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The Estée Lauder Companies announces financial results

estee lauder

The Estée Lauder Companies Inc. reported net sales of $14.29 billion for its fiscal year ended 30th June, 2020, a decrease of 4% from $14.86 billion in the prior-year period.

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Excluding the impact of currency translation, net sales decreased 3%. The net sales decline was driven by retail store closures as a result of the global spread of COVID-19 that was partially offset by the tremendous acceleration online. Net sales from the company’s acquisition of Have&Be Co. Ltd. (“Dr. Jart+”) contributed approximately 1 percentage point of growth to reported net sales.

The company reported net earnings of $0.68 billion, compared with net earnings of $1.79 billion last year. Diluted net earnings per common share was $1.86, compared with $4.82 reported in the prior-year period. Excluding the negative impact of currency translation, adjusted diluted earnings per common share, which excludes items detailed on page 4, decreased 22% to $4.16.

Fabrizio Freda, President and Chief Executive Officer said, “Fiscal 2020 was a year without parallel, as we delivered record sales and exceptionally strong adjusted EPS growth in our first half and navigated with agility through an unprecedented pandemic in our second half. The second half also marked a period of profound pain as tragic events in the United States highlighted the systemic racial injustice that has plagued our society for far too long.”

“In this challenging year, our multiple engines of growth strategy proved highly effective. The Estée Lauder brand grew double-digits for the third consecutive year. Asia/Pacific was strong with organic sales growth in mainland China and several other markets driving prestige beauty share gains, our skin care category grew and was further boosted by the acquisition of Dr. Jart+, and our online channel surged. We quickly pivoted to capture consumption online during COVID-19 as retail stores around the world temporarily closed,” Freda continued.

Total reported operating income was $606 million, a 74% decrease from $2.3 billion in the prior year. Operating income decreased 19%. This decline largely reflected lower net sales due to the impacts of COVID-19, as well as costs to maintain employee salaries and benefits in portions of the second half of the fiscal year despite retail store closures and reduced capacity at certain of our manufacturing facilities. These impacts were partially offset by strong growth in skin care in Asia/Pacific as well as the acceleration of online growth and disciplined expense management throughout the business from cost containment actions taken in response to COVID-19.

Skin care net sales grew across most regions, led by Estée Lauder and La Mer. The category increased 26% in the first half of the fiscal year and was the most resilient category globally during the pandemic. Origins also increased net sales.

Net sales of Dr. Jart+, which the company acquired in December 2019, contributed approximately 1% to skin care net sales growth.

Estée Lauder delivered strong double-digit growth, reflecting growth in Asia/Pacific, with significant strength in mainland China, as well as growth in the Balkans and in the United Kingdom. It also delivered double-digit growth in travel retail and triple-digit growth online, driven by consumer demand for high loyalty hero franchises, including Advanced Night Repair, Perfectionist, Re-Nutriv, Micro Essence and Revitalizing Supreme+.

Double-digit growth from La Mer was also driven by Asia/Pacific, with significant strength in mainland China, and by travel retail given strong growth in hero products, including The Treatment Lotion and relaunches of The Regenerating Serum and The Eye Concentrate. Targeted expanded consumer reach also contributed to growth.

Skin care operating income increased, primarily from higher net sales at Estée Lauder and La Mer. Incremental cost containment in response to COVID-19 only partially offset expenses and strategic investments that were made during the fiscal year.

Net sales declined in makeup with declines at all brands with the exceptions of La Mer and By Kilian. The effects of COVID-19 had a larger impact on makeup, particularly foundation and lip, and makeup sales continued to be soft in most markets. Together, these impacts more than offset the 5% growth for the category in the first half of the fiscal year.

Net sales from La Mer grew despite the impacts of COVID-19 given strong growth in the first half of the fiscal year due to the success of The Luminous Lifting Cushion Foundation in international markets and successful holiday campaigns and events globally.

Makeup operating income declined, primarily reflecting goodwill and other intangible asset impairments related to Too Faced, BECCA and Smashbox, lower net sales and impairment charges associated with certain freestanding stores. These impacts were partially offset by disciplined expense management across all brands in response to COVID-19.

Net sales decreased, primarily due to declines from certain designer fragrances, Estée Lauder and Jo Malone London due to the impacts of COVID-19. Net sales also declined due to the expiration of the Tory Burch license agreement in December 2019. Additionally, the Estée Lauder brand had a difficult comparison due to the launch of Beautiful Belle in the prior-year period. Combined, these more than offset the 3% growth in the first half of the fiscal year.

Strong double-digit net sales growth in Asia/Pacific accelerated year over year driven by our luxury and artisanal fragrance portfolio.

Net sales from Le Labo rose mid-single digits with growth in nearly all regions and strong double-digit growth in Asia/Pacific and travel retail despite the decline in travel retail net sales in the second half of the fiscal year. Targeted expanded consumer reach also contributed to growth.

Jo Malone London continued to grow net sales in Asia/Pacific, led by China, Korea and Japan, with the launches of Poppy & Barley, Vetiver & Golden Vanilla and Valentine’s Day gift sets, as well as targeted expanded consumer reach.

Fragrance operating income declined, driven primarily by lower net sales partially offset by disciplined expense management.

Hair care net sales declined at both Aveda and Bumble and bumble due to the impacts of COVID-19, as mentioned above, which led to retail and salon closures in the second half of the fiscal year. Prior to that, net sales were flat for the first half of the fiscal year.

Net sales of Aveda’s Nutriplenish, a new line of hydrating hair care products, were strong globally prior to the salon and store closures related to COVID-19.

Hair care operating results declined reflecting lower net sales and impairment charges associated with certain freestanding stores.

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Freda emphasized, “Our strategic priorities for fiscal 2021 rightly balance investment in these engines with cost discipline amid the ongoing pandemic. Through the Post-COVID Business Acceleration Program announced today, we are better aligning our brick-and-mortar footprint to improve productivity and invest for growth. We are well-positioned to drive growth as the market dynamics support it, yet remain equally mindful of the effects of COVID-19 on consumers, the retail sector and economics, in general, as well as geopolitical uncertainty.”

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