Sales up 3 percent at Estée Lauder Companies for 3Q 2016, as company announces new cost-cutting initiative

Sales up 3 percent at Estée Lauder Companies for 3Q 2016, as company announces new cost-cutting initiative

Estée Lauder Companies has reported a better-than-expected profit for the third quarter of fiscal 2016 thanks to strong sales – up 3 percent to US$2.66 billion, spurred on by the make-up category, with brands Tom Ford, Smashbox and MAC delivering double-digit growth.

Overall, the make-up category put on 7 percent to reach a value of US$1.16 billion. Demand was driven by both innovation and expanded distribution, according to the US prestige cosmetics giant. On a regional basis, the UK and Asian markets stood out, particularly in foundations and lipsticks.

The fragrance category was also buoyant, with double-digit growth from both Jo Malone London and Tom Ford as well as incremental sales from recent acquisitions off-setting lower sales of certain Estée Lauder and designer fragrances.

Sales of skin care, however, decreased, due to the unfavorable impact of foreign currency translation. La Mer was the leading light in the company’s skin care portfolio, with double-digit growth offsetting lower sales from Estée Lauder and Clinique.

The company also announced a multi-year initiative, named Leading Beauty Forward, to reduce costs and enable investment in brand growth, including NPD, social media, POS activities and advertising. To that end, Lauder has announced its intention to cut 2.5 percent of its workforce, amounting to between 900 and 1,200 jobs globally.

Fabrizio Freda, President and Chief Executive Officer, said, “On the strength of our unique brands and agile execution, we posted constant currency sales gains in all our regions and most of our product categories and channels. Our results this quarter were again highlighted by strong top line growth in our international business, driven by higher sales in virtually every market we serve. We are particularly pleased with the acceleration of both our e-commerce business and social media initiatives, which are helping to drive brand engagement around the world.

“Our flexible business model, reflecting disciplined resource allocation and improved expense leverage, helped achieve bottom line results ahead of our forecast. We are committed to continuing to target investment spending behind our brands and our greatest opportunities to foster global growth. In view of our performance to date and our positive outlook for the balance of the year, we are reiterating our expectation for adjusted currency sales growth of 7 percent to 8 percent and earnings per share growth of 10 percent to 12 percent, before charges, for the 2016 fiscal year.”