The Estée Lauder Cos. Is at an Inflection Point, Says CEO

Is the Estée Lauder Cos. finally turning a corner?

The beauty company, which has been struggling amid slower demand in Asia and at home, beat Wall Street forecasts on the top and bottom lines in the third quarter of its fiscal 2024 and lifted its annual profit outlook.

The owner of Mac, Jo Malone, La Mer, Tom Ford and many more brands reported net sales of $3.94 billion for the quarter ended March 31, up 5 percent from $3.75 billion a year earlier. Analysts polled by Factset had predicted $3.91 billion.

Net earnings were $330 million, compared with $156 million in the prior-year period. Adjusted diluted net earnings per common share increased to 97 cents, topping Wall Street estimates of 50 cents.

At the same time, the group raised its diluted net earnings per common share outlook for the whole year to be between $2.14 and $2.24, up from its previous estimate of between $2.08 and $2.23.

Still, this was a touch below Wall Street estimates of $2.25 and organic net sales are set to decrease between 2 percent and 1 percent. This caused shares to dip 4 percent in pre-market trading.

Fabrizio Freda, president and chief executive officer of the Estée Lauder Cos., said, “With our third quarter results and fourth quarter outlook, we are confident that the second half of fiscal 2024 will prove to be an inflection point for our company performance. We expect accelerating momentum in organic sales growth in the fourth quarter, and for operating margin in the second half of fiscal 2024 to not only be stronger than the first half but also to expand from the year-ago period.”

A breakdown of the sales numbers for the quarter showed that skin care net sales increased 9 percent, due to growth in every geographic region. Double-digit growth in EMEA was driven by stronger sales in Asia travel retail. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends.

Elsewhere, makeup net sales increased 4 percent, fragrance net sales grew 1 percent and hair care net sales decreased 4 percent, primarily driven by Aveda reflecting softness in the company’s North America salon channel.

On a geographical basis, net sales increased 3 percent in Asia/Pacific, led by Hong Kong SAR, mainland China and Japan, reflecting growth in skin care and fragrance. Net sales rose 12 percent in Europe, Middle East and Africa, 1 percent in Latin America and were flat in North America.

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