The Estée Lauder Cos. Inc. reported third quarter net sales of $3.74 billion, an increase of 11 percent from the prior-year’s quarter. Net earnings rose to $555 million compared with $372 million last year. The company says growth expectations were exceeded due to China’s unforeseen demand for luxury beauty products, leading it to raise its full-year 2019 earnings guidance.
“We had anticipated a gradual moderation of growth in China and travel retail starting in the quarter, which didn’t happen, and that contributed to our over achievement,” said Lauder’s Fabrizio Freda, President and Chief Executive Officer. “We continue to see strength in several of our key engines of growth and, as a result, we are again raising our net sales and EPS guidance for the year.”
Lauder is now forecasting net sales to increase between 7 percent and 8 percent, up from previous guidance of 5 percent and 6 percent. The company is also estimating its full-year earnings per share to be between $5.15 and $5.19, up from the $4.92 and $5 range forecasted three months ago.
As a result of the company’s local China strategy, which includes Alibaba’s Tmall marketplace, the Asia-Pacific region generated double-digit net sales growth in every major product category. The region saw a 25 percent growth, bringing total sales to $966 million for the quarter.
In the U.S., sales declined 2 percent, with total prestige beauty retail sales further slowing down during the quarter, particularly in makeup. Meanwhile, sales for Europe, the Middle East & Africa were up 15 percent.
Breaking down by category, makeup is up 5 percent, due to higher net sales from Tom Ford Beauty, Estée Lauder, La Mer and M•A•C. Notably, M•A•C’s increase was led by double-digit growth across Asia/Pacific, the Middle East and India. Specifically, in China, M•A•C benefited from the successful Strike of Kings collection. Skin care is up 21 percent, with the Estée Lauder brand and La Mer delivering double-digit net sales growth in most regions and channels. Fragrance is up 2 percent reflecting growth from Estée Lauder as well as from the company’s luxury fragrances, including Jo Malone London, Tom Ford Beauty, Le Labo, and By Kilian. Finally, hair care took a 2 percent dip primarily reflecting lower net sales from Bumble and bumble, primarily in the North America salon channel.