Fragrances success in Asia for Estée Lauder fails to sweeten global profits slump for category

By Amanda Lim contact

- Last updated on GMT

Estée Lauder Companies is seeing positive signs of recovery in its fragrance division in Asia Pacific. [Jo Malone London / Estée Lauder Companies]
Estée Lauder Companies is seeing positive signs of recovery in its fragrance division in Asia Pacific. [Jo Malone London / Estée Lauder Companies]

Related tags: Estée lauder companies, Fragrance, Business

The Estée Lauder Companies is seeing positive signs of recovery in its fragrance division in Asia Pacific, but the gains failed to offset the global profits slump across the division.

Overall, the company’s fragrance operating profit for the first quarter of 2021 declined by 9% to $714m, driven primarily by lower net sales.

In APAC, however, the firm’s fragrance business bucked the trend and grew by double-digits this quarter. The company was unable to provide the exact increase when asked by CosmeticsDesign-Asia.

Fabrizio Freda, president, CEO and director, asserted that fragrance had made “striking progress” ​this quarter.

Executive VP of Finance and CFO, Tracey Thomas Travis accredited this recovery to the company’s innovations in the category.

“The fragrance category has been a nice surprise for us. And that has been driven by innovation across the board with our fragrance brands.”

The introduction of brands such as KILIAN PARIS and Frédéric Mallle drove the growth in mainland China.

In South Korea, the firm made locally relevant innovations, such as the launch of Le Labo’s new Citron 28 Seoul fragrance.

“These unique luxurious brands are proving highly desirable, which, coupled with the ongoing strengths of Jo Malone London and Tom Ford, drove significant double-digit sales growth of fragrances,”​ said Freda.

Travis added that the category’s growth reflected the strengths of its fragrance brands.

“The category grew strongly in Asia, reflecting double-digit increases from both Tom Ford and Jo Malone London as well as the recent launches of KILIAN PARIS and Frédéric Malle in mainland China.”

Freda highlighted that the company plans to tap into the holiday season demand for fragrance too further boost the category.

“Fragrances are surprisingly back faster than what we originally thought… We are ready to try to push fragrances really in the best possible way during the holidays that we believe is a big opportunity, particularly our high-end fragrances and our artisanal fragrances like Jo Malone, Tom Ford, Frédéric Malle, KILIAN and Le Labo.”

China and Korea lead growth

For the ELC business as a whole, net sales of $3.56bn for the quarter represented a 9% decrease on a reported basis. Profits totalled $523m, down from $595 million.

Overall net sales in APAC grew by 7% to $1.15bn. However, the firm’s profit decreased by 6% to $714m.

The firm said this was due strategic investments in social selling to drive online as well as investments behind launches of key hero innovations.

Net sales growth in mainland China, Korea and several other markets offset declines in the rest of the region

In Korea, net sales growth reflected incremental net sales from the company’s acquisition of Dr. Jart+ in December 2019, which includes the brand’s travel retail business, as well as high single digit growth in the rest of the Korea business.

In mainland China, net sales grew by double-digits led by skin care and fragrance, with the luxury brands outperforming the market.

Again, the company was unable to provide exact numbers when asked.

“In mainland China, the bricks-and-mortar channel returned to double-digit growth, such that both offline and online were powerful growth drivers. The travel retail channel further contributed driven by tremendous growth in Hainan, partly reflecting increased duty-free purchase limits, the opening of some travel corridors in Asia, and online pre-tail growth facilitating higher conversion,”​ said Freda.

Moving forward, Freda said the company plans to continue investing into China.

“We continued expanding our talent in anticipation of our new state-of-art innovation center, which will open in Shanghai as we aim to best meet the needs of Chinese and Asian consumers with local relevancy and local trends through increased capabilities in product design, formulation, consumer insights and trend analytics.”

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