Fabrizio Freda, president, CEO and Director said: “We expect another year of strong above-industry sales growth, margin expansion and double-digit EPS gains. We believe global prestige beauty will remain one of the most exciting consumer product areas, driven by strong demographic trends and desirable products, and we will remain completely focused on this sector.”
Estée Lauder executives expect global prestige beauty to increase approximately 6% to 7% in 2020, “assuming no additional geopolitical risk materialises”.
The company highlighted that its forecast also takes into account the geopolitical issues such as the cost associated with Brexit, Hong Kong protests and the escalating trade tensions between the US and China.
It is already experiencing an impact on its performance in the UK. Where its sales reflected reduced consumer confidence ahead of Brexit and lower traffic across brick-and-mortar stores, including from department store closures.
“As we enter our fiscal 2020, we must consider the escalating macro issues that could have an impact on our business,” said Tracey Thomas Travis, executive vice president and CFO.
“The ongoing tension and unresolved trading terms between the U.S. and China, the looming concern and consequences of a hard Brexit in October and recent protests in Hong Kong and other markets are all examples of factors that could impact our fiscal 2020 results.”
Company remains confident
The company reported that FY2019 global net sales increased by 9% to US$14.86bn or 12% on a currency-neutral basis. Its net earnings rose from $1.11bn the previous year to $1.79bn.
“We delivered another outstanding performance in fiscal year 2019, as our strategy based on multiple engines of growth continue to be a winning model,” said Freda.
He added: “Our performance was [noteworthy] considering the volatility and challenges in some of our most important markets. As you know, they included trade tensions, uncertainty surrounding Brexit in the UK, a difficult environment in North America with increased competition and slowing beauty sales overall, and certain department store challenges both in the U.S. and the UK.”
The company attributed its growth to the sales increase in Asia-Pacific and in the skin care category, as well as the performance of the travel retail and e-commerce channels.
It believes the growth of the middle class and consumption behaviour will continue to drive sales next year.
“In fiscal 2020, we plan to continue to invest in the most compelling opportunities, including those in emerging markets beyond China. We expect another year of strong net sales growth, margin improvement and a double-digit increase in earnings per share,” said Freda.
Travis added that the company was confident in its forecast.
“We are benefiting more from the momentum of those markets and we are less exposed to some of the slower-growth channels in particular than we have been historically. So yes, while moderation is certainly the right guidance for us this year given everything that's going on in the environment, we're still very comfortable with the 7% to 8%, top-line growth.”