Travel retail stars as Estée Lauder Companies reports record sales

We will support our sales growth by launching outstanding products, further penetrating fast-growing emerging markets, expanding our distribution in fast growing prestige channels and reigniting our fragrance category.
Fabrizio Freda,
President and Chief Executive Officer,
The Estée Lauder Companies

USA. Travel retail was once again one of the key growth drivers for The Estée Lauder Companies in the last financial year, with a particularly strong performance in Europe, the Middle East & Africa.

Groupwide, total net sales in the 12 months to the end of June hit a record US$10.18 billion, up +5% (+6% excluding the impact of foreign currency translation). Meanwhile, net earnings for the year rose +19% to US$1.02 billion.

Excluding returns and charges associated with restructuring activities in 2013 and 2012, gross margin expanded 70 basis points, operating expenses improved 30 basis points and operating margin rose 100 basis points to 15.2%. Net earnings increased +16% to US$1.04 billion.

In the fourth quarter, reported net sales increased +7% to US$2.41 billion (+8% excluding the impact of foreign currency translation).

The company said sales accelerated during the quarter, driven by greater benefits from its innovation pipeline, a sequential improvement in travel retail and more comparable period-over-period results from certain challenged markets.

For the whole fiscal year, it added that sales growth was particularly strong in its luxury brands, online and travel retail channels and overall in emerging markets, as well as in several developed countries.

The Estée Lauder Companies President and Chief Executive Officer Fabrizio Freda said: “Looking at a broader picture, we once again posted sales growth that we believe was greater than global prestige beauty, and achieved strong across-the-board sales gains in each of our geographic regions and major product categories.

“This year we also advanced our strategic priorities, including enhancing our business in skin care, emerging markets and fast-growing distribution channels.

“We expect our strong momentum to extend into fiscal 2014. We will support our sales growth by launching outstanding products, further penetrating fast-growing emerging markets, expanding our distribution in fast growing prestige channels and reigniting our fragrance category.”

He added that he expected (local currency) sales to increase by between +6% to +8% this year, helping the business progress towards reaching its new long-term operating margin target of 16.5% in fiscal 2016.”

Travel retail performed particularly well in Europe, the Middle East & Africa, where “high-single-digit growth” helped drive overall sales in the region up +4% (+6% excluding the impact of foreign currency translation) to US$3.76 billion.

The company added that travel retail also helped to increase operating income in the region by +9% to US$813.4 million.

Outlook

In its outlook for the current fiscal year, the company said it expects global prestige beauty to rise approximately +3% to +4%, reflecting continued weakness in certain Southern European countries and South Korea. It also predicted a slowdown in growth in the US beauty market,

It added: “The company’s goal remains to grow at least one percentage point faster than the industry by focusing on skin care and makeup and reigniting fragrance, bringing highly innovative products to market, capitalising on regional opportunities and serving emerging market consumers.”

It also said it would “substantially increase” advertising spending in the quarter to support major new product launch activity, which is expected to build sales momentum in the coming quarters.

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