Q1 Sales Fall at Estée Lauder

At a time when everyone knows to expect the unexpected, executives at The Estée Lauder Companies say they are pleased with results for the fiscal first quarter, even though sales declined 9% to $3.56 billion. Net sales decline were driven by some temporary retail store closures and lower foot traffic in open stores attributable to COVID-19, partially offset by strong growth online. Travel retail net sales were relatively flat year-over-year and net sales from the company’s acquisition of Have&Be Co. Ltd. (“Dr. Jart+”) contributed approximately 3 percentage points of net sales growth.

And although net earnings declined 12% to $523 million, ELC insisted that innovation representing over 30% of sales in the quarter, and the online channel thrived in every region. The copany successfully adjusted its cost structure to minimize the deleveraging effects of lower sales, while continuing to invest for growth, enhancing capabilities online and supporting innovation.

“We are pleased with the stronger than expected start to our fiscal year amid this difficult moment as the global community continues to confront COVID-19,” said President and CEO Fabrizo Freda. “We delivered significant sequential improvement in net sales growth in every product category driven by progress around the world. Asia/Pacific again excelled with double-digit year-over-year growth in mainland China. Travel retail was a stand-out performer as Chinese tourists were drawn to the growing duty-free shops in Hainan Island and purchase limits increased there.”

The company said that results were hampered by COVID-19, as the pandemic forced the closing of many retail locations throughout the world. For example:

• In The Americas, approximately 20% of the stores were closed at the beginning of July 2020, and by the end of September 2020, nearly all retail stores had re-opened.

• In Europe, the Middle East & Africa, approximately 15% of stores were closed at the beginning of July 2020, and nearly all were open by the end of September 2020.

• In Asia/Pacific, nearly all retail stores were open during the entire quarter.

• In addition, international travel has remained largely curtailed globally due to both government restrictions and consumer health concerns, which continues to adversely impact consumer traffic in most travel retail locations.

However, the company noted that during the first quarter of fiscal 2021, online sales growth remained strong in every region as the company and its retailers activated digital strategies to capture consumer demand online. As a result, total net sales in mainland China, Korea and several other markets delivered strong growth year-over-year, and the sales growth rate improved in nearly every market globally.

By category, skin care sales rose 10% to more than $2.0 billion, led by Estée Lauder and La Mer, and hair care sales were flat at $132 million—that's the good news. Makeup sales fell 32% to $978 million, fragrance sales fell 12% to $406 million and “other” sales fell 42% to $7 million.

By region, the Americas sales declined 25%; while sales in Europe, the Middle East and Africa fell 8%. However, Asia/Pacific sales rose 9%.