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The Estee Lauder Companies (EL) Benefits From Skin Care Sales
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The Estee Lauder Companies Inc. (EL - Free Report) looks well-positioned, courtesy of strength in the Skin Care business. Also, the company’s impressive online operations along with a solid presence in emerging markets are yielding. However, some pandemic-led delays are roadblocks for the company.
Let’s delve deeper.
Skin Care Business Holds Promise
The company’s Skin Care portfolio has been performing well for a while. During the second quarter of fiscal 2022, the Skin Care category’s sales were up 12% year over year to $3,159 million. Skin Care net sales rose across all regions on solid double-digit sales growth from La Mer and Clinique.
In May 2021, The Estee Lauder Companies expanded its Skin Care business when it concluded the first phase of raising its ownership stake in DECIEM Beauty Group Inc. ("DECIEM"). The Estee Lauder Companies now has nearly 76% ownership in DECIEM compared with 29% earlier. Further, management agreed to buy the remaining stake after three years. We note that DECIEM — a Canada-based company — is the force behind fast-growing skincare brands like The Ordinary and NIOD. The addition of DECIEM complimented the company’s reported sales growth in the fiscal second quarter.
Image Source: Zacks Investment Research
Online Sales Aiding Growth
The Zacks Rank #3 (Hold) company has a strong e-commerce business, which is expected to be a major growth engine in the upcoming years. The company has been 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 have been aiding the company’s online sale. The company expanded its omnichannel capabilities to aid flexible and convenient shopping options for consumers in the second quarter of fiscal 2022. In this regard, the company’s Buy online, pickup in-store offerings across the United States for M•A•C, Aveda, Jo Malone London and Le Labo have been gaining traction. The company’s global online channel generated solid performance, with organic sales increasing high single-digit during the fiscal second quarter. Management highlighted that brand.com, third-party platform, pure-play and retail.com contributed to growth.
Solid Emerging Market Presence
The Estee Lauder Companies has a strong presence in emerging markets that insulates it from the macroeconomic headwinds in matured markets. The company derives significant revenues from emerging markets, which keeps it encouraged about making distributional, digital and marketing investments in such markets. During second-quarter fiscal 2022, sales increased 7% to $1,902 million in the Asia-Pacific region. Organic net sales rose 5% in the Asia-Pacific region. Most markets in the region grew, led by Mainland China and Australia.
The Estee Lauder Companies is making investments to cater to demand from consumers in China and Asia. To this end, it bought Korea-based skincare brand Dr. Jart in 2019. In its fiscal second-quarter earnings call, management highlighted that it is on track to open its end-to-end innovation center in Shanghai in the next few months. The center will enable the company to carry on end-to-end innovation from concept product packaging through development, scale-up as well as commercialization. Management is building a state of art production unit near Tokyo. It is on track to begin limited production by the first quarter of fiscal 2023.
Roadblocks on Way
While most brick-and-mortar retail stores that sell The Estee Lauder Companies’ products (company and customer operated) remained operational during much of the second quarter of fiscal 2022, there were intermittent shutdowns in the rest of the world. In places where stores were operational, consumer traffic was below the pre-pandemic levels globally. The company notified that international passenger traffic remained largely restricted worldwide.
Apart from this, the company has been facing adverse impacts stemming from pandemic-led transportation and production delays owing to port congestion, labor and container shortages as well as shipment delays, among other reasons. Such high costs are likely to affect the cost of sales and operating expenses for the rest of fiscal 2022. That said, management is on track to counter such headwinds via strategic price rise, product mix, the timing of shipments and use of air freight, among other efforts.
Although The Estee Lauder Companies’ shares have dropped 5.7% in a year, it has outpaced the industry’s 24.5% decline.
Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently sports a Zacks Rank #1 (Strong Buy). Inter Parfums has a trailing four-quarter earnings surprise of 46.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for IPAR’s current financial year sales and earnings per share (EPS) suggests growth of 10.9% and 9.8%, respectively, from the year-ago period’s figures.
Pilgrim's Pride, the provider of frozen, fresh and value-added chicken products, currently sports a Zacks Rank #1. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.
The Zacks Consensus Estimate for Pilgrim's Pride’s current financial year EPS suggests growth of 19.7% from the year-ago reported number.
Tyson Foods, a meat provider, currently carries a Zacks Rank #2 (Buy). TSN has a trailing four-quarter earnings surprise of 32.2%, on average.
The Zacks Consensus Estimate for Tyson Foods’ current financial year sales and EPS suggests growth of 9.5% and 2.9%, respectively, from the year-ago period’s figures.
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The Estee Lauder Companies (EL) Benefits From Skin Care Sales
The Estee Lauder Companies Inc. (EL - Free Report) looks well-positioned, courtesy of strength in the Skin Care business. Also, the company’s impressive online operations along with a solid presence in emerging markets are yielding. However, some pandemic-led delays are roadblocks for the company.
Let’s delve deeper.
Skin Care Business Holds Promise
The company’s Skin Care portfolio has been performing well for a while. During the second quarter of fiscal 2022, the Skin Care category’s sales were up 12% year over year to $3,159 million. Skin Care net sales rose across all regions on solid double-digit sales growth from La Mer and Clinique.
In May 2021, The Estee Lauder Companies expanded its Skin Care business when it concluded the first phase of raising its ownership stake in DECIEM Beauty Group Inc. ("DECIEM"). The Estee Lauder Companies now has nearly 76% ownership in DECIEM compared with 29% earlier. Further, management agreed to buy the remaining stake after three years. We note that DECIEM — a Canada-based company — is the force behind fast-growing skincare brands like The Ordinary and NIOD. The addition of DECIEM complimented the company’s reported sales growth in the fiscal second quarter.
Image Source: Zacks Investment Research
Online Sales Aiding Growth
The Zacks Rank #3 (Hold) company has a strong e-commerce business, which is expected to be a major growth engine in the upcoming years. The company has been 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 have been aiding the company’s online sale. The company expanded its omnichannel capabilities to aid flexible and convenient shopping options for consumers in the second quarter of fiscal 2022. In this regard, the company’s Buy online, pickup in-store offerings across the United States for M•A•C, Aveda, Jo Malone London and Le Labo have been gaining traction. The company’s global online channel generated solid performance, with organic sales increasing high single-digit during the fiscal second quarter. Management highlighted that brand.com, third-party platform, pure-play and retail.com contributed to growth.
Solid Emerging Market Presence
The Estee Lauder Companies has a strong presence in emerging markets that insulates it from the macroeconomic headwinds in matured markets. The company derives significant revenues from emerging markets, which keeps it encouraged about making distributional, digital and marketing investments in such markets. During second-quarter fiscal 2022, sales increased 7% to $1,902 million in the Asia-Pacific region. Organic net sales rose 5% in the Asia-Pacific region. Most markets in the region grew, led by Mainland China and Australia.
The Estee Lauder Companies is making investments to cater to demand from consumers in China and Asia. To this end, it bought Korea-based skincare brand Dr. Jart in 2019. In its fiscal second-quarter earnings call, management highlighted that it is on track to open its end-to-end innovation center in Shanghai in the next few months. The center will enable the company to carry on end-to-end innovation from concept product packaging through development, scale-up as well as commercialization. Management is building a state of art production unit near Tokyo. It is on track to begin limited production by the first quarter of fiscal 2023.
Roadblocks on Way
While most brick-and-mortar retail stores that sell The Estee Lauder Companies’ products (company and customer operated) remained operational during much of the second quarter of fiscal 2022, there were intermittent shutdowns in the rest of the world. In places where stores were operational, consumer traffic was below the pre-pandemic levels globally. The company notified that international passenger traffic remained largely restricted worldwide.
Apart from this, the company has been facing adverse impacts stemming from pandemic-led transportation and production delays owing to port congestion, labor and container shortages as well as shipment delays, among other reasons. Such high costs are likely to affect the cost of sales and operating expenses for the rest of fiscal 2022. That said, management is on track to counter such headwinds via strategic price rise, product mix, the timing of shipments and use of air freight, among other efforts.
Although The Estee Lauder Companies’ shares have dropped 5.7% in a year, it has outpaced the industry’s 24.5% decline.
Solid Staple Bets
Some other top-ranked stocks are Inter Parfums, Inc. (IPAR - Free Report) , Pilgrim's Pride (PPC - Free Report) and Tyson Foods, Inc. (TSN - Free Report) .
Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently sports a Zacks Rank #1 (Strong Buy). Inter Parfums has a trailing four-quarter earnings surprise of 46.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for IPAR’s current financial year sales and earnings per share (EPS) suggests growth of 10.9% and 9.8%, respectively, from the year-ago period’s figures.
Pilgrim's Pride, the provider of frozen, fresh and value-added chicken products, currently sports a Zacks Rank #1. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.
The Zacks Consensus Estimate for Pilgrim's Pride’s current financial year EPS suggests growth of 19.7% from the year-ago reported number.
Tyson Foods, a meat provider, currently carries a Zacks Rank #2 (Buy). TSN has a trailing four-quarter earnings surprise of 32.2%, on average.
The Zacks Consensus Estimate for Tyson Foods’ current financial year sales and EPS suggests growth of 9.5% and 2.9%, respectively, from the year-ago period’s figures.