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Estée Lauder Still Sees Opportunity in Troubled China

Estée Lauder's Fabrizio Freda describes the growth prospects he still sees in China, despite its sluggish economy.

Despite China’s sluggish economy, the Estée Lauder Cos. Inc. still sees a rosy future there.

“We continue to view China and Chinese consumers as one of our biggest long-term growth opportunities thanks to the rapidly expanding middle class,” said Fabrizio Freda, president and chief executive officer of the Estée Lauder Cos. Inc., while speaking at Barclays Global Consumer Staples Conference, held in Boston on Thursday.

Freda said China currently represents 6 percent of the company’s global sales of $10.78 billion. And there’s more opportunity ahead, said Freda, as Lauder currently sells less than half of its brands in China.

He noted that Lauder currently has a presence in approximately 100 cities across China, and see potential for a bricks-and-mortar presence in at least 300 cities. Its sales online in China more than doubled last year. The company has six of its own brand sites in China and four brands on Tmall, including the Estée Lauder brand.

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Lauder has put a lot of emphasis on its skin-care business, but has seen a slowdown in the category, in large part due to weaker sales in Asia. But Freda sees that as a short-term issue.

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“Asian consumers are absolutely passionate about the category,” he said. “Asian women use seven steps for skin care in the morning and seven steps in the evening…We will continue to push skin care.” Accelerating makeup sales have picked up the slack somewhat.

He emphasized that the company’s diversified portfolio is designed to weather these challenges. “Whether you look at our company by brand, channel or market, at least one-third [of the firm] is growing by double digits,” said Lauder.

The company also is leaning more heavily on digital and said it expects to reach a record $1 billion in e-commerce sales this fiscal year.

It has e-commerce sites in more than 30 countries and expects to launch about 50 new global e-commerce and mobile sites this fiscal year, which will include five new countries and further expansion on China’s  Tmall platform, said Freda.