Estée Lauder Reports Q2 Results

The Estée Lauder Companies Inc. has reported the financial results for its second quarter ended December 31, 2019. Net sales of $4.62 billion increased 15% from $4.01 billion in the prior-year period. Excluding the impact of currency translation, net sales increased 16%.
 
“We delivered superb results in our second quarter, leading to an excellent first half. Our multiple engines of growth generated broad-based gains across all our regions and major categories, as our prestige brand portfolio was well received by global consumers during the Singles Day event and holiday season,” commented Fabrizio Freda, president and CEO.
 
“Our sales growth came from all facets of our business, including the Asia/Pacific region, the skin care and fragrance categories, the online and travel retail channels, and the Estée Lauder, La Mer and luxury fragrance brands. Our emerging markets continued to be vibrant and we made progress towards the stabilization of our North American business despite continued softness in the makeup category. Additionally, we completed the acquisition of the Korean-based Dr. Jart+ brand at the end of the quarter, which strengthens our position in global skin care.”
 
Freda emphasized, “In the wake of the recent coronavirus outbreak, we are first and foremost concerned about the health and safety of our employees, consumers and everyone affected in China and around the world. Our hearts and support go out to the many people working hard to mitigate the health risks of the coronavirus. The global situation will also affect our financial results in the near term, so we are updating our fiscal year outlook. With our results to date and our agility in allocating resources, we will strive to deliver full-year growth at least in line with our long-term goals, even in this challenging moment. We will be ready to return to our growth momentum as the global coronavirus outbreak is resolved.”
 
Segments
 

• Skin care net sales grew across all regions, led by Estée Lauder and La Mer. Origins and Clinique also grew globally.
• MakeUp net sales growth was primarily driven by increases from Estée Lauder, Tom Ford Beauty, Bobbi Brown and La Mer. These increases were partially offset by lower net sales primarily from BECCA and Smashbox.
• Fragrance net sales growth was driven primarily by increases from Jo Malone London and Tom Ford Beauty.
• Hair care net sales grew at both Aveda and Bumble and bumble. Aveda net sales benefitted from the launch of Nutriplenish, a new line of hydrating hair care products. In addition, Full Spectrum Demi Plus and the relaunch of Sap Moss also contributed to net sales growth.

 
Regions
 

• In North America, skin care net sales continued to grow, driven by increases from Estée Lauder, Origins and La Mer.
• Net sales in Latin America declined slightly, as gains across most of the region were offset by a decline in Chile, reflecting social unrest in that country.
• The company generated strong net sales growth in Europe, the Middle East and Africa, primarily due to strong double-digit gains in travel retail, online and specialty-multi.
• Net sales growth in Asia/Pacific was broad-based, with nearly every market in the region growing and more than a third increasing double digits in constant currency.

 
Six-Month Results
 
For the six months ended December 31, 2019, the company reported net sales of $8.52 billion, a 13% increase compared with $7.53 billion in the prior-year period. Net sales increased 14% in constant currency.
 
Outlook
 
The company continues to see strong consumer demand for its products, and for the fiscal year expects to grow ahead of the industry and to continue building global share. The company expects global prestige beauty to be adversely impacted over the next few months by the coronavirus. The company is also mindful of risks related to social, economic and political issues, including geopolitical tensions, regulatory matters, global security issues, currency volatility and economic challenges that could affect consumer spending in certain countries and travel corridors.
 
Reported net sales are forecasted to increase between 0% and 1% for the second half of fiscal 2020 versus the prior-year period. The third quarter is anticipated to be the most negatively impacted by the coronavirus with sales declining versus the prior-year period. The company’s recent acquisition of Have & Be is forecasted to contribute approximately 2% to the company’s overall sales growth. Excluding the impact of the acquisition and 1% negative impact from currency, net sales are forecasted to decline between 0% to 1%.
 
Reported net sales for full year fiscal 2020 are forecasted to increase between 6% and 8% versus the prior year. The company’s recent acquisition of Have & Be is forecasted to contribute approximately 1% to the company’s overall sales growth. Excluding the impact of the acquisition and 1% negative impact from currency, net sales are forecasted to grow between 6% and 8%, in-line with the company’s long-term growth goal.