Fiscal 2018 Shows 16% Rise in Sales at ELC

The Estée Lauder Companies Inc. (ELC) reported strong financial results for its fourth quarter and fiscal year ended June 30, 2018.

For the fiscal year, net sales rose 16% to $13.68 billion. The company posted net sales growth in each major product category and each geographic region. Excluding the impact of currency translation, net sales increased 13%, according to the global beauty giant.

These results reflect, in part, the firm’s strategy to drive growth by targeting its investments to shifts in consumer and market dynamics across product categories, geographic regions, brands and distribution channels, ELC contends. This strategy positioned ELC well for the resurgence in global prestige skin care growth as well as the strong increase in demand among Chinese consumers.

Net sales increased in several developed and emerging markets, and reflected strong growth from the travel retail, online and specialty-multi channels. Skin care net sales benefited from increases at Estée Lauder, La Mer, Origins and Clinique. Makeup net sales growth was driven by increases from Estée Lauder, Tom Ford and MAC, as well as both incremental and higher comparable net sales from the fiscal 2017 acquisitions of Too Faced and Becca. Fragrance net sales growth reflected increases from Jo Malone London, Tom Ford, Le Labo and By Kilian. Hair care net sales increased, reflecting growth from Aveda.

“Fiscal 2018 was an outstanding year for our company. We generated higher sales in every region and product category and gained global share. By investing in our hero franchises, fast-growing channels and digital and social media, we delivered double-digit sales and adjusted earnings per share growth. We achieved record net sales in fiscal 2018 and one of our best performances in the last decade,” said Fabrizio Freda, president and CEO. “Sales climbed in virtually all our brands and we hit milestones along the way. Among the top four brands, our flagship Estée Lauder brand achieved record global sales and grew 22% in constant currency, demonstrating the amazing equity of the brand. La Mer became the fourth brand in our portfolio to contribute well over $1 billion in net sales, and we increased sales at MAC and Clinique globally.

“Product innovation and creativity were strong across brands and Leading Beauty Forward provided us the flexibility to invest more in digital advertising behind our initiatives, which is accelerating our sales growth, the CEO added in a statement released with the financial news.

According to Freda, in fiscal 2019, ELC will continue to create products that appeal to a more diverse and growing middle class around the world and the company is confident that it can continue to achieve industry-leading sales and double-digit earnings per share growth.

“With a successful strategy that focuses on multiple engines of growth across products, geographies, channels and demographics, we expect to once again gain share globally in fiscal 2019,” he said.

For the three months ended June 30, 2018, the company reported net sales of $3.30 billion, a 14% increase compared with $2.89 billion in the prior-year period. The company posted net sales growth in most brands and across-the-board gains in all geographic regions and product categories. Net sales increased in several developed and emerging markets, reflecting especially strong growth from the travel retail, online and specialty-multi channels. Excluding the impact of currency translation, net sales increased 12%. Net earnings for the quarter were $186 million, compared with $229 million last year.

Net sales and operating income in the company’s product categories and regions outside the US were favorably impacted by a weaker US dollar in relation to most currencies. ELC reported operating income for the three months ended June 30, 2018 of $277 million, a 20% increase from $230 million in the prior year. Total operating income excluding the favorable impact of currency translation of $13 million and before charges and other adjustments, declined 1%, largely reflecting strategic investments made in digital and social media advertising to support long-term growth in fiscal 2019 and beyond.

In Q4, skin care net sales increased double-digits in every geographic region. growth was particularly strong in Europe, the Middle East & Africa, travel retail, and China. By brand, the Estée Lauder, La Mer and Clinique brands were the largest contributors to growth, according to ELC. Operating income increased primarily from Estée Lauder and La Mer, reflecting higher net sales in Asia/Pacific and Europe, the Middle East & Africa, with the strongest growth in China and travel retail.

Makeup net sales during the quarter increased with strong double-digit growth from Estée Lauder, Tom Ford, Too Faced, BECCA and La Mer. That performance, however, was partially offset by declines from MAC and Clinique. Makeup operating income declined primarily due to lower operating results from MAC that mainly reflected investments to support its turnaround in North America, stock adjustments in the Middle East, and higher advertising in Asia/Pacific to drive net sales in the fast-growing region, said ELC.

Higher fragrance net sales in Q4 reflected growth across all geographic regions. Jo Malone London, Tom Ford and Le Labo all had strong double-digit gains. Fragrance operating results improved, reflecting higher net sales from Tom Ford, primarily in North America, as well as the Europe, the Middle East & Africa region, which benefited from strong growth in travel retail. By Kilian also contributed to the growth. The category performance also reflected a decline from Estée Lauder fragrances in the United States.

Fourth quarter hair care net sales increased primarily due to the successful launch of new Aveda products. The increase in hair care operating income reflected the higher net sales, according to the company.