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The Estee Lauder Companies (EL) Up 61% in a Year: Here's How

Zacks Equity Research
·4-min read

Focus on growing e-commerce business and Skin Care category is working well for The Estee Lauder Companies Inc. EL. It is on track with effective cost-saving efforts. These trends were reflected in the company’s third-quarter fiscal 2021 results, with the top and the bottom line increasing year over year.

For fiscal 2021, management projects net sales to increase in the band of 11-12%. Adjusted earnings are anticipated to increase in the range of 45-47% at constant currency (cc) in fiscal 2021. Its fiscal fourth-quarter sales are anticipated to increase 44-50% at cc. This reflects recovery in several parts of the world and favorable year-over-year comparison.

The Estee Lauder Companies’ stock has surged 61% in the past year compared with the industry’s rally of 57.1%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

What’s Favoring The Estee Lauder Companies?

The Estee Lauder Companies has a strong online business and management expects it to be a major growth driver in the upcoming years. The company has been implementing new technologies and digital experiences, including online booking for each store appointment, omnichannel loyalty programs and high-touch mobile services. These initiatives and the company’s digital-first mindset are boosting online sales. During third-quarter fiscal 2021, online sales continued to drive the company’s top-line growth. In its last earnings call, management highlighted that its online channel almost doubled in the past two years. The company is on track to undertake high-touch innovation on digital platforms. Management has been expanding brand presence across various third-party sites, rolling out new digital payment technologies and enhancing its loyalty programs as it continues to widen market reach.

The Estee Lauder Companies’ Skin Care portfolio has been performing well for a while now. During fiscal third quarter, brands like Estee Lauder, Clinique and La Mer witnessed significant growth in the Skin Care category. The category is also benefiting from Origins as well as the acquisition of Dr. Jart (concluded in 2019). During the quarter, the Skin Care category’s sales increased 31%. In May 2021, The Estee Lauder Companies took another step to expand its Skin Care business when it concluded the first phase of raising its ownership stake in DECIEM Beauty Group Inc.

Management is undertaking cost-saving measures. Uncertainties related to COVID-19 have compelled the company to implement stringent cost-curtailment practices. These include costs related to advertising and promotion activities, travel, meetings, consulting and certain employee expenses. During fiscal third quarter, operating expenses, as a percentage of sales, declined significantly to 59.8% from 71.7% reported in the year-ago quarter.

Is all Rosy?

Most brick-and-mortar retail stores that sell The Estee Lauder Companies’ products (both company and customer operated) remained mostly open, especially in China and the United States during fiscal third quarter. However, there were intermittent shutdowns in the rest of the world. Many retail stores were temporarily shut at some point in the quarter across the U.K., Japan, Canada, Italy, Spain, France, Mexico and Brazil due to resurgence of coronavirus infections. Store traffic was significantly lower compared with pre-pandemic levels globally. Apart from these, international travel has been majorly restricted due to government regulations and consumer health concerns. Such restrictions have been affecting consumer traffic in most travel retail locations.

The Estee Lauder Companies, which shares apace with Nu Skin Enterprises, Inc. NUS, is progressing with its two-year Post-COVID Business Acceleration Program that was introduced in August 2020. Through this plan, management expected to shut 10-15% of its freestanding stores worldwide along with various low-performing department store counters.

Nevertheless, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company counter such hurdles and sustain its growth.

Top 2 Cosmetic Picks

Inter Parfums, Inc. IPAR, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 27.3%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Coty Inc. COTY currently has an Earnings ESP of +44.44% and a Zacks Rank of 2.


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The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report

Inter Parfums, Inc. (IPAR) : Free Stock Analysis Report

Nu Skin Enterprises, Inc. (NUS) : Free Stock Analysis Report

Coty Inc. (COTY) : Free Stock Analysis Report

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Zacks Investment Research