Estee Lauder’s new brands spark brighter sales outlook

Bloomberg

Estee Lauder Cos., the seven-decade-old cosmetics company, is getting a payoff from its push to acquire hipper brands and expand its e-commerce business.
The shares jumped as much as 8.1 percent, the most since November 2015, after the beauty company forecast annual profit that exceeded Wall Street expectations. Beyond the boost from its new brands, Estee Lauder also cited strength from duty free stores, China and specialty shops such as Ulta Beauty Inc.
The rosier forecast reflects the company’s move to acquire smaller brands such as Too Faced and Becca Cosmetics and meet younger shoppers’ growing demand for niche products, according to Chief Executive Officer Fabrizio Freda. He also cited healthy sales at the direct-to-consumer online website and at other companies’ e-commerce stores.
“We expect the great momentum we built throughout the past year to continue in fiscal 2018,” Freda said, adding that the company is “well-positioned to deliver strong profitable growth.”
Estee Lauder’s forecast for adjusted profit in a range of $3.87 to $3.94 a share in fiscal 2018 tops the average projection of $3.78 from analysts, while sales are expected to increase 8 percent to 9 percent. Estee Lauder will target sales growth of 6 percent to 8 percent and double-digit profit expansion for the next three years.
Department Stores
Its fourth-quarter profit of 51 cents a share beat the 43-cent projection from analysts, while sales of $2.89 billion were slightly above the consensus forecast of $2.86 billion.
Freda said the company is carefully watching the performance of department stores, which make up 17 percent of Estee Lauder’s global sales. Poor results at chains such as Macy’s Inc. and JC Penney Co. have sparked investor fears that the industry’s woes are part of a prolonged slump as consumers shift spending and shopping habits.
To cope with the declining sales at the department stores, it has put more focus on developing other fast-growing sales channels, including online, travel retail and specialty stores. Growth in these areas exceeded 20 percent.
Estee Lauder’s e-commerce business represented 11 percent of the company’s total sales, up from 4 percent five years ago. The company, which now has 700 websites in 39 countries, is betting local employees can help set up sales plans and marketing events to win domestic shoppers, said Dennis McEniry, who oversees the company’s online business.