Estée Lauder, the country’s largest cosmetics firm, said Monday (May 3) that “soft demand” for makeup and continued COVID outbreaks around the world crimped its latest results, but said it was seeing signs of increased demand in Asia.
For the three months ended March 31, the New York-based company said its fiscal third quarter sales rose 16 percent to $3.8 billion, as revenue grew in every region, and that it earned $456 million versus the year-ago loss it posted during the beginning stages of the pandemic.
Although Estée Lauder said its skin care franchise saw sales rise 31 percent to $2.2 billion accounting for nearly 60 percent of total sales, its key makeup business saw sales fall 11 percent to $1.0 billion and deliver an operating loss of $72 million.
Although the smaller fragrance division grew revenue 30 percent, and hair care sales rose 8 percent, the weakness in makeup continues to be a costly factor.
“Net sales in makeup declined across nearly all brands. The effects of the COVID-19 pandemic continued to disproportionately impact makeup usage, particularly foundation and lip, in most markets. Makeup sales rose slightly in Asia/Pacific, reflecting the more advanced recovery in the region, primarily in China where usage occasions are increasing,” the company said.
In addition, the company noted that a “significant decline in social gatherings” had also influenced consumer preferences and practices and as a result, “demand for makeup continues to be weak given fewer makeup usage occasions.”
Shift To Digital
Estée Lauder said online sales in the Americas “grew double digits” where most retail stores have reopened, but noted that its European eCommerce business doubled, where the pandemic has been more prolonged in several key countries and reflected the company’s increased focus on reaching consumers digitally.
The company also singled out accelerated growth in mainland China and improvement in its “travel retail” business as bright spots for the quarter.
“We are investing in many compelling long-term growth drivers, including end-to-end innovation with a new center in Shanghai, state of the art manufacturing in Asia/Pacific, global online, and consumer analytics,” Estée Lauder President and CEO Fabrizio Freda said. “We are progressing on our environmental goals and acting on our social commitments with urgency [and] expect the momentum in our sales growth to build [in April, May and June], not only from easing comparisons but also fundamental strength, as we drive recovery.”
The Forecast
Earlier this year, the CEO of rival cosmetics firm L’Oréal predicted a “roaring 20’s rebound” in the makeup business when the pandemic era’s restrictions and lifestyle changes are lifted.
Although domestically, where more than half of U.S. adults have received at least one dose of the vaccine and case counts and deaths have declined sharply, the deadly virus has proven to be stubbornly persistent in several other parts of the world, most recently India and Thailand.
While most brick-and-mortar retail stores that sell the company’s products in China and the United States were open in January, February and March, the company said it faced intermittent closures throughout the rest of the world during the quarter, including the U.K., Japan, Canada, Italy, Spain, France, Mexico and Brazil.
Against this backdrop, Estée Lauder said it expects sales for its current quarter and full fiscal year ending June 30th to grow 11 to 1 percent and projects it will earn between $5.31 and $5.48 per share.
Shares of Estée Lauder have risen 80 percent in the past 12 months and given the company a market value of $113 billion.
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