The Estée Lauder Cos. yesterday reported results for its fourth quarter fiscal year ended June 30. Net sales of $14.86 billion increased 9% from $13.68 billion in the prior year. The company posted net sales growth in its international business and nearly all product categories. Excluding the negative impact of currency translation ($371 million, or 2%) and the adoption of the new revenue recognition accounting standard (“ASC 606”) ($49 million, or less than 1%), net sales increased 12%.
Net earnings rose to $1.79 billion from $1.11 billion last year. Diluted net earnings per common share increased to $4.82 compared with $2.95 reported in the prior year. During the quarter, ended June 30, the company reported net sales of $3.59 billion, a 9% increase compared with $3.30 billion in the prior-year period. Results were driven largely by the same growth drivers as the full year, including China and most other emerging markets, as well as continued strength at the company’s travel retail and online channels. Net sales in the U.S. improved despite a tough retail environment. Most brands grew globally. Net earnings were $157 million, and diluted earnings per share was $.43. In the prior-year quarter, the company reported net earnings of $186 million and diluted earnings per share of $.49. Adjusting for restructuring and other charges and adjustments, and excluding the impact of currency translation and the adoption of ASC 606, net sales increased 12% and diluted earnings per share rose 15%.
Below, details on how each division performed for the year.
- Skin care net sales grew across most regions, led by the Estée Lauder and La Mer brands. Clinique’s skin care net sales also grew globally in constant currency.
- The Estée Lauder brand delivered double-digit net sales growth in all regions and nearly all channels of distribution. The increase reflected continued strength in certain of its core product franchises, including Advanced Night Repair, Perfectionist, Nutritious, Micro Essence and Revitalizing Supreme supported by successful innovations, such as Advanced Night Repair Eye Supercharged Complex.
- Double-digit growth from La Mer was also broad-based, with net sales increasing across all regions and channels, driven by hero products, including Crème de la Mer, The Concentrate and The Treatment Lotion. Targeted expanded consumer reach also contributed to growth.
- Operating income increased sharply, reflecting higher net sales with greater expense leverage, primarily from Estée Lauder and La Mer.
- Net sales growth in makeup was primarily driven by higher net sales from Estée Lauder, M.A.C, Tom Ford Beauty and La Mer. Too Faced also contributed to the growth. The increases were partially offset by lower net sales from Clinique and Smashbox.
- Estée Lauder generated strong net sales growth, driven largely by success from its Double Wear franchise and the Pure Color line of products.
- M.A.’s net sales increase was led by double-digit growth from Greater China, Japan and the Middle East, as well as travel retail.
- Net sales from Tom Ford Beauty increased double-digits, primarily driven by its lip color and eye shadow products in Asia/Pacific and the travel retail channel, as well as targeted expanded consumer reach, including the brand’s highly successful launch on Tmall. Emerging market growth outpaced the total brand growth, driven by China, Israel, India and Singapore.
- La Mer’s strong double-digit growth across international markets was largely driven by the recent launch of The Luminous Lifting Cushion Foundation as well as targeted expanded consumer reach.
- Makeup operating income declined, reflecting lower results across several brands, due to planned investments to support new and existing products, as well as lower results from Smashbox driven by the decline in net sales and $90 million of goodwill and other intangible asset impairments. This decrease was partially offset by higher results from Estée Lauder, primarily due to higher net sales with greater expense leverage.
- Excluding the unfavorable foreign currency translation impact of approximately $50 million, net sales increased, reflecting growth from luxury fragrances, including Jo Malone London, Tom Ford Beauty, Le Labo and By Kilian. These increases were mostly offset by lower net sales from certain designer fragrances and Estée Lauder.
- Jo Malone London’s net sales increase primarily reflected growth in colognes and expanded targeted consumer reach in Asia/Pacific, including the brand’s launch on Tmall.
- Increased net sales from Tom Ford Beauty reflected strong growth from Private Blend fragrances Soleil Blanc and Oud Wood, as well as expanded targeted consumer reach.
- Le Labo and By Kilian net sales increased, primarily due to expanded targeted consumer reach and new product launches.
- Fragrance operating income declined, primarily driven by investments in advertising and promotional activities and store operations to support targeted expanded consumer reach, as well as lower net sales from certain designer fragrances.
- Hair care net sales increased, primarily reflecting higher sales from Aveda, particularly online, driven by the launch of Cherry Almond Softening Shampoo and Conditioner and the continued success of certain hero franchises, such as the Rosemary Mint and Shampure product lines. The increase was partially offset by lower net sales from Bumble and bumble, primarily in the North America salon and specialty-multi channels.
- Hair care operating income declined, reflecting planned strategic advertising investments on hero franchises, as well as social media and digital outreach at Aveda and lower net sales from Bumble and bumble.