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Oct 31, 2018
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Estee Lauder sales beat as China demand booms, shares up 7 percent

Reuters API
Oct 31, 2018

Estée Lauder Cos Inc joined rival L’Oreal in dismissing fears of a slowdown in China as its quarterly results beat Wall Street estimates on Wednesday on booming demand for cosmetics and high-end skincare products in the Asian country.

Net sales rose nearly 8 percent to $3.52 billion Photo: Jo Malone London, an Estee Lauder brand

The company’s shares rose 7.3 percent to $140.74 before the opening bell.

Despite concerns about the knock-on effect of U.S.-China tariff dispute on consumers in China, Estée saw double-digit sales in the country with almost all product categories - hair care, makeup, fragrance and skin care- growing at the same pace.

In China, Estée has launched several high-end skincare brands and collaborated with Chinese celebrities like Yang Mi, Hua Chenyu and Fei Fei Sun to cater to more affluent millennial consumers in China.
Overall, sales in the Asia-Pacific region grew 24 percent.

“Our top growth drivers were skin care globally, the Asia/Pacific region and emerging markets, the global online and travel retail channels, and most brands, including Estée Lauder, M•A•C, La Mer, Tom Ford and Origins,” Chief Executive Officer Fabrizio Freda said in a statement.

Estée’s performance mirrors bigger rival L’Oreal SA that reported strong results on buoyant demand in China.

L’Oreal CEO Jean-Paul Agon told analysts on Tuesday that “Luxury in Asia is flying,” and that he saw “absolutely no sign of a slowing down of consumption in China.”

Fashion brands like Gucci-owner Kering and Italian down jacket maker Moncler have also played down gloomy market views on China.Estée said it would grow at a faster clip than the broader global prestige beauty industry’s market growth rate of 5 percent to 6 percent.

It expects net sales to rise 4 percent to 5 percent or between $14.24 billion and $14.38 billion. Analysts on average expected $14.31 billion, according to Refinitiv data.

The company raised its fiscal 2019 adjusted earnings per share outlook to $4.73-$4.82, above its prior forecast of $4.62-$4.71. Analysts had estimated $4.75 per share.

The outlook takes into account the impact of tariffs on future moderation of net sales growth in China and the travel retail market, which it has not experienced to date, Estée said.

Excluding items, the company earned $1.41 per share, while net sales rose nearly 8 percent to $3.52 billion in the first quarter. Analysts on average had expected earnings of $1.22 per share and $3.47 billion in sales.

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