Estée Lauder’s Strategies to Improve Supply Chain Performance
To improve its supply chain efficiency, Estée Lauder aims to utilize a network of third-party manufacturers on a global basis, including in the Asia Pacific region.
Estée Lauder’s large geographical footprint diversifies its revenue stream, which is one of its chief strengths.
Estée Lauder is trading at higher valuations relative to the S&P 500 Index, with a PE multiple of 29.0x forward earnings.
The abundance of counterfeit goods and accessories is adversely affecting the sales of Estée Lauder’s products. This also hurts EL’s brand image.
Estée Lauder’s sales grew ~7.7% for fiscal 2014. EL aims to boost sales of core product categories such as skincare and makeup through travel retail channels.
International brands such as Estée Lauder (EL), L’Oréal (LRLCY), Procter & Gamble (PG), Shiseido (SSDOY), and Nivea (BDRFF) dominate the cosmetics market in China.
Estée Lauder’s management aims to generate at least 1% of its total sales growth through acquisitions over the next three years.
Estée Lauder has paid dividends ever since it went public in November 1995. EL’s cash dividends per common share fell 27.8% to $0.78 in fiscal 2014.
Estée Lauder believes in a strong research and development function for an innovative product pipeline. The company’s research and development expense for fiscal 2014 came in at $0.2 billion, or 1.8% of net sales.
Estée Lauder’s net cash flow from investing activities for fiscal 2014 came in at $0.51 billion in fiscal 2014, compared to $0.46 billion in fiscal 2013.
Estée Lauder aims to expand its geographical market share in China, the Middle East, Eastern Europe, Brazil, and South Africa by focusing on consumers who purchase in travel retail channels.
Despite currency headwinds, Estée Lauder’s (EL) worldwide gross profit margin increased to 80.3% in fiscal 2014 from 80.1% in fiscal 2013.
Estée Lauder’s Aveda brand manufactures innovative plant-based hair care products. This helps to attract customers and adds to Estée Lauder’s brand value.
Estée Lauder’s fragrance products accounted for 13% or $1.4 billion of the consolidated net sales in fiscal year 2014. The segment’s operating profit came in at $0.1 billion.
Operating income for EL’s makeup business increased 23% in fiscal year 2014. This was due to the recent launch of All About Shadow from Clinique and higher sales of Smashbox products.
In addition to social media initiatives, Clinique’s “Forecast” mobile application provides weather information and skincare tips related to weather conditions.
Estée Lauder aims to partner with key brick-and-mortar retailers to strengthen their prestige beauty shopping e-commerce websites to better meet consumer online shopping preferences.
Estée Lauder’s skincare products alone accounted for 43.5% of the total net sales, or $4.8 billion, in fiscal 2014, contributing 53.5% of the company’s total operating income.
Highly competitive in the beauty and cosmetics market, Estée Lauder’s revenue reached $11 billion in fiscal year 2014. However, the cosmetics company faces stiff competition from L’Oréal, Coty, and Avon (AVP).
Catering to the premium market, Estee Lauder’s heritage brands include Aramis and Designer Fragrances, Clinique, and Origins.
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