Estee Lauder Shares Q1 Results

The Estée Lauder Companies Inc. has reported the financial results for its first quarter ended September 30, 2019. Net sales of $3.90 billion increased 11 percent from $3.52 billion in the prior-year period. Net earnings rose 19 percent to $595 million, compared with $500 million last year.
 
Fabrizio Freda, president and CEO said, “Our sales growth was led by excellent results from our international markets, particularly in China and our other emerging markets, the skin care category, the travel retail and online channels globally, our Estée Lauder brand and several luxury brands, all of which grew double digits. In addition, all four of our biggest brands, each with annual sales well over $1 billion, grew globally. This demonstrates the enduring consumer interest in established brands and their proven, desirable products.
 
“Improved data analytics and consumer insights fueled our successful innovations and digital marketing, and our hero franchises continued to power our portfolio. We broadened our growth engines, activated new ones and invested in the best opportunities across our global strategic priorities.”
 
Freda added, “By leveraging our sales gains and maintaining a disciplined operational and financial focus, adjusted diluted earnings per share rose significantly. At the same time, we increased our advertising spending. With this strong start and continued confidence in our ability to execute effectively, we are raising our full year net sales and EPS guidance in constant currency.”
 
Skincare
 
Skin care net sales grew across all regions, led by Estée Lauder and La Mer. Clinique and Origins also grew globally. The Estée Lauder brand delivered double-digit growth in all regions, reflecting continued strength in certain of its core product franchises, such as Advanced Night Repair, Micro Essence and Revitalizing Supreme, supported by successful innovations, including the launch of Advanced Night Repair Intense Reset Concentrate. Double-digit growth at La Mer was broad based, with net sales increasing across every region and major channel, driven by higher net sales of existing products, including The Treatment Lotion and The Concentrate, as well as the relaunch of The Regenerating Serum. Expanded targeted consumer reach also contributed to growth. Clinique’s growth was driven by increases in its hero moisturizers, including Moisture Surge, the Dramatically Different Moisturizing franchise and Smart Clinical, which drove growth in North America and travel retail. Operating income increased sharply, primarily from La Mer and Estée Lauder, reflecting higher net sales, that was partially offset by higher expenses to support strategic investments in technology and other select corporate functions.
 
Makeup
 
Net sales growth in makeup was primarily driven by increases from Estée Lauder, MAC, Tom Ford Beauty and La Mer. These increases were partially offset by lower net sales from Too Faced, Becca and Clinique. Estée Lauder generated solid double-digit growth, driven by strength from its Double Wear line of products. MAC’s growth was led by double-digit sales increases in Greater China, Japan, Southeast Asia and Latin America, as well as targeted expanded consumer reach that supported strong growth in travel retail and online. MAC’s sales from innovation grew mid-single digits, led by several new lip and foundation launches. Net sales from Tom Ford Beauty increased double digits, primarily driven by its lip color, eye shadow and cushion compact products in Asia/Pacific, as well as targeted expanded consumer reach, including the brand’s highly successful launch on Tmall this quarter. La Mer’s strong double-digit growth across international markets was largely driven by the continued success of The Luminous Lifting Cushion Foundation, as well as expanded targeted consumer reach. Makeup operating income declined, primarily reflecting lower net sales from Too Faced, Bobbi Brown and Becca, as well as planned investments to support new product launches.
 
Fragrance
 
Net sales decreased slightly in constant currency, as growth at Jo Malone London and Tom Ford Beauty was offset by lower net sales of certain designer fragrances. Additionally, the Estée Lauder brand had a difficult comparison due to the launch of Beautiful Belle in the prior-year period. Jo Malone London’s net sales increase primarily reflected growth in hero products and franchises as well as the launch of Poppy & Barley and targeted expanded consumer reach. Increased net sales from Tom Ford Beauty reflected the continued success of certain Private Blend fragrances and the launch of Metallique. Fragrance operating income increased at Jo Malone London and Tom Ford Beauty, and also benefitted from expense management.
 
Hair Care
 
Hair care net sales declined, reflecting lower net sales from Bumble and bumble, primarily in North American salon and specialty-multi channels, and difficult comparisons at Aveda, due to the successful launch of Cherry Almond Softening Shampoo and Conditioner in the prior-year period. Hair care operating income declined, reflecting the lower net sales.
 
The Company expects global prestige beauty to grow approximately 5-6 percent during the fiscal year, assuming no additional geopolitical risks materialize. Reported net sales for the full year fiscal 2020 are forecasted to increase between 7 percent and 8 percent versus the prior-year period, which includes a 1 percent unfavorable impact from currency translation.