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Estee Lauder (EL) Up Nearly 25% YTD, Will Momentum Stay in 2021?

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The Estee Lauder Companies Inc. (EL - Free Report) appears well positioned on the back of its robust growth-oriented strategies. In this regard, the company’s solid e-commerce business and presence in emerging markets are yielding. Also, its cost-saving efforts are impressive.

Such upsides have helped Estee Lauder’s stock to gain 25.7% year to date against the industry’s decline of 12.9%. Let’s delve deeper and see if this renowned cosmetic company can keep its growth story alive in 2021.

Factors Narrating Estee Lauder’s Growth Story

Estee Lauder has strong presence in emerging markets that insulates it from the macroeconomic headwinds in the matured markets. The company generates 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. Also, the company is focused on making incremental advertising investment on social and digital platform to expand its reach.


Additionally, Estee Lauder has a strong online business, which is expected to be a major growth engine in the upcoming 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 are focusing on proper product placement and showing cases tools including virtual try-on to ease decision making. During the fiscal first quarter, 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.

Apart from these, Estee Lauder is on track with cost-saving measures. In fact, uncertainties related to COVID-19 led management to implement stringent cost-curtailment practices. These include cutting down on costs related to advertising and promotion activities, travel, meetings, consulting and certain employee expenses. Markedly, cost-saving actions boosted the company’s operating margin during fiscal first quarter.

Wrapping Up

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, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles and remain on growth trajectory going into 2021.

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