Estee Lauder Braved Numerous Challenges To Deliver Growth Above That Of The Prestige Beauty Market
Estee Lauder released its fiscal 2016 results on August 19th (fiscal year ends in June). Though the company faced both macroeconomic and microeconomic challenges throughout the fiscal year, it successfully addressed those to deliver growth above the industry level. Estee Lauder’s focus on generating a greater millennial user base, as well as its digital initiatives, along with its adapting to changing demand were some of the factors that drove the company’s growth. In fiscal 2016, Estee Lauder’s net sales grew by 9% year-on-year on a constant currency basis. We expect Estee Lauder to continue ruling the prestige beauty market in the near future.
- Estee Lauder witnessed an over 7% year-on-year growth for Q4 FY 2016 which (like previous quarters) was more rapid than the growth rate of the global prestige market. Its adjusted earnings per share grew by 13% year-on-year during the same period.
- In FY 2016, the new products comprised of almost a quarter of its total sales marking a record high contribution.
- The company introduced Leading Beauty Forward — a multi-year initiative to improve efficiency, speed of market adaptability, and agility.
- The company braved drastic currency fluctuations, macroeconomic travails such as slow markets, and acts of terrorism in some of its important geographies. On the global prestige beauty front, there was increased competition and changing consumer behavior.
- The top growth contributor for FY 2016 was the Makeup category especially attributed by the MAC brand, the luxury brands, the Europe, Middle East and Africa regions, and the online and specialty multi channels.
- The two most important growth drivers for Estee Lauder were its agility and its multiple engines of growth. When the company witnessed unexpected crises in certain markets, it channeled resources to other areas with better growth opportunities. Its strength lies across 25 brands based on categories channels and countries which allowed the achievement of double-digit growth in some brands, channels, or markets, while balancing lower growth in other areas. For example, when Hong Kong’s political unrest resulted in a dearth of incoming Chinese tourists, the brands appealing to Chinese customers started targeting the alternative key tourist attractions frequented by the Chinese.
- Estee Lauder’s digital and e-commerce focus have increased over the year resulting in it becoming the fastest growth channel for the company. The e-commerce and m-commerce sales exceeded $1 billion in FY 2016.
- The company’s millennial focused initiatives yielded positive results with brands like Jo Malone, Tom Ford, Smashbox, MAC, and La Mer driving growth.
- In fiscal 2017, the company’s broad target will be two areas: 1. expanding its reach among target users and enhancing the level of customer engagement through tools like digital marketing, in-store merchandising, creativity, and omni-channel offerings.
- Estee Lauder expects to generate a 6% to 8% rise in sales over the next three fiscal years along with a double digit EPS growth in constant currency. In fiscal 2017, it expects a 6% to 7% constant currency growth in its top line and a double digit EPS growth.
Have more questions about Estee Lauder? See the links below.
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