4. The Estée Lauder Companies
Beauty Sales: $10.2 billion
Key Personnel: Leonard Lauder, chairman emeritus; William P. Lauder, executive chairman; Fabrizio Freda, president and chief executive officer; Ronald S. Lauder, chairman, Clinique Laboratories, LLC; John Demsey, group president; Lynne Greene, group president; Thia Breen, group president; Cedric Prouvé, group president; Carl Haney, executive vice president, global research and development corporate product innovation, package development; Gregory F. Polcer, executive vice president global supply chain; Jane Lauder, global president, general manager, Origins, Ojon, Darphin.
Michael Kors has expanded into beauty with ELC. The new collection features color cosmetics, body and sun care, and three new fragrances.
New Products: Estée Lauder Modern Muse, Clinique Chubby Stick Intense, Clinique Even Better Eyes Dark Circle Corrector, Aveda Pure Abundance Style Prep, DKNY Be Delicious So Intense, Tommy Hilfiger Freedom Men, Coach Love, Ermenegildo Zegna Uomo; reformulated versions of Clinique Dramatically Different Moisturizing Lotion and Estée Lauder Advanced Night Repair; La Mer Moisturizing Soft Cream, MAC Matchmaster Foundation, Bobbi Brown Bobbi & Katie Collection.
Comments: Fabrizio Freda, president and chief executive officer of The Estée Lauder Companies (ELC) continues to steer the global beauty powerhouse on a highly profitable course, making major gains in key markets. Full year net sales increased 5% to a record $10.2 billion.
In delivering the fiscal year-end results, Freda said, “We concluded another outstanding fiscal year with a strong fourth quarter that saw high-single-digit sales gains and exceptional double-digit earnings per share growth. Fiscal 2013 marked another record year in which our company achieved a number of historic milestones: $10 billion in net sales, 15.2% operating margin and $1 billion in net earnings. We also delivered record earnings per share and operating cash flow.”
Freda also said that sales growth was greater than that for global prestige beauty, and that the company had achieved strong across-the-board sales gains in each of its geographic regions and major product categories.
Sales growth was particularly strong in luxury brands, online and travel retail channels and overall in emerging markets, along with solid gains in several developed countries. Travel retail sales exceeded $1 billion for the first time. As planned, the company increased global advertising spending versus the prior year to build momentum and gain share in its key markets and product categories—and also in hopes of drawing mass consumers into the prestige market.
By product category, Skin Care sales topped the chart at $4.5 billion, up about 6% over the previous year. Makeup followed with a 5% gain, at nearly $3.9 billion. Fragrance rang in at $1.3 billion (up 3%); Hair Care sales registered $489 million (up 6%); Other accounted for $41 million.
Skin care remained a strategic priority for ELC, and the company gained share in several countries where its products are sold. Sales gains were partially attributed to launches of Perfectionist CP+R, Advanced Time Zone, Advanced Night Repair Eye Serum Infusion and the Optimizer line of products from Estée Lauder. Recent successful product introductions such as The Moisturizing Soft Cream from La Mer and Even Better Eyes Dark Circle Corrector from Clinique also contributed to sales growth.
New product introductions, such as High Impact Extreme Volume Mascara and Chubby Stick Intense from Clinique and Pure Color Vivid Shine Lipstick from Estée Lauder, as well as increased sales of the Tom Ford line of cosmetics contributed to the category’s growth. MAC proved to be an especially good performer.
In fragrance, sales increases were generated from the recent launches of Zegna Uomo, DKNY Be Delicious So Intense, Tommy Hilfiger Freedom Men and Coach Love. Higher fragrance sales were also generated from luxury brands Jo Malone and Tom Ford.
Demand for natural hair care products was driven by Aveda, in part due to the continued success of its Invati line of products and the recent launches of Pure Abundance Style Prep and Be Curly Curl Controller. The category also benefited from expanded global distribution.
In terms of geographical areas, while Asia-Pacific is the company’s fastest growing region—with much attention centered on China—Brazil and Turkey are also among the company’s strongest emerging markets. Activity is also picking up across the Middle East and Africa.
The Americas—and primarily the U.S.— led with net sales of $4.3 billion (up 5% over the prior year). The Europe, Middle East & Africa segment followed, with net sales of $3.8 billion (+4%). The Asia/Pacific region generated $2.1 billion, an increase of 5%.
The net sales increase in The Americas reflects growth from most of Lauder’s brands, particularly its makeup artist and heritage brands. The increase was primarily attributable to growth in the U.S., while double-digit sales growth was recorded in Latin America. Net sales in Canada also increased.
Sales to department and specialty-multi stores were solid, and the company’s online business grew double-digits.
Net sales increased in the majority of countries in the Europe, Middle East & Africa region. Economic difficulties in certain Southern European countries impacted beauty consumption, but ELC continued to outperform prestige beauty in many markets. The net sales increase was led by high-single-digit growth in the company’s travel retail business and the UK, and double-digit growth in the Middle East.
Net sales in the travel channel grew double-digits at retail, which was more than triple the increase in airline passenger traffic. Sales gains in the UK and the Middle East each benefited, in part, from strength in the company’s makeup artist brands.
Double-digit net sales growth was also recorded in a number of areas, including South Africa, the Nordic countries and Turkey. These increases were partially offset by lower net sales, primarily in Russia, Spain and the Balkans.
Osiao is ELC’s first skin care line developed specifically for the Asian market.
A favorite notebook inspired the Bobbi Brown and Katie Holmes new purse-sized palette for eyes, cheeks and lips.
In 2012-13 the company also underwent a widespread “strategic” executive reorganization. Lynne Greene and Thia Breen were named group presidents.
Jane Lauder, global president and general manager, Origins and Ojon, added Darphin to her brand leadership responsibilities. In addition to his duties as president of Bumble and Bumble, Peter Lichtenthal now also oversees Smashbox.
At press time, the company had just revealed a new custom designed beauty advisor wardrobe, created by fashion forward house Opening Ceremony. More than 15,000 advisors worldwide will wear pieces from the collection.
Looking ahead, for fiscal 2014, the Estée Lauder Companies expects global prestige beauty to rise about 3-4%, reflecting continued weakness in certain Southern European countries and Korea. The company continues to expect beauty market growth in the U.S. but at a slower pace than in fiscal 2013. ELC’s goal remains to grow at least one percentage point faster than the industry by focusing on skin care and makeup and reigniting fragrance (such as with Estée Lauder Modern Muse), bringing highly innovative products to market, capitalizing on regional opportunities and serving emerging market consumers. MAC plans to open 20 stores in Africa in the next five years.