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A-Brands

Estée Lauder Beats Sales Estimates As Demand For Makeup Rebounds

Estée Lauder Cos Inc on Thursday beat market estimates for quarterly sales, as the cosmetics maker benefited from a rebound in demand for makeup products after Americans started venturing out following the easing of coronavirus restrictions.

Strong online sales, increased demand in China, and investments in its skincare products helped the M.A.C brand owner cushion the blow from lower makeup sales in 2020 when people working from home shunned its foundations and lipsticks.

Sales of Estée Lauder's makeup products rebounded after Americans started trickling back to offices and stepping out for sporting events, restaurants, and bars following mass vaccinations.

Sales in its makeup division surged 76% on a reported basis to $960 million in the fourth quarter ended 30 June, marking a return to growth for the first time in more than a year.

Net sales rose to $3.94 billion in the fourth quarter, from $2.43 billion a year earlier. Analysts had expected net sales of $3.75 billion, according to IBES data from Refinitiv.

Annual Performance

For its full financial year ended 30 June, Estée Lauder's net sales increased by 13% to $16.22 billion. This growth was driven by the gradual reopening and recovery in brick-and-mortar retail across all markets.

The company's Europe, the Middle East and Africa division saw net sales growth of 9% at a constant currency basis, to $6.9 billion in this period.

Commenting on the company's performance, president and chief executive officer, Fabrizio Freda, said, "We delivered outstanding results in fiscal 2021, capped by an exceptional fourth quarter and powered by our multiple engines of growth strategy as well as the timeless desirability of prestige beauty.

"Notably, both sales and profitability meaningfully exceeded fiscal 2019 performance. Amid the challenges of the pandemic, we invested in near- and long-term growth opportunities and managed costs elsewhere with discipline, while making important progress on our social impact commitments and sustainability goals."

The company missed analysts' estimates for quarterly sales in the third quarter, as weak demand for its luxury foundations and lipsticks offset growth at the cosmetics maker's skincare brands, with people continuing to work from home.

Outlook

The company said it is well-positioned to continue to drive a gradual recovery in the new financial year as macro-conditions and market dynamics are favourable towards it.

In the longer-term, the company expects to return to its growth targets of 6% to 8% in sales, 50 basis points in operating margin expansion and double-digit adjusted diluted earnings per share growth in constant currency after a period of normalisation as the impact of COVID-19 subsides.

For the first quarter, reported net sales are expected to increase between 17% and 19% versus the same period last year.

Freda added, "We begin fiscal 2022 as a stronger company thanks to our employees, whose compassion, creativity, and resolve have been extraordinary during the pandemic. Our success in the past year gives us confidence for the new year, as volatility and variability from COVID-19 are likely to persist for some time to come.

"Our growth engines are poised to increasingly diversify as makeup and hair care, developed markets in the west, and brick-and-mortar retail gradually recover and complement the strength of our existing growth engines. We anticipate that growth in emerging markets will also resume over time as the impacts of the pandemic abate."

News by Reuters, additional reporting by ESM. For more A-Brands news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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