A rebound in its key north Asia travel retail business and strong EMEA results have helped The Estée Lauder Companies (ELC) achieve a +5% increase in net sales (US$3.94 billion) during the third quarter of FY2024 ended 31 March.
Organic net sales rose +6% driven by double-digit growth in Europe, Middle East and Africa (EMEA) region and stronger sales in Asia Pacific (APAC) travel retail.
ELC’s Q3 growth in Asia Pacific travel retail was driven by higher shipments in line with enhanced sales and improved retail inventory levels following the well-documented issues relating to 2023 crackdown on unstructured [i.e. Daigou -Ed] market activity in the key North Asia markets of Hainan and South Korea.
The uplift in organic net sales was also driven by strong double-digit growth in the company’s priority emerging markets.
ELC reported net earnings of US$330 million. Total reported operating income reached US$531 million, a +79% increase on the previous year.
ELC President and Chief Executive Officer Fabrizio Freda commented: “For the third quarter of fiscal 2024, we delivered our organic sales outlook, exceeded expectations for profitability and continued to improve working capital.
“La Mer, Estée Lauder, Jo Malone London, Le Labo and The Ordinary led organic sales growth, driven by beloved hero products and highly sought innovation. Asia travel retail returned to organic sales growth, as developed and emerging markets across Asia/Pacific, EMEA and Latin America further contributed.”
Growth by category
Skincare net sales increased by +9%, led by double-digit growth in EMEA and stronger sales in Asia Pacific travel retail.
La Mer’s net sales grew by double-digits globally, especially in EMEA and APAC thanks to its hero lines and new launch, The Moisturizing Fresh Cream. Estée Lauder followed with mid single-digit growth thanks to the popularity of the Advanced Night Repair and Revitalizing Supreme franchises and the success of the prestige Re-Nutriv line, particularly in Mainland China.
Makeup net sales increased +4%, benefitting from growth in ELC’s travel retail business and strong double-digit growth in Latin America and South Korea.
Fragrance net sales increased by +1%, led by Jo Malone London, which enjoyed strong double-digit growth in EMEA and the Americas, while Le Labo enjoyed strong sales in Asia Pacific.
Haircare net sales decreased by -4% due to the softness of Aveda’s business in the North American salon channel.
Growth by region
Net sales in EMEA increased by +12% thanks to the strength of ELC’s travel retail business in the region, where it recorded double-digit growth for both skincare and makeup.
In Asia, ELC recorded an increase of +3% in net sales, led by Hong Kong, Mainland China and Japan. Hong Kong recorded a double-digit increase, which can be attributed to the increase of travelling consumers compared to the year before. This increase also led to the doubling of ELC’s freestanding store footprint in Hong Kong.
Mainland China recorded low single-digit growth due to a strong performance in January. This growth, according to the company, was partially offset by the ongoing softness in Mainland China’s prestige beauty market.
A cautiously optimistic outlook
ELC is forecasting net sales to increase between +5% to 9% in the fourth quarter of FY2024.
The company is focused on re-establishing sustainable, profitable long-term growth across regions, product categories, brands and channels. It will continue to invest in consumer-facing activities innovation, advertising, growing market share in emerging economies and the completion of its first manufacturing facility in Asia. The company sees a continuation of net sales growth in Asia travel retail in the fourth quarter.
ELC is in the initial stages of executing its Profit Recovery Plan for FY 2025 and 2026.
The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities.
Freda added: “During the second half of fiscal 2024, we have strategically expanded our consumer reach in exciting ways, from Clinique’s debut on the US Amazon Premium Beauty store, which has greatly exceeded our retail sales expectations thus far, to striking new flagship stores in Asia Pacific for Jo Malone London and Le Labo.
“We have also made progress across all work streams for the Profit Recovery Plan, setting the stage to deliver its US$1.1 billion to US$1.4 billion of incremental operating profit in fiscal years 2025 and 2026 while also generating funds to reinvest into our brands and consumer-facing initiatives to accelerate sustainable sales and profit growth as a faster and leaner organisation.”
Freda concluded: “With our third quarter results and fourth quarter outlook, we are confident that the second half of fiscal 2024 will prove to be an inflection point for our Company performance. We expect accelerating momentum in organic sales growth in the fourth quarter, and for operating margin in the second half of fiscal 2024 to not only be stronger than the first half but also to expand from the year-ago period.” ✈
