The work of the Estée Lauder Cos. Inc.’s 10-year compass is paying off.
“Our 10-year compass forecasting continuing strong demand for skin care, and we matched our innovations to the biggest opportunities across the consumer segment and channels,” Lauder president and chief executive officer Fabrizio Freda told Wall Street analysts on Monday, following the company’s earnings release.
Freda noted the business has doubled in size since implementing the strategy, which aims to predict business opportunities. “Since 2009, our net sales more than doubled from $7 billion to nearly $15 billion, rising on average 8 percent a year, which is the top of our long-term goal.”
For its latest fiscal year, Lauder reported a 9 percent jump in net sales, to $14.86 billion, driven by skin care, travel retail and growth in Asia-Pacific. Net earnings for the year were up 61 percent to $1.79 billion. The key drivers for Lauder’s business remain China, travel retail — boosted by increased same-store sales and the “pretail” concept — and skin care. The U.S. market remains gloomy, and Freda said he’s hoping for stabilization in 2020.
Skin care was a real star of the show, with sales jumping 17 percent to $6.55 billion, led by Estée Lauder and La Mer.
You May Also Like
Makeup followed, with a 4 percent sales gain, to $5.86 billion, boosted by sales from Estée Lauder, MAC, Tom Ford Beauty and La Mer. Too Faced’s new Damn Girl mascara is also doing well, executives said, but Clinique and Smashbox are not. Lauder noted a $90 million goodwill impairment on Smashbox.
Fragrance declined 1 percent, to $1.8 billion, and hair care gained 2 percent, to $584 million. Jo Malone London, which launched on Tmall in the year, Tom Ford, Le Labo and By Kilian are doing well, but those sales were offset by declines in designer fragrances. The company recently signed a deal to sell the Tory Burch license to Shiseido. In hair, Aveda is doing well, but Bumble continues to struggle, especially in the North American salon and specialty multichannels, the company said.
Regionally, Asia-Pacific was the growth driver, jumping 21 percent to $3.67 billion in sales. That region, while the fastest growing, is still Lauder’s smallest. Europe, the Middle East and Africa gained 15 percent, to $6.4 billion, and the Americas dipped 5 percent to $4.7 billion, for the year. Lauder said decline reflected challenges in brick-and-mortar stores.
Travel retail continues to boom, and the concept of “pretail” — where customers buy ahead of time and pick products up at the airport — is taking off in Asia. “We forecast this will be a global methodology to buy in this channel in the future,” Freda said.
“Some consumers arrive to the airport late, arrive to the airport stressed that doesn’t want to shop, they want to go to a lounge, or they want to do other things and the fact that you can buy online before going and then getting it at the airport actually is increasing the amount of consumers which are willing to buy something in the airport,” Freda said.
Lauder has also upped its airport-based advertising, which Freda said is driving conversion.
For the fourth quarter, Lauder’s net sales increased 9 percent to $3.59 billion, driven by China, travel retail and online. The company said net sales in the U.S. improved, “despite a tough retail environment.”
Lauder is forecasting net sales growth between 9 and 10 percent for fiscal 2020.