The Estée Lauder Companies Inc (ELC) has reported net sales of $3.90bn in the first quarter of fiscal 2020 ended 30 September 2019, an increase of 11% (12% excluding the impact of currency translation) from $3.52bn in the prior year-end.
According to the company, the positive sales performance was driven by double-digit growth across international and emerging markets, the skincare category, travel retail, online channel, the Estée Lauder brand and several luxury labels.
During the fiscal 2020 first quarter, changes were made to reflect certain leading beauty forward enhancements made to the capabilities and cost structure of the travel retail business. The changes were primarily centralised in The Americas region and resulted in a change to the royalty structure of the travel retail business to reflect the value created in the Americas.
Accordingly, the fiscal 2019 operating income of The Americas increased by $201m with a corresponding decrease in Europe and the Middle East & Africa to conform with the current year presentation. The impact of such activities in the fiscal 2020 first quarter was comparable, so there was no material year-on-year change in operating results of either region attributable to such change.
Fabrizio Freda, President and Chief Executive Officer said: “We have started fiscal year 2020 with terrific results. Our winning strategy based on multiple engines of growth helped us deliver an extraordinary performance, especially in light of the volatile global environment, reflecting the agility and resiliency we have created in our business model.
GLOBAL BRAND GROWTH
“All four of our biggest brands, each with annual sales well over $1bn, grew globally. This demonstrates the enduring consumer interest in established brands and their proven, desirable products.”
Improved data analytics and consumer insights fuelled the company’s innovations and digital marketing, while its hero franchises continued to power the portfolio, according to Freda. “We broadened our growth engines, activated new ones and invested in the best opportunities across our global strategic priorities.”
He 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.”
In the skincare segment, Clinique’s growth was driven by increases in its hero moisturisers (Moisture Surge, the Dramatically Different Moisturising franchise Smart Clinical) which in turn drove growth in North America and travel retail.
Net sales in the category also grew across all regions, led by Estée Lauder and La Mer. Clinique and Origins also grew globally.
In the makeup category, net sales growth was primarily driven by increases from, Mac, Tom Ford Beauty and La Mer. These increases were partially offset by lower net sales from Too Faced, Becca and Clinique.
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.
In the Middle East and Africa, the company generated strong net sales growth, driven by high double-digit growth in travel retail and online. Net sales from the travel retail business was broad based with double-digit growth in many of the brands, led by Estée Lauder, La Mer, Origins, Jo Malone London and Bobbi Brown.
Growth also reflected the increase in international passenger traffic, improved conversion and strategic investments to support new and existing products. In addition, successful innovations and expanded targeted consumer reach contributed to growth.
HONG KONG TRAVEL RETAIL DECLINE
According to the company, the decline in travel retail in Hong Kong was offset by an acceleration in other Asian markets due to strong product demand. Operating income increased, primarily reflecting strong double-digit travel retail growth and disciplined cost management across the region.
ELC, which is expecting a gradual moderation of net sales growth in China and travel retail and costs associated with continuing uncertainty around Brexit commented: “The company continues to see strong consumer demand for its high-quality products and for the fiscal year expects to grow ahead of the industry and to continue building global share.
“The company expects global prestige beauty to grow approximately 5-6% during the fiscal year, assuming no additional geopolitical risks materialise. However, the company is mindful of risks related to social, economic and political issues, including geopolitical tensions, regulatory matters, global security issues, currency volatility and economic challenges that could affect consumer spending in certain countries and travel corridors.”
Meanwhile, ELC has appointed Sue Fox (below) as Senior Vice President/General Manager, UK and Ireland, effective 1 January 2020. Fox will report to Cedric Prouvé, President, International and join the global Executive Leadership Team.
She, joins the UK & Ireland business with 25 years’ experience within ELC. This includes several senior leadership roles, most recently in Japan, where she oversaw rapid growth in speciality-multi and online sales.
Fox previously led ELC’s travel retail EMEA business based in London and was head of the company’s South Africa affiliate for 10 years.
Prouvé said: “Sue is a transformative leader possessing the strategic global business acumen, proven track record and expertise to effectively navigate today’s shifting consumer and competitive landscape. In addition, Sue is a true steward of our company’s culture and values, making her ideally-placed to lead the UK & Ireland business, one of our most important markets, into the future.”