifting strategies, the company has ensured its structure has remained strong, and its operations have continued to be efficient. Much of the growth in the metric has been a result of strong performance across all the five key segments – Skin care, Makeup, Fragrance, Hair Care, and Other Segment.

We have created an interactive dashboard detailing EL’s revenue and EBITDA breakdown for the next three years. You can click here for our interactive dashboard on What Is EL’s Revenue And EBITDA Breakdown For the Next 3 Years? to view how the different segments will contribute to the company’s growth.

Factors determining EL’s Revenue & EBITDA Growth – 

As per our analysis, and in line with the guidance provided by the company, we believe that Skin Care and Makeup both will continue to report progressive growth in the next three years. With each year the Skin Care & Make Up segment will grow stronger as its sales strengthens in Europe, the Middle East & Africa, China, and due to travel retail.  In terms of growth, both the segments are expected to grow where Skin care is expected to rise from $5.5 Bn in 2018 to $7.5 Bn 2021, whereas Make Up will rise from $5.6 Bn to $7.4 Bn. This growth will be driven by strong demand from young millennials in newer regions.

Going forward, EL has aggressive growth strategies that will enable it to maintain 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 operations, which will boost its revenue growth in the coming years. All these factors, coupled with strong sales momentum, will enable Estee Lauder to continue to grow its top line.

The company is expected to continue with  strong momentum in line with its 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 future growth.

 

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