The Estee Lauder Companies Q3: Net Sales Rise 5%

The Estée Lauder Companies Inc. (ELC) reported net sales of $3.94 billion for its third quarter ended March 31, 2024, an increase of 5% from $3.75 billion in the prior-year period. Organic net sales increased 6% primarily due to double-digit growth in Europe, the Middle East & Africa (EMEA), driven by stronger sales in Asia travel retail, the beauty brand said.

The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds, according to ELC. The growth in organic net sales also reflected increases in several developed and emerging markets in Asia/Pacific, The Americas and EMEA, including strong double-digit growth in the company’s Priority Emerging Markets. Net sales increased in nearly all product categories, led by the return to high-single-digit growth in skin care, the company said.

ELC reported net earnings of $330 million, compared with net earnings of $156 million in the prior-year period.

“For the third quarter of fiscal 2024, we delivered our organic sales outlook, exceeded expectations for profitability and continued to improve working capital. La Mer, Estée Lauder, Jo Malone London, Le Labo, and The Ordinary led organic sales growth, driven by beloved hero products and highly sought innovation,” said Fabrizio Freda, president and CEO of ELC. “Asia travel retail returned to organic sales growth, as developed and emerging markets across Asia/Pacific, EMEA, and Latin America further contributed.”

Freda noted that during the second half of fiscal 2024, ELC strategically expanded its consumer reach, noting Clinique’s debut on the US Amazon Premium Beauty store, “which has greatly exceeded our retail sales expectations thus far.” He also pointed to  “striking” new flagship stores in Asia/Pacific for Jo Malone London and Le Labo.

“We have also made progress across all work streams for the Profit Recovery Plan, setting the stage to deliver its $1.1 to $1.4 billion of incremental operating profit in fiscal years 2025 and 2026 while also generating funds to reinvest into our brands and consumer-facing initiatives to accelerate sustainable sales and profit growth as a faster and leaner organization,” said Freda.
Freda said based on its third quarter results and fourth quarter outlook, ELC is confident that the second half of fiscal 2024 will prove to be an inflection point for the company performance.

“We expect accelerating momentum in organic sales growth in the fourth quarter, and for operating margin in the second half of fiscal 2024 to not only be stronger than the first half but also to expand from the year-ago period,” he said.

Skin Care

Skin care net sales increased 9%, due to growth in every geographic region. Double-digit growth in EMEA was driven by stronger sales in Asia travel retail. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds.

Net sales from La Mer rose strong double digits globally, driven by double-digit growth in EMEA and Asia/Pacific, benefiting from continued strength from hero products, including The Treatment Lotion, Crème de la Mer and The Concentrate, and new product innovation, such as The Moisturizing Fresh Cream.

Estée Lauder net sales grew mid-single digits, primarily due to the Advanced Night Repair and Revitalizing Supreme product franchises and benefiting from new product innovation, including Re-Nutriv Ultimate Diamond Transformative Brilliance Soft Creme Moisturizer primarily in mainland China.

Skin care operating income increased, primarily reflecting the growth in net sales as well as the decrease in obsolescence charges compared to the prior-year period primarily due to less inventory on hand reflecting the company’s progress to reduce excess.

Makeup

Makeup net sales increased 4%, primarily benefiting from growth in the Company’s travel retail business as well as strong double-digit growth in Latin America and Korea. Partially offsetting these increases was a benefit in the prior-year period as a result of changes to M·A·C’s take-back loyalty program.

Estée Lauder net sales grew strong double digits, reflecting growth across all geographic regions and continued success from the Double Wear product franchise.

Net sales from Clinique rose double digits globally, with growth across all geographic regions, benefiting from continued strength across the eye, face and lip subcategories.

Makeup operating results increased, primarily reflecting net sales growth and disciplined expense management.

Fragrance

Fragrance net sales grew 1%. Net sales from the company’s luxury brands increased mid-single digits, reflecting growth across all geographic regions, partially offset by a decline from Estée Lauder.

Jo Malone London net sales increased high-single digits, led by strong double-digit growth in EMEA and The Americas, primarily driven by hero product franchises, including English Pear and Wood Sage & Sea Salt and new product innovation, such as Red Hibiscus.

Net sales from Le Labo rose strong double digits globally and in Asia/Pacific, primarily driven by continued success of hero product franchises, such as Santal 33 and Another 13, and benefited from targeted expanded consumer reach globally.

Estée Lauder net sales declined, primarily due to softer retail sales during holiday and key shopping moments that led to lower shipments for replenishment orders compared to the prior-year period.

Fragrance operating income declined, primarily driven by strategic investments, including for targeted expanded consumer reach globally as well as advertising and promotional activities, to support growth of the company’s luxury brands.

Hair Care

Hair care net sales decreased 4%, primarily driven by Aveda reflecting softness in the Company’s North America salon channel. Hair care operating results decreased, driven by the decline in net sales, partially offset by disciplined expense management, said ELC.