10.25.12
4. The Estée Lauder Cos.
New York, NY
www.elcompanies.com
Beauty Sales: $9.7 billion
Key Personnel: Fabrizio Freda, president and chief executive officer; William P. Lauder, executive chairman; Leonard A. Lauder, chairman emeritus; Ronald S. Lauder, chairman, Clinique Laboratories, LLC; John Demsey, group president; Carl Haney, executive vice president, research and development, product innovation and brand product development; Tracey T. Travis executive vice president and chief financial officer; Gregory F. Polcer, executive vice president, global supply chain.
Major Products: Skincare, makeup, fragrances and hair care products marketed under brands including Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series Skincare for Men, Origins, Tommy Hilfiger, MAC, Kiton, La Mer, Bobbi Brown, Donna Karan, Aveda, Jo Malone, Bumble and Bumble, Michael Kors, Darphin, American Beauty, Flirt!, Goodskin Labs, Grassroots Research Labs, Tom Ford, Coach, Ojon, Smashbox, Ermenegildo Zegna.
New Products: M.A.C. Marilyn Monroe Collection, Clinique Even Better Eyes Dark Circle Corrector, Estée Lauder All-Day Lipstick, Estée Lauder Idealist Pore Minimizing Skin Refinisher, Origins Planscription Anti-Aging Foundation, Aveda Invati, La Mer Moisturizing Soft Cream, Tom Ford Violet Blonde, Donna Karan Woman Eau de Parfum.
Comments: The upward trend continues with another of the top players in the global beauty industry. With more than 25 brands in more than 150 countries, The Estée Lauder Companies Inc. (ELC) boasted a strong annual performance for the fiscal year ended June 30, 2012, with a double-digit 10% increase over the previous year, reporting net sales of $9.7 billion, compared with $8.81 billion reported in 2011. Even more impressive—the prior year was also a record-breaking one. And once again, as we’ve seen with other brands on this list, prestige beauty sales outpaced mass for the second year in a row.
Fabrizio Freda, president and chief executive officer, announced that 2011 had been a record year for ELC, one which he said was driven by continued interest in the U.S. and strong growth in China and travel retail. Freda said, “Sales grew at twice the rate of worldwide prestige beauty, owing to the success of our highly innovative products, marketing prowess and personalized services.” He added that despite world economic problems, the company enjoyed strong gains in sales in every geographic region and product category and many distribution channels. Much of the success owed to some of the beauty company’s largest and best-selling brands. A focus on cost savings also proved to be a good strategy as Lauder moved ahead with its long-term plan in this area—realizing savings of $145 million during the year. As a percentage of net sales, advertising, merchandising and sampling expenses increased to support the company’s largest innovations.
Looking at net sales by category, Skin Care rose 14% from the previous year to $4.2 billion; Makeup came in at second place, up 10% to $3.7 billion; fragrance took third place, up only 3% from the prior year, but generating $1.3 billion in sales; hair care grew 7% to $62 million; and Other grew 6% to $60 million.
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Skincare expertise remains a priority for Estée Lauder as it continues to build market share around the globe. |
Makeup net sales increased double-digits, which built upon the 13% growth achieved in the prior year. The category’s growth was primarily generated from strong gains in makeup artist brands, particularly with new products. Higher makeup sales were boosted by the recent launches of Repairwear Laser Focus All-Smooth Makeup and Lid Smoothie Antioxidant 8-Hour Eye Colour from Clinique, as well as the brand’s Even Better Makeup and Chubby Stick Moisturizing Lip Colour balm.
The recent launch of Doublewear Stay-In-Place Makeup and Invisible Fluid Makeup from Estée Lauder touted increased sales. Higher sales from Smashbox and the introduction of the Tom Ford Beauty line of cosmetics also contributed to growth.
Lower sales from certain existing products partially offset these sales gains.
Fragrance sales increased in each region, boosting the 9% gain in the previous year. Popular launches included Estée Lauder Sensuous Nude, DKNY Golden Delicious, Coach Poppy Flower and pureDKNY Verbena. Tom Ford and Jo Malone luxury brands also contributed incremental sales. These increases were partially offset by lower sales of certain Estée Lauder and designer fragrances.
Lauder conceded that its share in fragrance declined, which it said reflects its current focus on improving profitability rather than driving sales and share gains.
Hair care net sales growth was driven by solid gains from Aveda and Bumble and Bumble. Strong increases at Aveda reflect new product introductions, including the recent successful launch of its Invati products; expanded distribution also played a role.
By geographic region, sales remained strongest in The Americas, up 8% over FY 2011 to $4.1 billion; Europe, the Middle East and Africa gained double digits (11%) over the prior year to $3.6 billion; Asia Pacific also achieved double-digit (14%) growth, racking up more than $2 billion.
Net sales growth in The Americas was attributed to the U.S., specifically from new product offerings in the company’s heritage and makeup artist brands, as well as increased sales of higher-end prestige skin care products. As mentioned, growth indicates that prestige beauty trumped mass for the second year in a row, due in part to what the company calls strong innovations and “high-touch” service.
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Tom Ford has been a top performer for ELC. |
Despite economic uncertainties in Europe, net sales increased in most countries in Europe, the Middle East & Africa—and in each product category. Sales grew 14%, which was an improvement over the previous year. Double-digit net sales growth was recorded in a number of areas, led by the Middle East, Germany, France, Italy and Turkey, while solid sales gains were generated in the UK. Lower net sales were seen in Russia and the Balkans.
Lauder’s travel retail business continued to generate strong double-digit net sales growth, resulting from successful product launches, higher global airline passenger traffic and a stronger conversion of travelers into purchasers.
Sales grew 10% in the Asia/Pacific region, with the strongest gains seen in Hong Kong, China and Thailand, mostly with skincare and makeup products. Net sales were lower in Australia and Singapore.
In October, Lauder’s Aramis and Designer Fragrances Division signed a licensing deal with fashion designer Tory Burch. Earlier in the year, the division signed licensing agreements with the Ermenegildo Zegna Group and Marni, two Italian fashion brands, representing the men’s and women’s markets, respectively.
Late in 2011, the company—and the entire industry—mourned the passing of Evelyn H. Lauder, senior corporate vice president and head of fragrance development worldwide.
In March, the Lauder brand added to its stable of spokesmodels, signing 23-year old runway fashion star Arizona Muse for skin care, makeup and fragrance. Actress Katie Holmes became the first celebrity face of Bobbi Brown cosmetics.
Early in September, Lauder announced a move specifically aimed at its largest market, with the most potential for growth. In mid-October it launched Osiao, its first Chinese skincare line. Osiao will debut in two Lane Crawford stores in Hong Kong, with an expansion planned into Mainland China.
Looking ahead, ELC expects to further improve its gross margin during fiscal 2013, reflecting favorable pricing and mix. The company also plans to increase global advertising spending on new product launches and successful existing products.
First quarter net sales are forecasted to increase between 5% and 7% in constant currency. In compliance with its long-term strategic plan, the company plans to save between $15- and $20 million in the first quarter of fiscal 2013. Full year net sales are forecasted to grow between 6% and 8% in constant currency.
