Estee Lauder (EL) Tops Q3 EPS by 13c, Revenues Beat

Estee Lauder (NYSE: EL) reported Q3 EPS of $0.86, $0.13 better than the analyst estimate of $0.73. Revenue for the quarter came in at $3.35 billion versus the consensus estimate of $3.05 billion.

Fabrizio Freda, President and Chief Executive Officer said, “While the terrific double-digit momentum in sales growth from the first half of our fiscal year carried into January, the dynamics in the quarter changed significantly as COVID-19 spread beyond Asia. By early March, consumers around the world began social distancing which resulted in lower traffic in retail locations. As March evolved, most retail stores temporarily closed and consumers increasingly stayed home. In this very complex and unprecedented environment, there were several bright spots across our portfolio which drove global prestige beauty share expansion in the quarter. The Estée Lauder, Darphin, and Le Labo brands grew, global online sales rose strong double-digits, sales in mainland China and global travel retail increased, and skin care sales grew internationally, including Dr. Jart+. The surge in our online business worldwide, coupled with the recovery we are seeing emerge in China, confirm consumers’ passion for our prestige beauty portfolio.

“In light of ongoing temporary store closures in many regions, we have begun to adjust our cost structure and have enhanced our liquidity during this challenging time. We remain focused on our proven strategy built on multiple engines of growth and the desirability of our brands and their hero franchises. Our diverse portfolio of categories, channels and geographies affords us the needed agility to navigate through this environment and emerge strongly. We stand ready to leverage the recovery when stores reopen and consumers restock at home.”

Freda emphasized, “As the global community continues to confront the COVID-19 pandemic, the health and well-being of our employees and consumers remain paramount to us. We are continuing to find ways to make meaningful contributions worldwide, both monetary and in-kind. We are producing over one million hand sanitizers at our plants in the United States and Europe. This week, we established the ELC Cares Employee Relief Fund, our newest giving initiative, which will be funded through contributions from the Company, the Lauder family and our employees to provide immediate and critical financial relief to employees whose lives have been impacted by the pandemic.”

Outlook for Fiscal 2020 Full Year
The Company continues to believe that strong consumer demand for its high-quality products remains intact despite temporary challenges related to COVID-19. For the fiscal year, the Company expects to continue to build global share, even in a declining market.

The Company expects the majority of retail stores will remain closed for most of the fiscal 2020 fourth quarter and that traffic will rebuild gradually when stores reopen around the world. As a result, the Company expects global prestige beauty to continue to be adversely impacted during that period. The Company is mindful that some retail locations in certain markets may not reopen and there are likely to be lingering adverse global economic and social impacts. The Company is also mindful of other risks related to social, economic and political matters, including restructurings and bankruptcies in the retail industry, destocking and tighter working capital management by retailers, challenges for suppliers, geopolitical tensions, regulatory developments, global security issues, currency volatility, general economic challenges and changes in where and how consumers shop that is affecting consumer spending in certain countries, channels and travel corridors.

Given the uncertainty around the timing, speed and duration of the recovery from the adverse impacts of COVID-19, the Company is not providing specific sales and EPS guidance for the fiscal 2020 fourth quarter and full year. The Company stands ready to facilitate the recovery in fiscal 2021 as soon as the market dynamics support it. The Company’s actions to control costs during this very volatile moment, while maintaining the flexibility to make strategic investments in the areas of greatest opportunity, are expected to help it emerge strongly when the global recovery begins.

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