The Estée Lauder Companies today reported net sales of US$3.35 billion for its third quarter ended 31 March, a decrease of -11% year-on-year. An increase in travel retail sales (driven by a strong pre-crisis January) was among the “bright spots” cited by the company, alongside the online channel and business in Mainland China.
Excluding the impact of currency translation, net sales fell by -9% in the quarter. The company reported a net loss of US$6 million, compared with net earnings of US$555 million last year.
President and Chief Executive Officer Fabrizio Freda said: “While the terrific double-digit momentum in sales growth from the first half of our fiscal year carried into January, the dynamics in the quarter changed significantly as COVID-19 spread beyond Asia.”
Describing the current situation as a “very complex and unprecedented environment”, Freda noted some highlights across the company’s portfolio, which drove global prestige beauty share expansion in the quarter.
He revealed that Estée Lauder, Darphin, and Le Labo brands grew, global online sales rose strongly in double-digits and sales in Mainland China and global travel retail increased, as noted above. He added that skincare sales grew, including at recent acquisition Dr. Jart+.
Freda said: “The surge in our online business worldwide, coupled with the recovery we are seeing emerge in China, confirm consumers’ passion for our prestige beauty portfolio.
“In light of ongoing temporary store closures in many regions, we have begun to adjust our cost structure and have enhanced our liquidity during this challenging time. We stand ready to leverage the recovery when stores reopen and consumers restock at home.”
COVID-19 business update
During the third quarter of fiscal 2020, the outbreak and global spread of COVID-19 caused a significant disruption in the operating environment, noted The Estée Lauder Companies.
Many retail stores across most regions, whether operated by The Estée Lauder Companies or its customers, have been closed. In Asia Pacific, some retail stores in northern Asia have been reopening after closing for most of February and March while most retail stores in southern Asia remain closed, and retail stores in Europe, the Middle East & Africa and in The Americas began closing in early March.
In addition, with air travel largely curtailed to and from Asia since the end of January and on remaining international travel routes since March, this has hit growth in the travel retail business.
In the Asia Pacific region, operations in Mainland China were impacted from late January through to March as a result of COVID-19. At the peak in February, over 70% of retail doors, whether operated by the company or its customers, were closed, and the remaining stores were operating on reduced hours. During that period, The Estée Lauder Companies’ said that online net sales growth accelerated as beauty advisors and retailers worked to capture consumer demand online.
Meanwhile, The Estée Lauder Companies’ net sales in Mainland China returned to double-digit growth in constant currency in March, mainly driven by online. The company said that as of mid-April 2020, “virtually all doors” are open in Greater China and Korea.
Net sales in mainland China grew year-over-year during fiscal Q3 2020 and net sales in Korea have returned to growth since the beginning of April. In the rest of Asia Pacific, between 80% and 100% of doors in most markets remained closed as of mid-April.
Consistent with the trends in mainland China, online net sales growth has also accelerated in the Americas and in Europe, the Middle East and Africa.
The demand for skincare and hair care products has been more resilient than the demand for makeup and fragrance, the company observed. Within skincare, it said the demand for products in hero franchises has remained strong, driving high single-digit growth of the Estée Lauder brand during Q3.
The Estée Lauder Companies said that the cost controls put in place during the third quarter are expected to deliver “an even larger benefit” starting in the fiscal 2020 fourth quarter.
Additionally, the company announced new cost saving actions on April 15, 2020, that it said are expected to have a greater impact beginning in May 2020. These include furloughs and similar unpaid temporary leaves of absence for many point of sale employees, temporary salary reductions for senior executives and other management employees, and a temporary elimination of cash retainers for the Board of Directors.
Together, the company estimates that these actions, combined with those implemented in the fiscal 2020 third quarter, will reduce operating expenses by approximately US$500 million to US$600 million in the fiscal 2020 fourth quarter.
The Estée Lauder Companies COVID-19 corporate giving initiatives update
As the world confronts the wide-ranging impacts of the COVID-19 pandemic, The Estée Lauder Companies said it stands with the global community to help limit the spread of the virus and ease the related economic hardships faced by those it affects.
The company, its brands and its foundations have made numerous donations including commitments to Doctors Without Borders, The New York City COVID-19 Response and Impact Fund, Red Cross Society of China, Shanghai Charity Foundation, Give2Asia, and Community Chest of Korea.
And, the company is making over one million hand sanitisers for front line workers, high-risk individuals and its employees.
The Estée Lauder brand donated two million surgical masks for frontline workers in NewYork; Clinique donated 50,000 skin care products to doctors and nurses in New York City’s hospitals; Aveda launched Aveda Cares, a relief programme to benefit independent salons and stylists in the US, and the MAC VIVA GLAM fund is donating funds to local organisations globally that are providing essential needs and services to people at higher risk of being infected with COVID-19.
To support its employees worldwide facing financial hardships due to COVID-19, The Estée Lauder Companies has established an ELC Cares Employee Relief Fund, consisting of contributions from the company, the Lauder family and the Company’s employees.
These initiatives are covered in our regular column, Love in the time of Coronavirus, which can be accessed here.
