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How Did Beauty Companies’ Revenues Shape Up in 4Q15?


Nov. 20 2020, Updated 11:54 a.m. ET

4Q15 results

Beauty companies’ results for 4Q15, which ended December 31, 2015, conveyed mixed signals to investors. Although Procter & Gamble (PG) and Avon (AVP) started the earnings season on a disappointing note with lower sales, Estée Lauder (EL) and Coty (COTY) came in ahead of consensus Wall Street estimates.

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Factors that impacted revenue

Procter & Gamble’s revenue declined by 8.5% to $16.9 billion in 4Q15. Reported revenue was negatively impacted by foreign exchange, Venezuelan deconsolidation, and minor brand divestitures.

Avon’s (AVP) 4Q15 revenue also declined by 31.3% to $1.6 billion from $2.3 billion in 4Q14. This was due to the Brazilian IPI (industrialized products tax), VAT (value-added tax) credit, and the adverse effect of foreign exchange headwinds.

For Coty, the revenue trend remained muted, with a 1% drop in 4Q15. Coty’s (COTY) revenue declined by 3.9% to $1.2 billion from $1.3 billion in 4Q14. However, on a constant currency basis, its net revenue increased by 3% in 4Q15 and came in ahead of the consensus Wall Street estimates on revenue after missing it in the previous quarter. Analysts had projected revenue of ~$1.2 billion.

However, for Estée Lauder, net revenue increased by 2.6% to $3.1 billion from $3.0 billion in 4Q15. The increase was primarily due to strategic resource allocation and constant currency gains across the board in all regions, especially in the makeup and fragrance categories.

Expectations for 1Q16

In 1Q16, Estée Lauder expects sales to rise by 6%–7% on a constant currency basis, including 70 basis points from acquisitions. In addition to acquisitions, Estée Lauder, Shiseido (SSDOY), and L’Oréal (LRLCY) continue to expand their business through travel retail (XRT) to boost revenue.

Coty and Procter & Gamble expect the foreign exchange headwinds to continue in 1Q16. The IPI tax could continue to be a challenge for Avon, which expects weaker results in that quarter due to significant foreign currency deterioration. Together, COTY and EL make up 0.2% of the iShares Russell 1000 Growth ETF (IWF).[1. As of March 21, 2016]


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