uploads///Skincare FQ Overview

How Did Estée Lauder’s Skincare Segment Perform in Fiscal 2Q16?

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Mar. 17 2016, Published 1:13 p.m. ET

Fiscal 2Q16 revenue for the skincare segment

Estée Lauder’s (EL) skincare segment’s net revenue decreased 3.3% in reported terms and increased 2% on a constant currency basis to $1.2 billion in fiscal 2Q16. The decrease was due to the unfavorable impact of foreign currency translation.

In constant currency terms, the skincare segment’s net sales increased primarily due to strong gains from luxury skin care brand La Mer, the Origins brand, and incremental sales from recent acquisitions.

Recent product launches such as New Dimension and Re-Nutriv Ultimate Diamond eye cream also helped revenues. However, this boost was partially offset by lower sales from Clinique due to more launch activities in the prior year.

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Macroeconomic trends

Skincare is a dominant beauty category in China and Hong Kong. However, challenging macroeconomic trends have contributed to the category’s slower global growth. Procter & Gamble’s (PG), L’Oréal’s (LRLCY), and Avon’s (AVP) revenues were also affected by the negative impact of foreign currencies.

The operating income of the skincare segment fell 2.5% to $0.3 billion in fiscal 2Q16. The decrease was primarily due to lower results from the Estée Lauder brand and partially offset by higher results from La Mer.

Regional launches

Estée Lauder is focusing on consumer-preferred products across different regions. For example, the company launched its new Advanced Night Repair PowerFoil Mask in Asia, where masks are extremely popular.

In addition, Estée Lauder’s New Dimension serum was successful in many markets in Europe and Asia, offsetting lower-than-expected results in North America. Incremental sales from the recent acquisition of GLAMGLOW popularized subcategories such as masks. EL makes up 0.9% of the PowerShares S&P 500 High-Quality ETF (SPHQ).[1. As of March 15, 2016]

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