The Estée Lauder Companies Inc.
CEO : Mr. Fabrizio Freda
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | -16.6% YoY | -61.1% | -63.6% | 2023-02-02 |
Fabrizio Freda says,
Organic Sales and EPS Results
- Organic sales fell 11% in Q2 FY 2023, within the company’s outlook, due to COVID-19 resurgence in China
- Adjusted EPS fell 45%, but was better than expected due to disciplined expense management
Outlook for FY 2023
- Outlook for organic sales growth and adjusted diluted EPS lowered due to elevated inventory levels in China and potential rollback of COVID-related measures in Korea Duty Free
- Return to growth shifted from Q3 to Q4
Growth Engines
- Fragrance category extended its double-digit organic sales growth streak, with portfolios ideally positioned for consumer trends
- Makeup grew organically in the Americas, EMEA, and across Southeast Asia
- Brands in hair care and skin care extended category organic sales growth streaks
- Many emerging markets globally posted strong double-digit organic sales growth
Geographies
- US and domestic China were challenged in Q2, but optimistic for growth in second half
- Online channel fueled by many brands, led by La Mer double-digit growth
- Outstanding organic sales growth in many large developed and emerging markets around the world
Strategic Deal
- Acquisition of Tom Ford expected to achieve $1 billion in net sales annually over next couple of years
- Agreements with luxury companies ZenyaGroup and Marcolin to license fashion and eyewear businesses, respectively
Fabrizio Freda says,
China Market Performance
- Net sales were negative single digits and retail was negative double digits, but market share was gained in every category during the quarter.
- La Mer in skincare gained the best market share, and Jo Malone London in fragrance led the share gain.
- 11/11 net sales were up 10.9%, and retail sales were up 11.9%.
- The reopening of Hainan and Chinese consumers starting to travel internationally will have a positive impact on the retail channel.
- Skin care is expected to accelerate for the company, generating a substantial improvement in margin mix.
Market Performance in Other Regions
- Strong market share gains in most European markets, Japan, and Australia.
- Excluding travel retail impacts, Korea also progressed well.
- North America continues to lose share, but there has been progress in top-line sales acceleration in retail.
Plans for Future Growth
- Accelerating plan of share recovery in North America with an even stronger plan in the next 6 months.
- Strong acceleration of innovation and important distribution improvement in the U.S.
- Improvements in digital marketing, supply chain, R&D, and distribution capabilities make the company ready for future reacceleration.
Q & A sessions,
Normalization of Margins and Volume
- Normalization of margins will depend on the volume of business, particularly in travel retail in China where skin care tends to have higher margins.
- The normalization trends will evolve and take time to restart the normal algorithm.
Key Dynamics in Travel Retail
- Hainan is now established, and the international charter is coming back.
- Korea, Hong Kong, Macau, and Japan were all important travel retail businesses that will improve.
- Travel retail acceleration in the future will carry skin care and high-end fragrance categories.
- Strong acceleration of the fragrance category, particularly the high-end fragrance category.
- Increased traffic and conversion of travelers in Asia, particularly linked to Hainan.
- Increase in mix of Chinese travelers is good news for global travel retail.
Reopening of China and Sales Online
- Reopening of brick-and-mortar will be positively impacted by the reopening of China.
- Half of the business in China will increase dramatically on traffic when people will be free of COVID as a disease.
- Skin care will be the biggest beneficiary, followed by fragrance, makeup, and luxury hair care.
No bad stock 