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Estée Lauder’s 10-Year View

The prestige beauty company plans to sail past $10 billion in sales by the end of its fiscal year on June 30.

The Estée Lauder Cos. Inc. is closing in on a milestone year.

This story first appeared in the June 12, 2013 issue of WWD.  Subscribe Today.

The prestige beauty company plans to sail past $10 billion in sales by the end of its fiscal year on June 30, which also marks the end of its four-year restructuring program, which began in 2009.

“The $100 billion [beauty] industry at retail expanded by 3 to 4 percent annually in the past decade and is forecasted to increase at least that much over the next 10 years,” Cedric Prouvé, the company’s group president of international, told attendees on Tuesday at Deutsche Bank’s 10th Annual Consumer Conference, taking place this week in Paris. He noted that Lauder has an approximate 15 percent share of the prestige beauty market and reiterated “our goal is to expand 1 percent faster than the industry.”

Lauder has been outpacing that goal for some time under the stewardship of Fabrizio Freda, who assumed the post of president and chief executive officer in 2009. Prouvé said the company has grown about two times faster than the industry over the past four years. It has also expanded its operating margin to an estimated 15 percent for the year, up from 7 percent in 2009 when sales were $7.3 billion.

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“We are guided by our 10-year compass, which identifies the biggest and fastest growing opportunities in the beauty industry,” said Prouvé. He continued that the company is pursing high-growth channels and markets and focusing its efforts on leveraging its innovation to create “superb products.”

Lauder has also thrown more weight into its advertising efforts — particular in TV and digital — in a bid to pull mass shoppers into the prestige channel. The company has doubled its advertising spending since 2009, funneling nearly $2.5 billion into advertising, merchandising and sampling efforts in fiscal 2012.

Having spent the last several years heavily focused on the skin-care and makeup businesses, Lauder is now turning its attention to fragrances, particularly in the luxury tier where its brands like Jo Malone and Tom Ford live. Lauder had deliberated trimming its fragrance business in recent years, as it worked to make the category more profitable. But it’s now accelerating the number of introductions, such as the global rollout of Ermenegildo Zegna Uomo. Prouvé noted that strong fragrance sales will strengthen the company’s performance across Europe and in travel retail. He added that in fiscal 2012, the company’s travel retail sales exceeded $1 billion for the first time.

By region, Prouvé said China, Brazil and Turkey are some of the company’s strongest emerging markets, and that Lauder sees “white space” and opportunity across the Middle East and Africa. Asia-Pacific is the company’s fastest growing region, and much of its attention is centered on China, where Lauder has grown its business by an average of 33 percent annually, said Prouvé.