A return to physical retail helped Estée Lauder reduce losses in its fiscal second quarter as the company talked up a “renaissance in usage occasions” and product innovations across its portfolio, including modernization of freestanding stores and a revamped omnichannel strategy.
On a Thursday (Feb.2) earnings call, Estée Lauder President and CEO Fabrizio Freda told analysts and investors that COVID-related disruptions in China and Asia-Pacific (APAC) to its core travel retail sales and lower replenishment orders created downward pressures, while certain categories, including fragrances and makeup, experienced upticks in select markets.
While its travel retail sales remain depressed, particularly in China’s Hainan tourism travel hub, and with duty-free pressures affecting sales in Korea, other regions performed strongly.
Highlights of the portfolio breakdown included MAC Cosmetics, which Freda called “a standout success,” as freestanding stores delivered double-digit organic sales growth globally across channels.
“Clinique further fueled makeup across subcategories led by lipstick, as the brand has created a hero franchise with cult favorite Almost Lipstick in Black Honey,” Freda said.
He added the “My Shade, My Story” campaign in Western Europe went viral on TikTok and “drove strong new consumer acquisition as the franchise strengthened its No. 1 rank in foundation with prestige beauty share gains.”
“We are also progressively modernizing numerous freestanding stores, as they are primed to be an important contributor to growth following rationalization of the footprints,” he said, pointing to “numerous growth drivers, including an exceptional innovation pipeline across brands rollout to new Clinique counters to select doors after a successful pilot of Clinique Lab in Macy’s Herald Square” and the launch of exclusive products.
He added that enhanced omnichannel capabilities “are also primed to contribute to growth in the U.S. as consumers we engage with our brands online and in-store drive consistently higher value from upsell and cross-sell.”
“This was especially true during holidays in the second quarter,” he said. “…We expect online to continue its trends and anticipate a gradual return to more fulsome brick-and-mortar traffic by the end of the fiscal year.”
Freda said retail sales growth in online channels “meaningfully outpaced the industry in the quarter for strong prestige beauty share gains” led by double-digit growth for the La Mer skincare brand. He added that a Singles Day sale performed well.
Emerging markets also performed strongly for the brand, with Freda citing India, Brazil, Turkey and Malaysia as “among the stars of our emerging markets with each posting strong double-digit organic sales growth led by India rising nearly 50%.”
Acquired in November, the Tom Ford Beauty line is on track to achieve $1 billion in annual sales as Estée Lauder invests in various expansions around the iconic brand.
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