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    Breaking News

    Lauder Logs Another Year of Growth

    CEO calls fiscal 2019 an outstanding year for the "best diversified pure play in the industry."

    Lauder Logs Another Year of Growth
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    • 2. Estée Lauder
    08.20.19
    The Estée Lauder Companies Inc. said net sales for the fiscal year ended June 30, 2019 rose 9% over the prior year reaching $14.86 billion. 
     
    Excluding the negative impact of currency translation and the adoption of the new revenue recognition accounting standard (ASC 606), net sales increased 12%, according to the company. Net earnings rose to $1.79 billion from $1.11 billion last year. 
     
    “Fiscal 2019 was an outstanding year for our company. We achieved strong net sales gains across our business, fueled by investments in our strategic priorities, including improved data analytics that helped power our innovation and digital marketing. Our winning strategy led to continued share gains in global prestige beauty,” said Fabrizio Freda, president and CEO. “With savings from our Leading Beauty Forward initiative and cost discipline throughout the organization, we grew profit far ahead of our net sales growth, while also investing in our strategic priorities.
     
    Freda said many engines drove growth, including “nearly every market in the Asia/Pacific region and many other important emerging markets around the world; our skin care category in every region; the travel retail and online channels globally; and compelling innovations and high-quality products, which drove strong repeat purchases. Globally, three of our four largest brands grew strongly as did many of our small and mid-sized brands. Our results were particularly impressive given macro volatility and challenges in several key markets demonstrating our successful strategy of multiple engines of growth and our agility to reallocate resources to the best opportunities.”
     
    He added, “Importantly, this year’s results cap a remarkable decade of strategic and operating achievements. Since launching our current strategy in 2009, we have diversified and strengthened our company, creating a solid foundation to continue our growth.”

    Freda said Prestige beauty continues to be one of the most desirable consumer sectors. 
     
    “As the best diversified pure play in the industry, we are uniquely positioned to capture global share. In fiscal 2020, we plan to continue to invest in the most compelling opportunities, including those in emerging markets beyond China. We expect another year of strong net sales growth, margin improvement and a double-digit increase in earnings per share,” he said.
     
    According to ELC, the adoption of ASC 606 decreased reported net sales growth by $48 million, or 1%, and decreased operating income by $2 million. Adjusting for the impact of ASC 606, total net sales in constant currency increased 21%.
     
    Skin care net sales grew across most regions, led by Estée Lauder and La Mer. Clinique’s skin care net sales also grew globally in constant currency. The Estée Lauder brand delivered double-digit net sales growth in all regions and nearly all channels of distribution. The increase reflected continued strength in certain of its core product franchises, including Advanced Night Repair, Perfectionist, Nutritious, Micro Essence and Revitalizing Supreme supported by successful innovations, such as Advanced Night Repair Eye Supercharged Complex.
     
    In makeup, the adoption of ASC 606 increased reported net sales growth by $10 million and increased operating income by $18 million, said ELC.  Net sales growth in makeup was primarily driven by higher net sales from Estée Lauder, M· A· C, Tom Ford Beauty and La Mer. Too Faced also contributed to the growth. These increases were partially offset by lower net sales from Clinique and Smashbox. M· A· C’s net sales increase was led by double-digit growth from Greater China, Japan and the Middle East, as well as travel retail, said ELC. Net sales from Tom Ford Beauty increased double-digits, primarily driven by its lip color and eye shadow products in Asia/Pacific and the travel retail channel, as well as targeted expanded consumer reach, including the brand’s highly successful launch on Tmall. Emerging market growth outpaced the total brand growth, driven by China, Israel, India and Singapore. La Mer’s strong double-digit growth across international markets was largely driven by the recent launch of The Luminous Lifting Cushion Foundation as well as targeted expanded consumer reach.
     
    ELC noted that makeup operating income declined, reflecting lower results across several brands, due to planned investments to support new and existing products, as well as lower results from Smashbox driven by the decline in net sales and $90 million of goodwill and other intangible asset impairments. This decrease was partially offset by higher results from Estée Lauder, primarily due to higher net sales with greater expense leverage.
     
    In fragrance, the adoption of ASC 606 decreased reported net sales growth by $14 million, or 1%, and increased operating income by $2 million. Adjusting for the impact of ASC 606, total net sales in constant currency increased 2%. Excluding the unfavorable foreign currency translation impact of approximately $50 million, net sales increased, reflecting growth from luxury fragrances, including Jo Malone London, Tom Ford Beauty, Le Labo and By Kilian. These increases were mostly offset by lower net sales from certain designer fragrances and Estée Lauder. Fragrance operating income declined, primarily driven by investments in advertising and promotional activities and store operations to support targeted expanded consumer reach, as well as lower net sales from certain designer fragrances.

    ELC’s hair care net sales increased, primarily reflecting higher sales from Aveda, particularly online, driven by the launch of Cherry Almond Softening Shampoo and Conditioner and the continued success of certain hero franchises, such as the Rosemary Mint and Shampure product lines. The increase was partially offset by lower net sales from Bumble and bumble, primarily in the North America salon and specialty-multi channels. Hair care operating income declined, reflecting planned strategic advertising investments on hero franchises, as well as social media and digital outreach at Aveda and lower net sales from Bumble and bumble, noted Lauder.
     
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