THE WHAT? The Estee Lauder Companies has reported its results for the first quarter of fiscal 2021. In the three months ended September 30, 2020, the US prestige beauty behemoth saw sales drop 9 percent on a reported basis to US$3.56 billion.
THE DETAILS Lauder attributed the decline to GVC-related temporary store closures, lower foot traffic as a result of social distancing measures and stay home orders and flat travel retail sales. Earnings were also down at US$523 million versus US$595 million in the prior-year quarter.
However, when broken down by category, it’s clear that skin and hair care sales proved more resilient than make-up and fragrance. Skin care jumped 10 percent while hair care sales remained flat. Make-up and fragrance, on the other hand, dove 32 percent and 12 percent (reported) respectively.
Indeed, CEO and President Fabrizio Freda said that there were green shoots of hope thanks to the strong growth of online sales, innovations in skin care and China’s bounce-back.
“We are pleased with the stronger than expected start to our fiscal year amid this difficult moment as the global community continues to confront COVID-19,” he commented. “We delivered significant sequential improvement in net sales growth in every product category driven by progress around the world. Asia/Pacific again excelled with double-digit year-over-year growth in mainland China. Travel retail was a stand-out performer as Chinese tourists were drawn to the growing duty-free shops in Hainan Island and purchase limits increased there.
THE WHY? The continuing COVID-19 crisis continues to affect cosmetics sales, not only due to store closures (Lauder said 20 percent of stores were closed at the start of the quarter in the Americas and 15 percent shuttered in Europe, not to mention international travel curtailed), but also changing consumer preferences.