Estée Lauder’s Sales Fall 2% in Fiscal 2024

While second half results rebounded a bit, fiscal 2024 sales fell 2% to $15.61 billion at The Estée Lauder Companies Inc. Net earnings declined 60% to $390 million. Organic net sales decreased 2%, primarily reflecting ongoing softness in the mainland China prestige beauty in mainland China and a decline in Asia travel retail. Partially offsetting these declines was growth in Hong Kong SAR, Europe, the Middle East & Africa (“EMEA”), Japan and Latin America.

Declines in Skincare, Makeup and Haircare

In fiscal 2024, skincare sales fell 3%, primarily due to ongoing softness in overall prestige beauty in mainland China and declines in Asia travel retail. Excluding the declines in mainland China and the company’s global travel retail business, reported and organic net sales increased 3%. Net sales from Estée Lauder, Clinique and Dr.Jart+ declined, primarily due to continued challenges in mainland China and Asia travel retail. Partially offsetting the declines, Estée Lauder net sales grew mid-single-digits in The Americas, benefiting from continued strength from the Advanced Night Repair and Revitalizing Supreme+ product franchises. Net sales from Dr.Jart+ more than doubled in the EMEA and increased double digits in The Americas. La Mer net sales increased high-single-digits, benefiting from hero products, such as The Treatment Lotion and The Eye Concentrate, and new product innovation, such as The Moisturizing Fresh Cream. The Ordinary’s net sales grew strong double digits, driven by growth across every geographic region and benefiting from the continued success of hero products, new product innovation, such as the Soothing & Barrier Support Serum and targeted expanded consumer reach, according to the company.

Makeup sales fell 1%, primarily due to ELC’s global travel retail business and a result of changes to MAC’s take-back loyalty program, partially offset by growth overall in the markets of EMEA as well as in Latin America and Asia/Pacific. Reported and organic net sales increased low-single digits in the second half of fiscal 2024, primarily driven by Estée Lauder and Clinique.

Net sales from La Mer decreased. ELC blamed the impact of rationalizing product assortment in the its global travel retail business, partially offset by double-digit growth in Asia/Pacific that benefited from online and brick-and-mortar expansion. Clinique net sales increased double digits, reflecting strong growth across all geographic regions, primarily driven by continued strength across the lip and mascara subcategories.

Haircare sales declined 4%, primarily due to Aveda in North America, reflecting softness in the salon channel and ELC’s direct-to-consumer distribution channels.

Want some good news? Fragrance net sales increased 2%, driven by mid-single-digit growth from the company’s luxury brands, which increased double digits in Asia/Pacific and The Americas, partially offset by a decline from Estée Lauder. Le Labo net sales grew strong double digits, nearly doubling in Asia/Pacific, owing to hero product franchises, such as Santal 33 and the City Exclusive collection, targeted expanded consumer reach globally and new product innovation, such as Lavande 31. Net sales from Jo Malone London increased, led by double-digit growth in The Americas, benefiting from new product innovation, such as English Pear & Sweet Pea, and continued strength from hero product franchises, including Wood Sage & Sea Salt and Cypress & Grapevine. Estée Lauder net sales declined, reflecting softer retail sales during holiday and key shopping moments and pressure in the company’s Asia travel retail business that led to lower shipments for replenishment orders, as well as lower net sales from new product innovation.

Latin America Remains a Bright Spot

By region, net sales increased double digits in Latin America and were flat in North America. Net sales grew in Latin America in nearly every market and product category, led by Mexico and Brazil. Net sales in North America declined in makeup and were partially offset by high-single-digit growth in fragrance, led by the company’s luxury brands. The performance in North America also reflected double-digit growth in specialty-multi and a benefit to online net sales from Clinique’s fiscal 2024 launch on the US Amazon Premium Beauty store, offset by declines in other channels of distribution, primarily department stores.

Net sales in Europe, the Middle East and Africa, fell 2%, primarily due to the challenges in Asia travel retail, partially offset by net sales growth in many markets across the region. Global travel retail net sales decreased high-single-digits. Total net sales in the markets of EMEA grew low-single-digits, reflecting growth in skincare, makeup and luxury fragrance brands, which drove double-digit growth in specialty-multi.

Net sales in Asia/Pacific fell 3%, primarily driven by mainland China, partially offset by double-digit growth in Hong Kong SAR and Japan.

Things turned around a bit in the fiscal fourth quarter. For the three months ended June 30, ELC reported sales rose 7% to $3.87 billion.

2025 Sales Expected To Decline in China

CEO Fabrizio Freda, who recently announced his retirement plans, said ELC sales will continue to decline in fiscal 2025, due to persistent weak sentiment among Chinese consumers.

“We intend to drive share gains in a market that continues to hold strong long-term promise,” said Freda. “In the rest of our business, we are planning to deliver improved performance across both developed and emerging markets.”

To fuel this, ELC is determined to reignite skincare, capitalize on the multiple growth drivers of high-end fragrance, move faster in leveraging winning channels, launch accretive innovation inclusive of new, big opportunities, and enhance precision marketing capabilities.

“From La Mer’s entry into night-specific consumption, to The Ordinary’s expansion into new markets and more brands debuting in new channels, like on Amazon’s US Premium Beauty store, we have a rich slate of initiatives to drive new consumer acquisition and continue to leverage our strength in retention,” said Freda. “Alongside this work, we are realizing initial benefits of the Profit Recovery and Growth Plan as we rightsize our cost structure and simplify the organization to be more agile and faster to market.”

For fiscal 2025, the Profit Recovery and Growth Plan will enable ELC to offset the pressure to profitability driven by the prestige beauty segment’s ongoing softness in China, yielding a more moderate pace of operating margin expansion than previously expected, according to Freda.

“While our sales and profit outlook for fiscal 2025 is disappointing, this year we will make important strides, as we implement our strategy reset to continue rebalancing regional growth, deliver improved annual profitability, and strengthen go-to-market and innovation capabilities to elevate our execution in response to a more competitive market,” said Freda. “These efforts, coupled with the strengths of our brands, product portfolio and talented teams around the world, will position us to both outperform prestige beauty in fiscal 2026 and accelerate profitability expansion.”

While the outlook for ELC remains murky, the company expects global prestige beauty to grow 2-3% in fiscal 2025, reflecting the ongoing strength in many developed and emerging markets globally, tempered growth in certain large markets, such as North America, partially offset by continued declines in mainland China and Asia travel retail due to low consumer sentiment and conversion rates.