The Estee Lauder Companies Inc. (EL) announced strong fourth-quarter fiscal 2024 results, exceeding both revenue and earnings expectations despite a challenging market landscape. The company reported adjusted earnings of 64 cents per share, surpassing the Zacks Consensus Estimate of 25 cents. Net sales reached $3,871 million, also exceeding the consensus estimate of $3,833 million. This marked a 7% year-over-year increase in revenue, driven by growth in all product categories, particularly Skin Care. However, the company cautioned that it expects continued sluggishness in the prestige beauty segment in China, primarily due to ongoing weak consumer sentiment.
Despite the challenges in China, Estee Lauder anticipates improved performance in other regions, including developed and emerging markets. The company is confident in its ability to deliver strong results driven by strategic initiatives, including revitalizing Skin Care, leveraging the growth of high-end Fragrance, capitalizing on successful channels, launching innovative products, and enhancing precision marketing.
To drive profitability and accelerate growth, Estee Lauder has implemented a Profit Recovery and Growth Plan (PRGP). This plan aims to enhance gross margins, reduce costs, establish expense leverage even at lower sales growth levels, and boost agility and speed-to-market. The PRGP is expected to generate significant operating profit net savings in the coming years.
For fiscal 2025, Estee Lauder projects a more restrained performance compared to the industry average due to its substantial business presence in China and Asia travel retail. However, the company anticipates accelerated net sales growth in other regions. The company expects net sales and organic sales growth in the range of 1% decrease to 2% growth. Adjusted operating margin is projected to be in the band of 11-11.5%, including gains from the PRGP. Adjusted EPS is expected to grow 7-5% to the $2.78-$2.98 band at constant currency.
Despite the positive outlook for the overall business, the company faces challenges in China and Asia travel retail, which are likely to partially offset the benefits of the PRGP. These challenges include weak consumer sentiment, retailer destocking, changes in traveler behavior, and increased competition in the prestige beauty market.
Estee Lauder acquired the multi-brand company DECIEM Beauty Group Inc. in May 2024. This acquisition will contribute to the company’s growth strategy in the coming years.
Looking ahead, Estee Lauder is committed to navigating the complexities of the beauty market while capitalizing on its strengths and strategic initiatives to deliver long-term value for shareholders.
