The Estée Lauder Companies today reported net sales of US$4.85 billion for its second quarter ended 31 December, 2020, an increase of +5% on a reported basis, and +3% in constant currency terms. Travel retail contributed notably, with net sales rising by single digits year-on-year despite the COVID-19 pandemic, driven by China-led business in the Asia Pacific region.
Of performance in the travel retail channel, the company noted: “The adverse impacts from COVID-19 on international passenger traffic were more than offset by strong growth in Hainan and other Asia Pacific destinations, partly reflecting increased duty free purchase limits and the opening of some key travel corridors in Asia.”
Incremental net sales from the company’s acquisition of Have&Be Co. Ltd. (Dr. Jart+) contributed around three percentage points of net sales growth overall.
Growth in the Asia Pacific region, travel retail and global online net sales was partially offset by lower foot traffic in open stores and, to a lesser extent, temporary retail store closures attributable to COVID-19.
Commenting on changing consumer preferences, the company said that demand for skincare, fragrance and hair care products has been more resilient than the demand for makeup.
It highlighted double-digit growth from Estée Lauder and La Mer during the second quarter of fiscal 2021. It noted that consumers “re-engaged with luxury and artisanal fragrances during the holiday season, contributing to double-digit total net sales growth from Le Labo and Editions de Parfums Frédéric Malle as well as solid increases from Jo Malone London and Tom Ford Beauty”.
Among the key brands, Estée Lauder’s double-digit growth was led by mainland China and travel retail. In Mainland China, Estée Lauder was the top-selling beauty brand on Tmall’s 11.11 Global Shopping Festival. Net sales growth for the brand was driven by the launch of the new Advanced Night Repair Synchronized Multi-Recovery Complex as well as consumer demand for other high-loyalty hero products.
La Mer also delivered double-digit growth in every region, led by Asia Pacific, with significant strength in Mainland China. Net sales in travel retail also grew strong double digits. La Mer’s growth was primarily driven by strong demand for Crème de la Mer, The Concentrate and The Treatment Lotion. La Mer was the top selling luxury beauty brand on Tmall’s 11.11 Global Shopping Festival.
Net sales in makeup declined across all brands. “The effects of COVID-19 continued to disproportionately impact makeup usage in most markets, particularly foundation and lip,” said the company.
In fragrance, net sales grew, primarily due to increases from Tom Ford Beauty, Jo Malone London, Clinique and Le Labo. Kilian Paris and Editions de Parfums Frédéric Malle also contributed.
President and Chief Executive Officer Fabrizio Freda said: “We are proud to have returned to growth in our second quarter, earlier than we anticipated, demonstrating the enduring success of our multiple engines of growth strategy.
“The powerful engines of skincare, fragrance, Asia Pacific, travel retail in Asia and global online fuelled our performance despite the increasing complexity of the pandemic. Ten of our brands grew, signifying the broad-based strength of our portfolio, hero products and innovation, led by double-digit sales growth from the Estée Lauder and La Mer brands. For holiday and key shopping events, we welcomed new consumers and deepened relationships with existing consumers.
“We successfully combined technology and data with our talented beauty advisors to deliver high-touch services, enriching the online shopping experience. We invested in our growth engines and employed strict cost discipline in other areas, driving double-digit adjusted earnings growth.”
Freda added, “Our performance this quarter gives us confidence, as we delivered strong sales and earnings growth amid the pandemic while living our company values and investing in technology for new capabilities to support accelerating growth drivers. We still expect to deliver sequentially improving sales growth each quarter for the remainder of fiscal 2021 as we continue driving recovery.”
The company reported net earnings of US$873 million, compared with US$557 million in the prior-year period.
For the six months ended 31 December, the company reported net sales of US$8.42 billion, a -1% decrease year-on-year (-3% in constant currency) Net earnings were US$1.4 billion, compared to $1.15 billion a year earlier.
For Q3, reported net sales are forecast to increase between +13% and +14% versus the prior-year period.
Looking further ahead, the company said it plans to return to its long-term growth targets of +6% to +8% sales growth, 50 basis points of operating margin expansion and double-digit adjusted diluted earnings per share growth in constant currency, after the recovery period from the pandemic.
