Beauty Sales: $11.3 billion
Key Personnel: Fabrizio Freda, president and chief executive officer; William P. Lauder, executive chairman; John Demsey, executive group president; Jane Hertzmark Hudis, group president; Carl Haney, executive vice president, global research & development, corporate product innovation, package development; Leonard A. Lauder, chairman emeritus; Ronald S. Lauder, chairman, Clinique Laboratories; Peter Jueptner, president, Europe, the Middle East and Africa; Sue Fox, vice president/general manager, Travel Retail Europe, Middle East, and Africa; Gregory F. Polcer, executive vice president, global supply chain; Alexandra C. Trower, executive vice president, global communications.
Major Products/Brands: Skin care, makeup, fragrance and hair care products sold in more than 150 countries and territories under brand names including: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, Tommy Hilfiger, M•A•C, Kiton, La Mer, Bobbi Brown, DKNY, Aveda, Jo Malone London, Bumble and bumble, Michael Kors, Darphin, Tom Ford, Smashbox, Ermenegildo Zegna, Aerin, Tory Burch, Rodin olio lusso, Le Labo, Editions de Parfums Frédéric Malle, Glamglow and By Kilian.
New Products: La Mer Genaissance de La Mer The Serum Essence, Estée Lauder Double Wear, Estée Lauder Pure Color Envy, Estée Lauder Advanced Night Repair Intensive Recovery Ampoules, Clinique Beyond Perfecting foundation + concealer, Jo Malone Mimosa & Cardamom, Tom Ford Noir, Aveda Thickening Tonic, Estée Edit, Bobbi Brown Retouching Wand.
Comments: Over the past year or two, The Estée Lauder Companies (ELC) has been finding its place in the rapidly changing world of beauty, now challenged by indie brands, millennial consumers, tough prestige competition, lower department store traffic and global online sales. Strategies have included corporate restructuring, a multi-year plan and bringing on younger and intensely popular social media influencers such as Kendall Jenner and most recently, Victoria Beckham.
Focusing on makeup and revitalizing its fragrance holdings paid off. For the year, ELC announced that it had achieved net sales of $11.3 billion, up 4% over the prior year.
Fabrizio Freda, president and chief executive officer, said, “Our fiscal 2016 performance gives us much to celebrate. We again delivered strong constant currency net sales growth and double-digit adjusted constant currency EPS growth, reflecting the compelling products and services we bring to consumers around the world. We capitalized on shifting consumer preferences by leveraging our strength in makeup and positioning our company to win in luxury fragrances. We nimbly allocated resources and made strategic investments in areas that gave us terrific results, including emerging markets, our makeup category, and the online and specialty-multi retail channels. Importantly, we achieved these results against a backdrop of social and political instability, currency volatility and economic challenges.”
The company noted that sales in all categories and in all geographic regions were affected by the negative impact of a strong U.S. dollar in comparison to other currencies. But the company remains “in the right place at the right time,” with the prestige market seemingly stronger than ever, and with a positive outlook for the future.
For instance, while Skin Care net sales decreased, due to currency issues, double-digit gains were contributed by ultra-prestige brand La Mer, including new product introductions, such as Genaissance de La Mer The Serum Essence. The Origins brand brought increases in facial mask products. These brands offset lower skin care sales from Estée Lauder and Clinique, which may have been indicative of a general global slowdown in the category especially within the Asia/Pacific region, and particularly Hong Kong.
Makeup continued to be a corporate winner as the category generated net sales growth, due especially to double-digit increases from M•A•C, Smashbox and Tom Ford, as well as solid gains from Bobbi Brown. The Estée Lauder and Clinique brands also achieved good results. Clinique posted higher makeup sales, reflecting recent product offerings, such as Beyond Perfecting foundation + concealer.
According to ELC, its makeup category is growing in lipsticks and foundations, due to increased usage in geographic areas such as the UK and Asia.
Luxury fragrance brands Jo Malone London and Tom Ford contributed double-digit gains. Jo Malone Mimosa & Cardamom and Tom Ford Noir proved especially popular. Sales of these brands partially offset flagging sales of certain Estée Lauder, Clinique and designer fragrances.
Growth in hair care net sales were attributed to a few recent product launches, including Invati Men, Shampure dry shampoo and the Thickening Tonic by Aveda.
In North America, net sales increased, due to growth of a number of brands led by Tom Ford, Jo Malone and Smashbox, as well as La Mer, M•A•C and Bobbi Brown. Increased makeup sales were partially offset by lower skin care and fragrance sales. The Estée Lauder and Clinique brands each posted double-digit growth in makeup for the year. Sales in ELC’s online business grew strong double digits.
Sales in Canada and Latin America each increased single-digits. Growth in Latin America was led by Brazil and Mexico, primarily driven by M•A•C. Europe, the Middle East & Africa led the company’s growth for the year, with nearly all countries recording net sales growth, and with many posting double-digit increases. ELC estimates that it continued to outperform prestige beauty in most markets in the region. In travel retail, sales growth was generated on new launch initiatives, an increase in airline passengers, new consumers and new brand launches. Jo Malone, Tom Ford, M•A•C and Smashbox were major contributors.
In the Asia/Pacific region, sales in constant currency increased in every country, except Hong Kong, including double-digit growth in Australia, the Philippines and New Zealand. Higher sales in China reflected sales gains in most brands and increased online activity. In Hong Kong, the reduction in tourism from China continues to negatively impact business, particularly for the Estée Lauder, Clinique and La Mer brands.
News of Note in 2016
A major corporate restructuring began in November 2015. John Demsey was promoted to executive group president and Jane Hertzmark Hudis took over as group president when Lynne Greene announced her retirement. A couple of months later, Stephane de la Faverie was promoted to global brand president, Origins and Darphin. Beth DiNardo became global brand president, Smashbox. At the same time, Daniel Rachmanis was promoted to president, Latin America.
In February, ELC continued its play for niche, luxury fragrance brands, acquiring By Kilian, which boasts creative, innovative and refillable packaging, and is sold in freestanding retail locations, specialty stores and perfumeries in more than 40 countries.
In March, in a major attempt to reach out to Millennials—and with the aid of spokesmodel Kendall Jenner—Estée Lauder moved outside department store counters to launch its new makeup and skin care collection, Estée Edit, in Sephora.
Leadership changes continued in April. Peter Jueptner was appointed president, Europe, the Middle East and Africa. Stephane de la Faverie became global brand president, Estée Lauder. Nancy Mahon took on the role of senior vice president, global corporate citizenship and sustainability. Maria Cristina González Noguera was appointed senior vice president, global public affairs.
The prestige global beauty giant announced a new deal for a limited-edition collection called Victoria Beckham Estée Lauder.
The former president of Beauté Prestige International USA at Shiseido, Patrice Béliard transitioned to ELC to run the Aramis and Designer Fragrances division.
At the beginning of May 2016, Lauder announced a major restructuring plan. The three-year plan includes job cuts of between 900 and 1,200 positions—reportedly about 2.5% of the firm’s employees. The company will also focus on its digital side and continue to develop its makeup categories.
In June, expansion plans were announced highlighting Tom Ford Beauty, and Lauder’s plan to make it into a global leader, aiming for billion-dollar brand status.
Following the announcement, Guillaume Jesel was promoted to global brand president for the brand.
Continuing changes in its leadership strategy, in August, Andrew Ross, former executive vice president and chief strategy officer at ConAgra Foods, Inc., was appointed to the role of senior vice president, strategy and new business development.
Going forward, Freda remains confident. He said, “In fiscal 2017, we will aggressively pursue new opportunities to enhance our leadership position. We will continue to diversify our distribution toward the fastest growing channels, while further developing our mid-sized brands and the newest additions to our portfolio. With our Leading Beauty Forward initiative, we are laying the foundation for future growth by lowering our cost base, increasing our agility and investing behind our strengths and improving our go-to-market capabilities.”
For the year ending in June 2017, the company expects sales to rise 6% to 7% over the previous year’s period, or roughly $12 billion, below the $12.8 billion average analyst estimate.