The Estée Lauder Companies (ELC) net sales fell 9% year-over-year to $3.56bn in the first quarter of fiscal 2021, the three months ended September 30. The company reported net earnings of $523m, compared with $595m in the prior-year period.
The decline was driven by pandemic-related temporary store closures and lower foot traffic, but was partially offset by strong online growth. Travel retail net sales were relatively flat year-over-year and net sales from the company’s acquisition of Dr. Jart+ contributed about three percentage points of sales growth.
Demand for skincare and haircare proved more resilient than make-up and fragrance. Within skincare, hero franchises remained strong. As stores re-opened throughout the quarter, consumers returned to in-store fragrance experiences, contributing to double-digit sales growth at several luxury and artisanal fragrance brands, including Le Labo and Editions de Parfums Frédéric Malle.
However, ELC notes that it is continuously monitoring the effects of the pandemic and the resurgence of COVID-19 cases in various parts of the world, including the UK, Ireland and other countries in Europe, which has resulted in government restrictions leading to non-essential retail closures.
Hero products drive growth
Skincare was resilient, with net sales up 10% compared to the same period last year. The category grew across most regions, led by the Estée Lauder and La Mer brands. Sales of Dr. Jart+, which ELC acquired in December 2019, contributed 6% to skincare net sales growth.
Estée Lauder delivered strong double-digit growth thanks to double-digit growth in travel retail and in mainland China, in addition to online. Sales were fueled by the launch of the new Advanced Night Repair Synchronized Multi-Recovery Complex, as well as Perfectionist and Micro Essence.
Double-digit growth from La Mer was driven by Asia Pacific, with strength in mainland China. Net sales in travel retail also grew strong double-digits. La Mer’s growth was primarily driven by the launch of the new The Concentrate.
Make-up sales fell 32% with declines across all brands, save for Too Faced, which saw a small increase. The COVID-19 pandemic continues to “ disproportionately impact makeup,” says ELC, particularly foundation and lip, and make-up sales continued to be soft in most markets.
Fragrance sales fell 12% year-over-year with decreases from Estée Lauder, Clinique, certain designer fragrances, Jo Malone London and Tom Ford. Certain luxury and artisanal fragrance brands grew during the quarter as retail stores re-opened and consumers were able to partake in in-store experiences.
Strong double-digit net sales growth in Asia/Pacific accelerated year-over-year driven by the company’s luxury and artisanal fragrance portfolio. Net sales from Le Labo rose double digits with growth in all regions, while net sales more than doubled in Asia/Pacific and online.
Growth from Kilian Paris and Editions de Parfums Frédéric Malle were driven primarily by the launch of the brands in China and strong double-digit growth online.
Travel retail sees help from Hainan
In Asia Pacific, sales increased 9% with growth in mainland China, Korea and several other markets, which offset declines in the rest of the region. The company continued to focus investments on digital marketing, which resulted in strong double-digit online sales growth. In mainland China, net sales grew double-digits led by skincare and fragrance, with the luxury brands outperforming. Sales increased in nearly every channel and both brick-and-mortar and online grew.
Sales in The Americas fell 25% as in-store traffic continued to be soft during the quarter, resulting in declines in brick-and-mortar doors, despite growth in July as retailers restocked stores upon opening. Due to weak footfall, ELC and many retailers continued to move consumers online using digital techniques, which partially offset the brick-and-mortar declines.In North America, prestige beauty continued to experience soft make-up sales, impacting the category’s overall results. Online sales accounted for more than 35% of total sales in the region, with strong double-digit growth.
Europe, the Middle East & Africa saw sales fall 8% year-over-year with decreases in virtually every market, led by the Middle East, the UK and the Western European markets, due to lower retail traffic caused by the pandemic. However, sales online nearly doubled reflecting the company’s and retailers’ increased focus on digital.
Global travel retail business sales (which excludes travel retail sales from Dr. Jart+) were relatively flat year-over-year, ELC said. The impact of the pandemic on international passenger traffic was offset by strong growth in Hainan, partly reflecting increased duty-free purchase limits, the opening of some travel corridors in Asia and online pre-tail growth.
Outlook
For the second quarter, ELC expects reported sales to fall between 5% and 3% compared to the prior-year period. The company’s recent acquisition of Dr. Jart+ is forecast to contribute 2% to overall sales growth. Excluding the impact of the acquisition and 1% benefit from currency, net sales are forecast to decrease between 8% and 6%.
ELC is not providing guidance for the fiscal 2021 full year due to the uncertainty regarding the COVID-19 pandemic. The company says it is well-positioned to facilitate recovery in the fiscal year. The group continues to implement cost controls, including temporary salary reductions.
In fiscal 2021, ELC will continue to review unproductive brick-and-mortar stores, increase manufacturing capabilities, expand the fulfillment for its online business and invest in Asia Pacific.