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The Estee Lauder Companies (EL) Rides on Solid Online Business

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The Estee Lauder Companies Inc. (EL - Free Report) appears solid, courtesy of strength in the Skin Care category. Also, the company’s growing online business and robust presence in emerging markets are encouraging. Moreover, it is committed to provide effective cost-saving initiatives. Thanks to these factors, shares of this Zacks Rank #2 (Buy) company have surged 85.7% in the past year compared with the industry’s 81% rally.

Factors Narrating The Estee Lauder Companies’ Growth Story

The Estee Lauder Companies’ Skin Care portfolio has been performing well for a while now. During second-quarter fiscal 2021, brands like Estee Lauder, Clinique and La Mer witnessed significant growth. Notably, the Estee Lauder brand delivered solid double-digit growth on the back of improvement in travel retail and Mainland China. Further, the La Mer brand increased in double digits across every region and saw robust growth in the travel retail channel. The Skin Care category is also benefiting from the acquisition of Dr. Jart (concluded in December 2019). Skin Care category sales surged 28% year over year for the fiscal second quarter.

The Estee Lauder Companies is on track to expand brand presence for boosting growth. Progressing along these lines, the company recently signed an agreement to increase its stake in DECIEM Beauty Group Inc. (“DECIEM”) from nearly 29% to 76%. We note that DECIEM is the force behind fast-growing skincare brands like The Ordinary and NIOD. Well, DECIEM’s hero products, innovations, and digital-and consumer-first high-touch approach have been instrumental to its growth. Clearly, the recently-announced agreement is likely to add another leaf to The Estee Lauder Companies’ growth story.


Moreover, the company has a strong online business and management expects it to be a major growth engine in the upcoming years. Incidentally, the company has been implementing new technology and digital experiences including online booking for each store appointment, omni-channel loyalty programs, along with high-touch mobile services. These initiatives and the company’s digital-first mindset have been aiding online sales. Moreover, The Estee Lauder Companies’ brand teams have been fully committed to enhance online consumer experiences since the coronavirus outbreak.

Additionally, The Estee Lauder Companies has strong presence in emerging markets. This insulates it from macroeconomic headwinds in matured markets. The company derives significant revenues from emerging markets like Thailand, India, Russia and Brazil, which keeps it encouraged about making distributional, digital and marketing investments in these countries. In the Asia-Pacific region, sales increased 35% for the fiscal second quarter.

The Estee Lauder Companies is on track with cost-saving measures. In fact, 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, as well as certain employee expenses. We believe that focus on such growth endeavors is likely to help The Estee Lauder Companies stay in investors’ good books.

Other Solid Staple Bets

The Hain Celestial (HAIN - Free Report) , currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 26.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medifast, Inc. (MED - Free Report) — currently carrying a Zacks Rank #2 — has a trailing four-quarter earnings surprise of 17.4%, on average.

The J. M. Smucker Company (SJM - Free Report) , currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.

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