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The Estee Lauder Companies' (EL) Online Sales Bode Well
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Solid e-commerce business and Skin Care sales are favoring The Estee Lauder Companies Inc. (EL - Free Report) . The leading skin care, makeup, fragrance and hair care product provider’s presence in emerging markets bodes well.
Let’s delve deeper.
Image Source: Zacks Investment Research
What’s Favoring the Company?
The Estee Lauder Companies 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 support the company’s online sales. The company expanded its omnichannel capabilities to aid consumers’ flexible and convenient shopping options in the second quarter of fiscal 2022. The company’s global online channel generated solid performance, with organic sales increasing high single-digit during the fiscal second quarter.
The Zacks Rank #3 (Hold) company’s Skin Care portfolio has been performing well for a while. During the fiscal second quarter, the Skin Care category’s sales were up 12% year over year to $3,159 million. Skin Care’s 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.
The Estee Lauder Companies has a strong presence in emerging markets, insulating it from the macroeconomic headwinds in matured markets. The company derives significant revenues from emerging markets, encouraging it to make 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.
Is All Rosy For The Estee Lauder Companies?
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 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 and 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. EL’s stock has lost 10.9% in the past year compared with the industry’s 32.2% decline.
Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently carries a Zacks Rank #2 (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 12.5% and 10.9%, respectively, from the year-ago period’s figures.
Flowers Foods, the producer and marketer of packaged bakery products, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial year sales and EPS suggests growth of 7.2% and 4%, respectively, from the year-ago reported figure.
McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It presently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 7.3%, on average
The Zacks Consensus Estimate for McCormick's current financial year sales and EPS suggests growth of 5% and 3.9%, respectively, from the year-ago period’s reported figures.
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The Estee Lauder Companies' (EL) Online Sales Bode Well
Solid e-commerce business and Skin Care sales are favoring The Estee Lauder Companies Inc. (EL - Free Report) . The leading skin care, makeup, fragrance and hair care product provider’s presence in emerging markets bodes well.
Let’s delve deeper.
Image Source: Zacks Investment Research
What’s Favoring the Company?
The Estee Lauder Companies 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 support the company’s online sales. The company expanded its omnichannel capabilities to aid consumers’ flexible and convenient shopping options in the second quarter of fiscal 2022. The company’s global online channel generated solid performance, with organic sales increasing high single-digit during the fiscal second quarter.
The Zacks Rank #3 (Hold) company’s Skin Care portfolio has been performing well for a while. During the fiscal second quarter, the Skin Care category’s sales were up 12% year over year to $3,159 million. Skin Care’s 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.
The Estee Lauder Companies has a strong presence in emerging markets, insulating it from the macroeconomic headwinds in matured markets. The company derives significant revenues from emerging markets, encouraging it to make 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.
Is All Rosy For The Estee Lauder Companies?
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 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 and 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. EL’s stock has lost 10.9% in the past year compared with the industry’s 32.2% decline.
Solid Staple Bets
Some better-ranked stocks are Inter Parfums, Inc. (IPAR - Free Report) , Flowers Foods (FLO - Free Report) and McCormick & Company (MKC - Free Report) .
Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently carries a Zacks Rank #2 (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 12.5% and 10.9%, respectively, from the year-ago period’s figures.
Flowers Foods, the producer and marketer of packaged bakery products, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial year sales and EPS suggests growth of 7.2% and 4%, respectively, from the year-ago reported figure.
McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It presently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 7.3%, on average
The Zacks Consensus Estimate for McCormick's current financial year sales and EPS suggests growth of 5% and 3.9%, respectively, from the year-ago period’s reported figures.