Estée Lauder turns to the digital realm as retail profits slow in Asia

By Michelle Yeomans

- Last updated on GMT

Estée Lauder turns to the digital realm as retail profits slow in Asia

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As retail growth slows down in Hong Kong and China, Estée Lauder says it is turning its resources to the digital realm, including the development of omni-channel concepts, retail store expansion and information technology enhancements.

The global beauty giant revealed in its recently published annual report that it has seen a general slowdown in department store traffic in some markets in 2015, which has particularly affected Estée Lauder and Clinique.

The company attributes this slow down to a decline in spending by Russian and Brazilian travelers, unfavorable foreign exchange due to the strength of the U.S. dollar in relation to most currencies, and lower net sales in Korea, one of Estée Lauder's largest markets for travel retail.

"To further drive our online sales, we are expanding our presence on key third-party platforms in China. While our business is performing well overall, we continue to see competitive pressures and economic challenges in certain countries around the world​," the document stated.

Facts and figures

In Asia/Pacific, operating income increased 3%, or $11.6 million, to $360.7 million. Higher results in China, Korea and Australia totaled approximately $49 million, combined.

These higher results were partially offset by lower results in Japan, due to the accelerated orders, and Singapore of approximately $40 million, combined.

The lower results in Singapore were primarily due to lower net sales. Adjusting for the impact of the accelerated orders, operating income in Asia/Pacific would have increased 16%.

2016: Accelerating growth in heritage brands

Internationally, Estée Lauder expanded its business in freestanding stores in European perfumeries and pharmacies, and in department stores, particularly in the United Kingdom and certain markets in Asia.

In China, M·A·C collaborated with social media fanatic and designer Bao Bao Wan to introduce a color collection inspired by her womanly and brazen aesthetic. Over half of the lipsticks in the collection sold out in three days in China.

"These locally relevant collaborations drove brand loyalty and sales in emerging markets," ​the annual report stated.

Looking ahead to fiscal 2016, we plan to strengthen our presence in emerging markets, continuing to revitalize and accelerate growth in our heritage brands, focusing on key demographics and seeking opportunities to add to our diverse brand portfolio.

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