A strong bounce back in the pivotal Hainan offshore duty-free channel highlighted The Estée Lauder Companies’ encouraging third-quarter performance revealed yesterday (1 May). As reported, the US beauty products giant 1 May) posted a +5% year-on-year increase in reported (+2% organic) Q3d sales to US$3,712 million for the period ended 31 March.
The US beauty products group said on the subsequent earnings call that it would not comment on the status of merger discussions with Spanish peer Puig or the possibility of a transaction. It said: “The company does not intend to provide any further information ahead of an official announcement detailing an agreed-upon transaction or a termination of discussions.”
Speaking on that call, The Estée Lauder Companies President and CEO Stéphane de La Faverie commented, “For travel retail, in Hainan we significantly outperformed prestige beauty, which itself improved sequentially, to gain share as our activation for Lunar New Year drove remarkable performance.
“Retail sales rose strong double digit, accelerating from high single digit in the second quarter with ten brands growing double digit, led by La Mer, Estée Lauder, and M·A·C.”
Later, he added, “Hainan has been absolutely fantastic for us. We grew over +30% in the quarter in retail, which is significantly above the department. We have six brands in double digit with Lauder, La Mer, Jo Malone, Clinique, M·A·C and Bobbi Brown growing.
“So we are accelerating. We are accelerating the recapture. And at the same time, as we are rebalancing within the China travel retail ecosystem, we’re also accelerating travel retail around the world.”
Responding to a question on the impact of duty-free concessionaire changes at Beijing Capital International, Shanghai Pudong International and Shanghai Hongqiao International airports highlighted on the Q2 earnings call, de La Faverie commented, “On travel retail, things are moving in the right direction. Our travel retail business posted a low single-digit growth in the quarter, which is a net sequential improvement compared to what we’ve been.
“We said there was a potential issue with the retailer transition, especially in Beijing and Shanghai airports and obviously, online [Sunrise]. But the impact has been less than initially expected
“I want to recognise again my team in travel retail and also our retailer partners in Hainan because they’ve worked tirelessly to make sure that we were not going to miss Chinese New Year or the key activities. So frankly, things are getting better.”
de La Faverie emphasised the heavy strategic investment The Estée Lauder Companies is making across the channel elsewhere. “If we are lucky to travel around the world, we are going to see better presentation and more consumer experience in all key airports – from Heathrow to Charles de Gaulle to Singapore to Bangkok, you name it.
“Our team is working tirelessly to deploy new brands, especially all our luxury fragrances brands like Kilian, Le Labo, Tom Ford and Jo Malone. So we have a lot of work to continue to do, and we are confident that travel retail is back to stabilisation, and we are hoping – past, hopefully, the disruption in the Middle East – that we are going to be able to continue to grow in multiple geographies.”
Noting the combination of strong year-to-date results and momentum from the Beauty Reimagined rejuvenation programme, de La Faverie said, “We are confident we will deliver our now higher fiscal ’26 outlook.”
Looking ahead to fiscal ’27, which begins on 1 July, The Estée Lauder Companies expects prestige beauty’s growth to accelerate as global demand remains robust. This improvement will be partly driven by an anticipated retail sales growth from the China ecosystem, including travel retail, to improve to mid-single digit.
“In our preliminary plan, we intend to deliver another strong year in ’27 as we expect accelerating organic sales growth of +3% to_ 5%, gaining prestige beauty share at the mid- to high end of the range and operating margin of 12.5% to 13%. We have the right brands, the right team and a clear momentum onward and upward,” de La Faverie concluded. ✈
Earnings call snapshots from The Estée Lauder Companies President and Chief Executive Officer Stéphane de La Faverie
