On to the next goal.
This story first appeared in the August 16, 2013 issue of WWD. Subscribe Today.
The Estée Lauder Cos. Inc. in fiscal 2013 sailed past $10 billion in sales for the first time, and capped off its four-year restructuring plan.
“We have always been a growth company, but over the past four years our mission was to make that growth more profitable and sustainable, and we clearly accomplished that goal,” said Fabrizio Freda, Lauder’s president and chief executive officer, during the company’s earnings call on Thursday. “Having established a firm foundation, we have an even better position today to focus on our top-line growth with the added advantage of having greater advertising firepower to unite our brands and promote the latest innovations.”
The company reported that for the year, net earnings attributable to the company gained 18.9 percent to $1.02 billion, or $2.58 a diluted share, compared with $856.9 million, or $2.16 a share, in fiscal 2012, which included charges of $63.2 million tied to the company’s restructuring activities. Sales for the year ended June 30 gained 4.8 percent to $10.18 billion, compared with $9.71 billion in the prior year, with growth across all core categories. Excluding the impact of foreign currency translation, net sales increased 6 percent.
Citing another milestone for the company, Freda said Lauder increased its operating margin to 15.2 percent.
For the fourth quarter, net earnings attributable to Lauder gained 83.6 percent to $94 million, or 24 cents a diluted share, compared with $51.2 million, or 13 cents a share, in the year-ago period. The company’s earnings per share results beat Wall Street’s consensus of 21 cents.
Net sales in the quarter gained 7 percent to $2.41 billion, or 8 percent, excluding the impact of foreign currency translation.
The results sent Lauder’s stock price up more than 5 percent to $68.82 in morning trading Thursday on the New York Stock Exchange. Shares closed at $67.36, or up 3.4 percent.
The company said it expects fiscal 2014 local currency sales to grow by 6 to 8 percent, and outpace the forecasted growth of the prestige market by double. It also anticipates reaching a new long-term operating margin target of 16.5 percent in fiscal 2016.
Freda plans to keep the momentum going in fiscal 2014 with a full plate of “attention-getting innovations,” including the recently launched reformulated versions of Clinique Dramatically Different Moisturizing Lotion and Estée Lauder Advanced Night Repair, as well as new products across brands such as MAC Cosmetics, Smashbox and Bobbi Brown.
Explaining the strategy behind the relaunches, Freda told WWD the benefits are threefold: Updated formulas reward loyal customers with improved technology; attract new customers, particularly from the mass market, with energized marketing efforts, and help make inroads into markets where the product may not have been a strong performer.
Under Freda’s leadership, the company has continued to flex its marketing muscle, delving more into TV and digital. The company said since 2009, it has increased spending on marketing activities, such as advertising, merchandising and sampling, by almost $900 million.
Freda said the company will continue to focus on “fewer but bigger launches to the largest market and consumer opportunities.” He added that the product lineup includes a number of fragrances, an area that’s a key focus for the firm this year.
“We believe [fragrance] can be a larger and more profitable opportunity for our brands, particularly in emerging markets such as Latin America and the Middle East,” he said. “In the past few years, we focused on improving fragrance profitability. Today, we are well positioned to resume faster growth, leveraging the new cost structure we have implemented.”
Upcoming fragrance launches for fall include Estée Lauder Modern Muse, Tory Burch and a quintet of scents from the Aerin brand.
Another area of focus for Freda is the growth of freestanding stores — or “image builders,” as he referred to them — which he said allow the company to increase its presence in key markets, such as China and Brazil, regardless of the existing retail infrastructure.
In Brazil, the company plans to increase MAC’s base of 30 freestanding stores to 50 stores in 30 cities by fiscal 2016, said Daniel Rachmanis, Lauder’s senior vice president, Latin America.