Estee Lauder Total Net Sales Slump 11%
- Chaileedo Press
- Nov 3, 2022
- 5 min read
By geography, Estee Lauder Group’s net sales were negative in all major regions.
(Credit: from website)
Recently, Estee Lauder released financial data for the first quarter of the fiscal year 2023 (July to September 2022). Total Group net sales for the last quarter were $3.93 billion, which declined 11% year-over-year, with organic sales down 5%.
However, the latest Tmall Double 11 list shows that the Estée Lauder brand remains in the TOP five of several lists, and Jo Malone and Tom Ford fragrances also performed relatively well, indicating that there is still an advantage in the Chinese market.
The downtrend in skincare and color cosmetics
Fabrizio Freda, President and CEO of Estee Lauder Group, said that despite the many external pressures still faced in the first quarter, such as high global inflation and strict anti-pandemic policies in China, the Estee Lauder Group still achieved organic sales in line with expectations.
In terms of specific results, the skin care segment continued to account for the highest percentage of sales, with net sales of $2,104 million last quarter, down 14 % year-over-year. In response, Estee Lauder said significant factors impacting last quarter's revenue included travel retail restrictions due to China's prolonged and strict pandemic control measures, as well as Chinese and international retailers beginning to tighten inventory.
As a result, the Estee Lauder brand was unable to rescue the brand's overall sales decline, despite the launch of new serums and eye creams, which brought some incremental growth to its performance. In addition, Dr. Jart+ and Origins also saw a decline in sales.
However, sales of brands such as La Mer, Bobbi Brown, and The Ordinary still maintained growth. Bobbi Brown, in particular, achieved double-digit net sales growth in every region, driven by its foundation and makeup remover products.
Also affected by the travel retail channel, the color cosmetics segment saw a 10% decline in net sales to $1,025 million, with Estee Lauder and Tom Ford beauty sales declining. However, M-A-C achieved high single-digit net sales growth, benefiting from the recovery of brick-and-mortar stores.
The fragrance segment was essentially flat with net sales of $607 million, impacted by the termination of licenses for some designer fragrances, although the remaining major fragrance brands all achieved strong growth, such as Tom Ford fragrances and Le Labo, which achieved double-digit growth, and Jo Malone, which achieved high single-digit growth.
Hair Care net sales were $158 million, up 7% year-over-year, which was the only major segment to achieve positive growth. Key drivers of growth included Aveda and others.
(Credit: Estee Lauder earnings report)
Decrease by 15% in Asia Pacific
Geographically, Estée Lauder Group’s net sales were negative in all major regions.
In particular, net sales in the Americas declined 6% year-over-year to $1,123 million as retailers tightened inventory management, although net sales in Latin America increased by double-digits as the cosmetics category sold well.
Net sales in Europe, Middle East, and Africa declined 10% to $1,682 million, also constrained by the travel retail channel, with only India, Turkey, Spain, Italy, and Germany posting modest growth.
Overall sales in Asia Pacific decreased 15% to $1,130 million, with growth in fragrance and hair care products unable to fully offset the decline in skincare and color cosmetics. Declining sales in brick-and-mortar stores in Greater China continued to be one of the main factors, with travel retail also declining in South Korea. However, Thailand, Malaysia, and Japan showed positive growth.
(Credit: Estee Lauder earnings report)
Although Asia Pacific sales was in negative growth, China is still an important market for Estée Lauder. In fact, in mainland China, Estée Lauder Group has already achieved good performance in this year's "Double 11" promotion. According to official Tmall data, from the official opening of the sale at 8 pm on October 31 to 24 pm on November 1, Estée Lauder ranked second in the beauty industry and beauty and skincare category and fourth in the color cosmetics category, with Jo Malone and Tom Ford ranked first and third in the fragrance and aromatherapy industry respectively.
Expansion, reorganization ...... Estee Lauder seeks growth
In the fiscal year 2022 annual report, Estee Lauder has said that taking into account the termination of some product line licensing agreements and the deterioration of multiple macro environments such as the Russian-Ukrainian conflict, net sales in the next quarter are expected to decline by 10% to 8% compared to the same period last year. From the performance of this earnings report, Estee Lauder's performance decline was within expectation.
In fact, in order to achieve performance growth and stable and sustainable development of the company, Estee Lauder has made a number of adjustment measures in the last quarter.
In September, Estée Lauder announced the consolidation of the company's brand portfolio into two brand clusters under the leadership of Jane Hertzmark Hudis, the Executive Group Presidents, and Stéphane de La Faverie, in line with the company's long-term, sustainable growth strategy. Estée Lauder said this new brand leadership structure is designed to ensure continued consistency in the portfolio of similar products, allowing the business to focus on the greatest areas of opportunity.
Fabrizio Freda said the integration will further enable Estée Lauder Companies' brands to win over consumers in a complex and ever-changing beauty market, while enhancing the talent pool and organizational planning within the group, enabling Estée Lauder to better and more flexibly implement the company's long-term strategy.
Jane Hertzmark Hudis, who previously headed the Estee Lauder, Origins, and Beauty Bank, will continue to focus on skincare and hair care, leading La Mer, BOBBI BROWN, Tom Ford Beauty, M-A-C, Clinique, Origins, Aveda, Bumble and bumble, Dr. Jart+, and other brands.
Another cluster of brands led by Stéphane de La Faverie includes Estée Lauder, AERIN Beauty, Jo Malone, LE LABO, KILIAN PARIS, Editions de Parfums Frederic Malle, Darphin Paris, LAB Series, DECIEM (including The Ordinary, NIOD, and Avestan), Too Faced, Smashbox, GLAMGLOW.
In addition, in August this year, Estee Lauder announced that it was working with luxury brand Balmain to create a beauty brand, Balmain Beauty, with products expected to be officially launched in the fall of 2024. On the day of the official announcement, Guillaume Jesel was also appointed as the Global President of Tom Ford Beauty, Balmain Beauty, and Luxury Business Development, and is also responsible for the overall strategic direction, global development, management, and growth of Tom Ford Beauty and Balmain Beauty going forward.
Although Balmain's beauty line is currently largely dormant, its history in the beauty industry can be traced back to the launch of its first fragrance Vent Vert in 1947. 2017 also saw Balmain launch a limited edition lipstick in association with L'Oréal Paris. In personal care, its hair care brand Balmain Hair Couture was also founded more than 40 years ago. Balmain can be said to have accumulated a considerable part of experience in the beauty field, so some analysts believe that Estee Lauder's move or want to copy the success of Tom Ford beauty and then create a high-growth beauty brand.
For the next quarter, Estee Lauder said that compared to the same period last year reported net sales were expected to decline by 19%-17% and organic net sales declined by 11%-9%. Overall, Estee Lauder expects reported net sales to decline 8-6% in fiscal 2023.
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