Estée Lauder delivers strong results, but is cautious on outlook

By Simon Pitman

- Last updated on GMT

Estée Lauder delivers strong results, but is cautious on outlook

Related tags Revenue growth Revenue

Estée Lauder has continued its strong run of financial results, reporting industry leading revenue growth for its second quarter on the back of like-for-like gains worldwide.

But despite the strong performance, executives say the outlook for the business looks challenging as the strong US dollar is likely to see currency translations impacting any revenue growth seen during the course of 2016.

The company reported that net revenue for the quarter grew by 3% to reach $3.12bn, but excluding the impact of foreign currency the figure represented an increase of 8%.

Net earnings increased by 2% to reach $446.2m, compared to a figure of $437.7m in the corresponding period last year.

Prestige make-up hits the spot

“Our strong constant currency sales growth reflects our ability to effectively anticipate key consumer and market trends, including greater demand for products in the fast-growing prestige makeup category and luxury beauty tier, and the importance of a strong and growing online presence,”​ said Fabrizio Freda, president and CEO.

“In the holiday season, our brands achieved outstanding results from their e-commerce businesses, as well as the gift sets, services, sampling and events they offered at retail.”

The company said that the skin care category sales were hard hit by currency headwinds, resulting in a decline in revenues of 3% to $1.23bn. However, discounting the currency translation revenues were slightly up, driven by new products launches, including New Dimension and Re-Nutrive Ultimate Diamond eye cream.

Smashbox and Tom Ford grab consumer attention

However, growth in the make-up category was robust, with sales rising 6% to $1.25bn, eclipsing skin care to become the company’s biggest category by revenue. Gains in this category were driven by double-digit growth from Smashbox and the Tom Ford brand.

In fragrance sales were up by 7% to $470.6m, driven by double-digit gains from the Jo Malone brand. While in hair care, sales grew by 9% to reach $149.0m, primarily from the Aveda and Bumble and bumble brands.

By region sales were up in The Americas by 2% to $1.23bn, and increased by 5% in Europe, the Middle East, and Africa.

Asia Pacific hard hit by currency translations

However, sales in the Asia Pacific region were flat at $629.4m, mainly due to a 6% negative impact from currency translations. Like-for-like sales were much stronger, with double-digit growth seen in Australia, the Philippines, Singapore and New Zealand, together with strong growth in China, Korea and Japan.

Looking ahead to the third quarter and full year, the company said that currency headwinds will continue to impact growth, compounded by an economic slowdown in markets such as Hong Kong and China, as well as several other developing countries.

Net sales for the third quarter are forecast to increase at around 2 - 3%, while for the full financial year revenue growth should register in the region of 4 - 5%

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