[Overseas Stocks Spotlight] “Est?e Lauder’s Aggressive Channel Strategy Will Sustain Mid- to Long-Term Growth”

[Asia Economy Reporter Eunmo Koo] Est?e Lauder (ESTEE LAUDER·EL US) posted weak results in the fourth quarter of fiscal year 2020 (April to June 2020) due to the impact of the novel coronavirus disease (COVID-19). It is analyzed that mid- to long-term growth will continue as the company plans to expand store restructuring and investment in digital channels to respond to changed consumer patterns in the future.

Est?e Lauder's sales in the fourth quarter of fiscal year 2020 (April to June 2020) recorded $2.43 billion, down 32% compared to the same period last year. Operating profit turned to a loss of $543 million, and net profit also turned to a loss, recording -$459 million. Analyst Orin Ah from Ebest Investment & Securities explained in a report on the 23rd, "The Q4 results were heavily impacted by store closures due to COVID-19, but strong online growth partially offset this."

The proportion of online sales in total company sales in Q4 rose to over 40%, showing a pattern similar to global competitors. Analyst Oh explained, "Q4 Global Travel Retail sales fell by less than 30% year-on-year, but despite a significant drop in international passengers, strong local travel demand within China largely defended sales."

By region, the atmosphere varied depending on the timing of COVID-19 spread. In China, most offline channels resumed operations from mid-February to the end of June, and online channel sales showed double-digit growth compared to the previous year, resulting in overall double-digit growth in China’s total sales, meeting expectations. South Korea also showed a recovery compared to the previous quarter, with mid-single-digit growth year-on-year, similar to China.

On the other hand, the North American region suffered due to intensified competition in the makeup category, and the South American region was significantly affected by COVID-19. The Europe, Middle East, and Africa region also saw a sharp decline in sales in the UK and Western European countries due to shutdowns and decreased local tourism caused by COVID-19.

Along with this earnings announcement, Est?e Lauder revealed a two-year plan to respond to changes in consumer patterns after COVID-19. Analyst Oh said, "The main points are store restructuring and expanded investment in digital channels," adding, "Est?e Lauder plans to close about 10-15% of its globally operated freestanding stores, and also plans to rationalize inefficient department store locations." Furthermore, "There will likely be workforce restructuring involving approximately 1,500 to 2,000 employees, mainly related to offline stores," he predicted.

However, mid- to long-term growth is expected to continue due to aggressive channel strategies. Est?e Lauder did not provide guidance for fiscal year 2021 due to increased short-term uncertainty. The guidance for Q1 fiscal year 2021 (July to September 2020) projects sales growth of -12% to -13% year-on-year and earnings per share (EPS) of $0.77 to $0.83.

Researcher Han Yujeong from Daishin Securities said, "Although the short-term outlook is conservative, the online channel's share of sales expanded to 40% as of Q4 2020, driving top-line growth. Additionally, July sales at the Hainan duty-free store tripled compared to the same period last year, and with aggressive strategies in changing channels, competitive advantages are expected to continue."

This content was produced with the assistance of AI translation services.