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Estée Lauder Sales Jump in Latest Quarter

Sales increased across categories, including makeup.

Sales at the Estée Lauder Cos. spiked during the most recent quarter, with growth across all segments — including makeup.

The beauty company, which owns the Estée Lauder brand as well as Clinique, Tom Ford Beauty, MAC, La Mer and others, saw a 23 percent increase in sales for the quarter ended Sept. 30, to nearly $4.4 billion. Net earnings increased 32 percent, to $695 million.

The company’s stock rose on Tuesday by 4.1 percent, to close at $338.62. 

According to Lauder president and chief executive officer Fabrizio Freda, the company’s “multiple engines of growth strategy” is working. “Our growth engines increasingly diversified,” he said in a statement. “Relative to the pre-pandemic first quarter of fiscal 2020, the overall business is much bigger and more profitable.”

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On a call with Wall Street analysts, Freda clarified that Lauder’s business ended the most recent quarter 13 percent larger than before the pandemic, and more profitable, too. Deciem, which Lauder agreed to buy the majority of in February, added three points to sales gains, executives said. 

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Lauder is learning about incubating brands from Deciem, Freda said. “What we are learning is also the power of creative incubation and the creation of new brands — this will have an influence on our future ability to continue developing brands and we will leverage the strength of Deciem in this area,” Freda said.

“We expect that Deciem will continue to incubate new brands, and hopefully have another hit like The Ordinary,” said Tracey Travis, Lauder executive vice president and chief financial officer, in an interview. “But in addition to that, right now I’d say we’re primarily focused on innovating for our existing portfolio of brands, but it’s not out of consideration that in the future we might once again incubate brands within the broader portfolio.” 

During the most recent quarter, hero products drove sales at many brands, Freda said, and 13 Lauder brands contributed double-digit organic sales growth compared to the prior-year period. The business has been impacted by the widespread supply chain challenges associated with the pandemic, and planned further ahead in order to navigate through this holiday season, Travis said.

“We’re in pretty good shape for holiday,” Travis said. “We’ve had longer supply chain times in terms of getting product in, and we’ve also had the cost inflation that everyone is saying. We have had to, in some cases, air freight some product. In other cases, even products on boats is costing more than certainly what it did even a year ago.” 

Travis said Lauder has been working with suppliers and retailers to mitigate supply chain challenges through the holiday season as much as possible, and that she anticipates supply chain issues will persist at least midway through next calendar year.

Lauder has also increased prices in order to make up for the added costs, Travis said. “It varies brand by brand,” she said. “Three percent is an average across all of our markets, across all of our products. We are taking a little bit more pricing in light of the environment.” 

New innovation is one area where prices have been increased, Travis said. The Ordinary, Lauder’s most affordable line, has not increased prices, she noted. “Typically we would take less pricing on our entry-level prestige products and could take more pricing for our luxury products,” she said.

For the quarter, Lauder saw sales increases in all categories and geographies, compared to a year ago.

Skin care sales increased 20 percent, to $2.4 billion, boosted by sales at La Mer and Clinique. La Mer’s hero products, including Crème de la Mer, The Moisturizing Soft Cream and The Treatment Lotion, drove sales. The brand also launched the Hydrating Infused Emulsion and a new online platform in Southeast Asia that contributed to growth. 

Freda said the Emulsion is an example of “East to West innovations.” 

“It is a striking example of the innovation gains we can achieve with the power of our data analytics combined with our creative talent and R&D,” Freda said. 

In the interview, Travis said that the idea of “East to West” innovation is tied to Lauder’s new innovation center in Shanghai, which opens next year. 

“We will have on the ground the ability to develop end-to-end innovation from ideation and consumer insights through pre-production,” Travis said. “You’re seeing so much ideation of new products in the China market now. We’ve seen this in the Korean market and in the Japan market, as well. There is an opportunity to have more — in particular skin care, but I would say even makeup innovation is now growing in Eastern markets — so we see even more of an opportunity especially with boots on the ground from an R&D capability standpoint to transfer some of that innovation to Western markets.”

At Clinique, sales were also driven by hero products — Even Better Clinical Radical Dark Spot Corrector + Interrupter sold well. Clinique’s launch of Smart Clinical Repair Wrinkle Correcting Serum also did well, the company said.

Makeup sales jumped 20 percent, to $1.17 billion. Lauder said the increase reflected “a nascent recovery in Western markets.” Estée Lauder and MAC both saw double-digit sales growth, the company said. Estée Lauder’s Double Wear and Futuritist foundation lines did well, as did the Double Wear Sheer Long-Wear Foundation and Pure Color Whipped Matte Lip Color launches. MAC saw strength in face and eye products, the company said.

Makeup sales are still down 19 percent compared to where they were before the pandemic, executives said. 

Fragrance sales increased 50 percent to $609 million. Lauder said the segment grew broadly, across brands, and that Tom Ford and Jo Malone London both saw sales increases in the double digits. Lauder said in September that it will close the Aramis and Designer Fragrances division, which houses Tommy Hilfiger, Michael Kors and other designer brands. It will wind down between now and 2023.

Hair care sales increased 9 percent, to $148 million. Lauder said both Bumble and bumble and Aveda saw gains as salons and retail shops opened.

Geographically, Lauder sales rose in all regions. The Americas was up 37 percent, to nearly $1.2 billion; Europe the Middle East and Africa sales jumped 22 percent, to $1.9 billion, and Asia Pacific sales increased by 15 percent, to $1.3 billion.

Sales in the Americas were propelled by retail reopenings, and Latin America and the U.S. saw double-digit increases. Brick-and-mortar sales increased, offsetting a small decline in organic online sales.

In EMEA, sales increases were led by the U.K., Russia and the Middle East, propelled by fragrance and makeup. In Asia Pacific, sales gains reflected increases in Greater China and South Korea, Lauder said.

The results come a year after Lauder unveiled a two-year restructuring program, the post-COVID[-19] Business Acceleration Program, which is meant to allow the business to shift resources toward growth areas.

Right now, most of Lauder’s office employees continue to work remotely, Travis said, and the company plans to bring those workers back to offices early next year on a hybrid basis.

For the second quarter of fiscal 2022, Lauder is projecting net sales increases between 11 percent and 12 percent from the prior-year period. For the full year, net sales are forecast to increase between 12 percent and 15 percent.

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