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The Estee Lauder Companies' (EL) Emerging Market Presence Strong
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The Estee Lauder Companies Inc. (EL - Free Report) has a strong presence in emerging markets, insulating it from the macroeconomic headwinds in the matured markets. The beauty company’s strong online business is a major growth engine. Yet, the company is not immune to inflationary pressures and supply chain-related issues.
Let’s delve deeper.
What’s Favoring The Estee Lauder Companies?
The Zacks Rank #3 (Hold) company has a strong presence in emerging markets. The company derives significant revenues from emerging markets like Thailand, India, Russia and Brazil, encouraging it to make distributional, digital and marketing investments in these countries. The Estee Lauder Companies is investing in catering to consumer demand in China and Asia. To this end, it bought Korea-based skincare brand Dr. Jart in 2019.
In its second-quarter fiscal 2023 earnings call, management highlighted that several developed and emerging markets globally outpaced its expectations to counter COVID-related issues across China. The company posted strong double-digit organic sales growth across several emerging markets like India, Brazil, Turkey and Malaysia.
The company is on track to expand its consumer reach in productive distribution across high-growth channels while strategically expanding brands into new countries. In this regard, management strengthened its manufacturing, distribution and innovation capabilities. The company opened the China innovation labs, its first plant in the Asia Pacific and a new DC in China. The company also announced its partnership with brands like Tom Ford and Balmain Beauty.
Image Source: Zacks Investment Research
The Estee Lauder Companies is benefiting from a strong online business. 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 boosting online sales. The company has been expanding its omnichannel capabilities to aid flexible and convenient shopping options for consumers.
What’s Hurting The Estee Lauder Companies?
The Estee Lauder Companies reported second-quarter fiscal 2023 results, with the top and the bottom line declining year over year. COVID-19 continued affecting the company’s operating environment throughout the first half of fiscal 2023, which included curbs in China that weighed on travel retail in Hainan and retail traffic in mainland China. Results were affected by increased inflation, concerns surrounding the recession and unfavorable currency rates.
The Estee Lauder Companies’ fiscal second-quarter gross profit came in at $3,401 million, down 21% year over year. The gross margin contracted to 73.6% from 77.9% reported in the year-ago quarter. The downside can be attributed to inflationary pressures across the supply chain, region and category mix and increased costs associated with promotional items. Also, the adjusted operating income declined 42% at cc, mainly due to reduced net sales.
Management anticipates the rest of fiscal 2023 to be dynamic, including uncertain consumer recovery in travel retail, evolving COVID-19 situation, inflation, supply chain-related issues and slowdown risk across some markets worldwide. For fiscal 2023, management projects net sales to decrease in the band of 5-7% year over year. Adjusted earnings per share (EPS) are expected in the band of $4.87-$5.02, suggesting a 31-33% decline from the year-ago period. The bottom line is expected to decline 27-29% at constant currency.
That said, The Estee Lauder Companies’ aforementioned upsides are likely to offer some respite. The company’s shares have declined 14.4% in the past year compared with the industry’s 20.7% decline.
Post Holdings, which is a consumer-packaged goods company, sports a Zacks Rank #1 (Strong Buy) at present. Post Holdings has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for POST’s current financial-year sales and earnings suggests growth of 1.6% and 111.3%, respectively, from the year-ago reported numbers.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5.2% and 6.1%, respectively, from the corresponding year-ago reported figures.
Hershey, the leader in chocolate and non-chocolate confectionery, currently carries a Zacks Rank #2. HSY has a trailing four-quarter earnings surprise of 11.3%, on average
The Zacks Consensus Estimate for Hershey’s current financial-year sales and earnings suggests growth of 7.8% and 10.2%, respectively, from the year-ago reported numbers.
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The Estee Lauder Companies' (EL) Emerging Market Presence Strong
The Estee Lauder Companies Inc. (EL - Free Report) has a strong presence in emerging markets, insulating it from the macroeconomic headwinds in the matured markets. The beauty company’s strong online business is a major growth engine. Yet, the company is not immune to inflationary pressures and supply chain-related issues.
Let’s delve deeper.
What’s Favoring The Estee Lauder Companies?
The Zacks Rank #3 (Hold) company has a strong presence in emerging markets. The company derives significant revenues from emerging markets like Thailand, India, Russia and Brazil, encouraging it to make distributional, digital and marketing investments in these countries. The Estee Lauder Companies is investing in catering to consumer demand in China and Asia. To this end, it bought Korea-based skincare brand Dr. Jart in 2019.
In its second-quarter fiscal 2023 earnings call, management highlighted that several developed and emerging markets globally outpaced its expectations to counter COVID-related issues across China. The company posted strong double-digit organic sales growth across several emerging markets like India, Brazil, Turkey and Malaysia.
The company is on track to expand its consumer reach in productive distribution across high-growth channels while strategically expanding brands into new countries. In this regard, management strengthened its manufacturing, distribution and innovation capabilities. The company opened the China innovation labs, its first plant in the Asia Pacific and a new DC in China. The company also announced its partnership with brands like Tom Ford and Balmain Beauty.
Image Source: Zacks Investment Research
The Estee Lauder Companies is benefiting from a strong online business. 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 boosting online sales. The company has been expanding its omnichannel capabilities to aid flexible and convenient shopping options for consumers.
What’s Hurting The Estee Lauder Companies?
The Estee Lauder Companies reported second-quarter fiscal 2023 results, with the top and the bottom line declining year over year. COVID-19 continued affecting the company’s operating environment throughout the first half of fiscal 2023, which included curbs in China that weighed on travel retail in Hainan and retail traffic in mainland China. Results were affected by increased inflation, concerns surrounding the recession and unfavorable currency rates.
The Estee Lauder Companies’ fiscal second-quarter gross profit came in at $3,401 million, down 21% year over year. The gross margin contracted to 73.6% from 77.9% reported in the year-ago quarter. The downside can be attributed to inflationary pressures across the supply chain, region and category mix and increased costs associated with promotional items. Also, the adjusted operating income declined 42% at cc, mainly due to reduced net sales.
Management anticipates the rest of fiscal 2023 to be dynamic, including uncertain consumer recovery in travel retail, evolving COVID-19 situation, inflation, supply chain-related issues and slowdown risk across some markets worldwide. For fiscal 2023, management projects net sales to decrease in the band of 5-7% year over year. Adjusted earnings per share (EPS) are expected in the band of $4.87-$5.02, suggesting a 31-33% decline from the year-ago period. The bottom line is expected to decline 27-29% at constant currency.
That said, The Estee Lauder Companies’ aforementioned upsides are likely to offer some respite. The company’s shares have declined 14.4% in the past year compared with the industry’s 20.7% decline.
Solid Staple Bets
Some top-ranked stocks are Post Holding (POST - Free Report) , General Mills (GIS - Free Report) and The Hershey Company (HSY - Free Report) .
Post Holdings, which is a consumer-packaged goods company, sports a Zacks Rank #1 (Strong Buy) at present. Post Holdings has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for POST’s current financial-year sales and earnings suggests growth of 1.6% and 111.3%, respectively, from the year-ago reported numbers.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5.2% and 6.1%, respectively, from the corresponding year-ago reported figures.
Hershey, the leader in chocolate and non-chocolate confectionery, currently carries a Zacks Rank #2. HSY has a trailing four-quarter earnings surprise of 11.3%, on average
The Zacks Consensus Estimate for Hershey’s current financial-year sales and earnings suggests growth of 7.8% and 10.2%, respectively, from the year-ago reported numbers.