Estée Lauder Posts Best Quarter Yet
The Estée Lauder Cos. has posted its largest quarter ever, notching $4.85 billion in net sales.
The maker of MAC, Clinique and Tom Ford Beauty saw sales increase 14 percent for the quarter ended Dec. 31, thanks to the recovery in Western markets and strong online sales. Lauder posted earnings of $1.09 billion, up from $870 million in the prior-year period.
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For the six months ended Dec. 31, Lauder posted nearly $10 billion in sales — $9.93 billion — an 18 percent increase from the prior-year period. Net earnings were $1.78 billion.
Fabrizio Freda, Lauder president and chief executive officer, said Thursday that the figures are “all the more impressive” when compared to Lauder’s pre-pandemic holiday quarter in 2019, which was also a record-setter.
“Despite the ongoing challenges of COVID-19, which escalated during the quarter with Omicron, we far exceeded the exceptional results of two years ago. Reported sales are 20 percent higher, driven by organic sales and with every region now larger, and we are much more profitable,” Freda told Wall Street analysts on the company’s earnings call.
“Our optimism in the opportunities of tomorrow remains incredibly strong,” Freda said. “Our brand portfolio of large, scaling and developing brands served as a powerful catalyst for growth as consumers reward the quality of our trusted brands and hero products.”
Lauder posted sales gains across all categories and all geographies in the quarter.
Regionally, the Americas was the fastest-growing geography in the quarter, with a 24 percent year-over-year increase, to $1.3 billion in sales. One-third of those sales came from online, according to Tracey Travis, executive vice president and chief financial officer.
Sales have started to pick up in the U.S., Canada and Latin America as people returned to stores.
In the U.S., which had seen a sales slowdown pre-pandemic, things are looking up. “We actually were ahead of our pre-pandemic sales level that was quite meaningful for the U.S.,” Travis said, ticking off growth in fragrance with Jo Malone, Tom Ford, Le Labo, Frederic Malle and Kilian.
“It says a lot to the consumers’ willingness to shop and spend on more luxury products,” Travis said.
“We also saw good growth in skin care and in hair care,” she added, noting that giftable items from Aveda sold well during the holiday. Total company hair care sales were $180 million in the quarter, a 17 percent uptick from the prior-year period.
“Makeup is still recovering,” Travis said, though MAC and Estée Lauder did well over the holidays in the U.S. and globally.
“Many of us are still wearing masks in this pandemic environment, and we’re seeing a resurgence in the foundation category,” she said. Estée Lauder’s Double Wear and Futurist foundation lines did well, too, the company said.
For the quarter, total company makeup sales were up by 11 percent to $1.4 billion, but have not yet eclipsed pre-pandemic sales levels.
Lauder said sales have ticked upward as consumers find themselves with more “usage occasions,” and that Estée Lauder, MAC, Too Faced, Tom Ford Beauty and Smashbox did well.
Skin care net sales in the quarter were up 12 percent year-over-year, to $3.2 billion. La Mer and Clinique both saw strong double-digit growth led by hero products. Lauder took a $81 million goodwill charge related to Glamglow in the quarter.
In skin care, Deciem is doing well, and Lauder said the newly acquired company added 3 points to total reported net sales growth. Regionally, Deciem sales also accounted for significant amounts of sales growth — five points in North America, three in EMEA and one in Asia Pacific, the company said.
Fragrance sales increased 29 percent in the quarter, to $799 million. Jo Malone saw a strong net sales gain, driven by English Pear & Freesia, holiday collections and bath, body and home offerings. Tom Ford, Le Labo and Kilian Paris also contributed to growth.
In addition to an uptick of fragrance sales in the U.S., Travis said there is more interest in fragrance coming from Chinese consumers.
Lauder uses “olfactory fragrance mapping” to determine consumer preferences by market, she said. For example, Jo Malone’s Wild Bluebell scent resonates in China, while Wood Sage and Sea Salt is more popular in Western markets. “Over time though, you see a bit of convergence,” she added.
The Asia Pacific region saw a 7 percent sales gain in the quarter, to $1.9 billion, driven by China, Australia and Southeast Asia.
Europe, the Middle East and Africa saw a 15 percent lift in sales during the quarter, to $2.3 billion. The U.K. saw the strongest recovery for Lauder, and posted major gains in makeup and fragrance.
Lauder plans to raise prices this year on a product-by-product basis in order to combat rising costs from supply chain woes. Travis said the company has been impacted by freight rates which have “gone up dramatically,” and that the company’s supplier base has also been “stressed.” Additionally, commodity prices have risen, she said.
“We’ve been managing all of these impacts incredibly well,” Travis said.
When it comes to suppliers, Travis said some of the stress is related to labor shortages, but some is related to increased demand.
“The beauty category is so strong that some of our suppliers actually have had more demand and more of a demand acceleration,” Travis said. To work around that, Lauder has been making sure it has secondary sourcing options, she said.
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