NEW YORK — For The Estée Lauder Cos. Inc., service and innovation are the key drivers having an impact on the bottom line.
For the third quarter ended March 31, net earnings attributable to Lauder rose 4.6 percent to $130.4 million, or 33 cents a diluted share, from $124.7 million, or 31 cents, a year ago.
Sales for the period rose 3.8 percent to $2.25 billion from $2.17 billion last year. By product category, skin care sales led the charge, rising 9.2 percent to $1.02 billion from $933.4 million in the quarter.
For the nine months, net earnings attributable to Lauder rose 22.1 percent to $805.7 million, or $2.03 a diluted share, from $659.7 million, or $1.64, last year. Net sales grew 10.6 percent to $7.46 billion from $6.75 billion.
Fabrizio Freda, president and chief executive officer, told Wall Street analysts during a conference call that the firm’s performance was driven by product innovations that were supported by an effective advertising strategy and elevated customer service.
In a telephone interview, Freda explained: “Our business model [reflects how the consumer is] more interested in the combination of high-quality products with services,” such as having an expert show them how to use the products.
In the U.S., Freda noted that the prestige cosmetic sector is growing much faster than the mass category, and he attributes the two-year phenomenon to the consumers’ need for individualization — a trend that he foresees continuing and which was a key factor in the planning of its five-year strategic plan that began three years ago.
That trend is also very much alive in China as well, Freda said.
“The middle class [in China] is going directly to prestige.…Women are shopping for themselves, not for their families. It is a moment for ‘me time,’” he said.
In Europe, the markets are mixed. Prestige is growing faster than mass in the U.K., even though the economy there remains sluggish. In Italy, the balance between prestige and mass is more balanced, Freda said. Spain and Greece are softer markets in terms of consumer spending for Lauder, while those of Italy, France, Germany are holding steady.
Brazil is a fast-growing market for Lauder. While the total beauty market in Brazil is growing at 10 percent, Lauder’s sales growth is growing at a 30 percent clip, with MAC the favorite prestige brand in Lauder’s umbrella.
Freda noted that the firm continues to evaluate acquisitions, but there is “nothing specific” at the moment.
It’s no secret that Lauder prefers brands it can grow on a global basis and, similar to the Smashbox acquisition, where the brand is known primarily in the U.S., Freda said the firm could someday acquire a brand known mainly in Asia that it could expand around the world.
So far the company this year is generating record cash flow projected at $1.1 billion, which Freda said can be “used to return money to shareholders, or for an acquisition.”
The company expects fourth-quarter diluted net earnings before restructuring charges to be between 11 cents and 16 cents. For the year, diluted net earnings was forecasted at between $2.21 to $2.26, before restructuring charges.
Shares of Lauder on Friday fell 5.4 percent to close at $60.72 over concerns of a slowdown in China. Freda noted that while growth in China might slow a bit, the growth rate is still fairly robust and a slight dip doesn’t accurately reflect consumption by consumers. He noted that the Chinese consumer is still spending, particularly when one adds data from their spending on their home turf to what they’re buying when they travel.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty