Estee Lauder sees no slowdown in China

An Estee Lauder beauty counter at a store in a Shanghai mall. The company has also been selling 10 of its brands including M.A.C on Alibaba's online marketplace Tmall, in a bid to boost its presence in the Asian market. PHOTO: BLOOMBERG
An Estee Lauder beauty counter at a store in a Shanghai mall. The company has also been selling 10 of its brands including M.A.C on Alibaba's online marketplace Tmall, in a bid to boost its presence in the Asian market. PHOTO: BLOOMBERG

Cosmetic firm expects robust growth in Asia-Pacific business

BENGALURU • Estee Lauder has forecast full-year revenue and profit above Wall Street expectations, putting to bed concerns of slowing demand in China due to trade tensions and Hong Kong protests as sales of its luxury skincare products soared, propelling its shares to a record high.

Major cosmetic companies such as Estee Lauder and L'Oreal are seeing a boom in their business in the Asia-Pacific region, mainly in China, as affluent millennials spend more at beauty retailers and duty-free stores in airports.

Shares of Estee Lauder, which on Monday posted better-than-expected fourth-quarter results, rose as much as 11 per cent to US$198.62.

The company has been selling 10 of its brands - including M.A.C and Tom Ford - on Alibaba's online marketplace Tmall in a bid to boost its presence in the Asian market.

The efforts helped sales in the Asia-Pacific region grow 18 per cent in the fourth quarter, while sales in the skincare business, its biggest and most profitable, rose 15 per cent to US$1.59 billion (S$2.2 billion), boosted by demand for its premium skincare brands such as La Mer and Clinique.

Estee Lauder expects full-year sales to grow in the range of 7 per cent to 8 per cent, and adjusted profit between US$5.90 and US$5.98 per share in fiscal year 2020.

Analysts had expected sales growth of 6.87 per cent and profit of US$5.81 per share.

Estee Lauder, which also forecast first-quarter sales growth and profit above expectations, said the outlook took into account the potential impact of the Hong Kong protests and the protracted US-China trade dispute, as well as costs related to Britain's impending exit from the European Union. "We are not seeing any slowdown in China at this point in time," said chief executive officer Fabrizio Freda.

  • 18%

    Increase in Estee Lauder's sales in the Asia-Pacific region in the fourth quarter.

Mr Freda said Hong Kong, including in travel retail, represented less than 4 per cent of the company's business globally, and the company was working to recover some of the potential losses in Hong Kong from other markets.

RBC analyst Nik Modi said: "We are a little surprised by Estee's aggressive approach to guidance for the year."

Overall, quarterly net sales rose 9 per cent to US$3.59 billion, beating expectations of US$3.53 billion, according to IBES data from Refinitiv.

Excluding items, it earned 64 US cents per share, beating estimates by 11 US cents.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 21, 2019, with the headline 'Estee Lauder sees no slowdown in China'. Print Edition | Subscribe