Strong Estée Lauder results undermined by Korea market

By Simon Pitman contact

- Last updated on GMT

Related tags: Revenue

Strong Estée Lauder results undermined by Korea market
Luxury international cosmetics player Estée Lauder posted record-breaking fourth quarter and full year results that show the company is continuing to lead the field.

In the Asia Pacific region annual net sales increased by 5% on a reported basis to reach $2.23bn, which was the lowest growth rate of the company’s three regions.

Although the figure was still well above regional average growth rates, reflecting increases in every country in the region, except Korea, where revenues fell slightly, but the country’s performance was counterbalanced by the fact that operating income grew significantly.

Strongest growth was seen in China, Japan, Hong Kong and Singapore, where double digit revenue growth was seen on a reported basis.

Fourth quarter group results

In the final quarter net group sales increased by 13%, up from $2.41bn to reach $2.73bn, a figure that was not impacted by foreign currency translation, but one that was also impacted positively by the effect of accelerated retail orders.

Excluding the positive impact of the retail orders, net sales increased by 5%.

The results also reflected double-digit gains in the US and travel retail segments, together with double-digit gains in many of the emerging markets in Europe.

Likewise net earnings exploded, increasing from $94.0m last year, to reach $257.7m.

Full year results

Net sales for the 12 month period ending in June were up 8%, from $10.18bn to $10.97bn, which again was positively impacted by accelerated retail orders ahead of the implementation of the company’s Strategic Modernization Initiative, due to be implemented in July 2014.

The full-year net sales were also not negatively impacted by foreign currency translation, while net earnings for the period rose by 18% to reach $1.20bn.

 “Fiscal 2014 was another outstanding year for our Company. Our topline growth was nearly double that of prestige beauty and was broad-based across regions, product categories and channels, despite slower industry growth in some key countries,”​ said Fabrizio Freda, President and Chief Executive Officer.

“Our emerging markets, makeup and luxury brands, and our online, freestanding store and travel retail channels led our growth. At the same time, we made careful investment choices to support the fastest areas of growth, while continuing to eliminate non-value-added costs.“

Results by product category

During the full year results were driven by the company’s make-up and fragrance category, which each recorded reported growth of 9%, to reach $4.21bn and $1.42bn, respectively.

In make-up higher sales for the year reflected double-digit growth for the company’s artist brands and a number of new launches, including Pur Color Envy Sculpting Lipstick. In fragrance double digit growth was recorded from luxury brands such as Tom Ford and Jo Malone.

The mainstay skin care category recorded annual reported growth of 7% to reach $4.77bn, while the hair care category recorded the slowest sales growth at 5% to reach $515.6m.

In skin care the growth was driven by the fact that the company gained market share in a number of strategic countries, while new product launches included the Advanced Night Repair Synchronized Recovery Complex.

Other regional results

On a regional basis, the strongest growth was seen in the Europe, Middle East and Africa region, with reported annual sales leaping by 11% to reach $4.16bn, which reflected net sales increases in each product category in most countries, including double-digit growth in the UK, as well as Turkey and in Central Europe.

In the mainstay Americas market, annual net sales increased by 6% on a reported basis to reach $4.57bn, with increases reflecting strong sales of makeup artist and luxury brands, together with heritage and designer fragrances.

Outlook for fiscal 2015 and next quarter

Looking ahead to the next financial year, the company says that it will beat expectations that the market for global prestige beauty will grow at 3% to 4%.

This growth is expected to be derived from highly innovative product launches and focusing on the fastest growing countries, product categories and channels.

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