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Estee Lauder (EL) Gains on Solid Online Business & Savings

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The Estee Lauder Companies Inc. (EL - Free Report) looks well positioned on strength in e-commerce business. Also, the company’s robust presence in emerging markets and effective cost-saving efforts bode well.

Thanks to such upsides, Estee Lauder’s shares have gained 19.5% year to date against the industry’s decline of 16.9%.Let’s delve deeper.

What’s Driving Estee Lauder’s Growth?

Estee Lauder has a strong online business and the company expects it to be a major growth engine for the upcoming few years. Management is implementing new technology and digital experiences including online booking for each store appointment, omni-channel loyalty programs and high touch mobile services. These initiatives and the company’s digital-first mindset are boosting online sale.

Moreover, Estee Lauder’s brand teams have been fully committed to enhancing consumer experiences online since the coronavirus outbreak. In this regard, they have been focusing on proper product placement and showing cases tools including virtual try-on to ease decision making. During the first quarter of fiscal 2021, the company hosted more than one million virtual try-on sessions worldwide. In North America, the Estee Lauder brand rolled out AI-driven product recommendations on the basis of real-time consumers' behaviors and past preferences.


 

Estee Lauder, which shares space with Coty (COTY - Free Report) , has strong presence in emerging markets that insulates it from the macroeconomic headwinds in the matured markets. The company derives significant revenues from emerging markets that keeps it encouraged about making distributional, digital and marketing investments in these countries.

Markedly, China is a major area of focus for Estee Lauder. In fact, the company’s recently piloted emerging business model for online and offline stores in Mainland China region bodes well. Moreover, it expanded to reach more than 130 cities in Mainland China. Also, the company is focused on making incremental advertising investment on social and digital platform to expand its reach. Notably, the brick-and-mortar channel returned to double-digit growth in Mainland China during the fiscal first quarter. Also, online channels and travel retail channels contributed to growth in the region.

Is All Rosy For Estee Lauder?

Due to the coronavirus outbreak, Estee Lauder had temporarily closed stores in several regions. While the company reopened almost all stores as coronavirus-induced restrictions are being lifted, the temporary closures of various stores at some point in the first quarter of fiscal 2021 put pressure on performance.

In the wake of the coronavirus outbreak, the company initiated a two-year Post-COVID Business Acceleration Program in August. Through this plan, management expects to shut 10-15% of its freestanding stores worldwide along with various low performing department store counters. Apart from this, various retailers have decided to undertake planned reduction of their footprint via door closures amid the pandemic.

Nevertheless, Estee Lauder’s cost-saving endeavors together with the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company remain in investors’ good books. Notably, uncertainties related to COVID-19 led management to implement stringent cost-curtailment practices. These include costs related to advertising and promotion activities, travel, meetings, consulting and certain employee expenses among others. Markedly, cost-saving actions have boosted the company’s operating margin during the fiscal first quarter.

Some Solid Cosmetic Picks

Inter Parfums (IPAR - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 18.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nu Skin (NUS - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 7.3%.

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