Outstanding Revenue Growth For Estee Lauder in Q2

by Trefis Team
Estee Lauder
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Estee Lauder (NYSE: EL) continued with its growth momentum in Q2 2019 reporting a 11% jump in sales to $4.01 billion from $3.74 billion in the same period last year (first time exceed $4 billion in a quarter) and diluted net earnings per common share increased to $1.55. The company’s earnings were driven by strong performance across most of its categories and brands, especially the skin care segment globally, growth from online and travel retail segments, and emerging markets particularly Asia / Pacific region. 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.

Driven by this strong Q2 performance and exciting upcoming launches and programs, Estee Lauder has forecast growth in its Q3 2019 sales to increase between the band of 8% – 9% (Excluding a 5% impact from currency translation and a 2% impact from the adoption of ASC 606), net earnings per share between $1.17 and $1.20. Please refer to our dashboard Key Takeaways from Estee Lauder’s Q2 results.

Skin Care segment drives top line with 16% y-o-y growth

The skin care segment, which constitutes over one-third of Estee Lauder’s sales, posted 16% growth to $1,732 million in sales in the Q2. The company posted this exceptional performance driven by strong innovations, increasing demand from younger consumers, improvements in channels and regions, and gains from its hero brands: Estée Lauder, La Mer, Origins, and Clinique.

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.

Makeup segment saw 3% jump in sales

The makeup segment of the company continued to see increased sales by 3% to $1,560 million driven by strong double-digit increases from Estée Lauder, MAC, Tom Ford Beauty, and BECCA. Net sales for the Fragrance revenues declined 5% to $537 million, owing to soft sales of various designer fragrances and the impact of the company’s holiday season promotional strategy. Hair care segment increased by 5%, and amounted to $154 million driven by higher sales of the Aveda brand and continued growth from the Invati Advanced line of products.

Asia-Pacific region continues to lead sales increase

Geographically, sales from the Asia-Pacific region led top line growth by rising 17% to $1,020 million. Europe, Middle-East and Africa also saw sales rise by 13% driven by growth in the Middle East (esp.  Turkey), strong Russia sales, and solid travel retail sales. Sales from the Americas declined 7%. 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 8% to 9% (excludes a 3% impact from currency translation and no 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 company is on track with the implementation of the Leading Beauty Forward initiative, also to make further investments in the next six months toward innovations, premium products, efficient commercial execution, and a well-chalked out advertising strategy. The continued emphasis by EL on a digital-first approach and on fast-growing markets and channels is also expected to contribute to its growth.


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