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Solid Online Business Aids The Estee Lauder Companies (EL)
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The Estee Lauder Companies Inc. (EL - Free Report) has a strong online business, which is proving to be a major growth engine. The beauty company’s solid presence across emerging markets is impressive. That said, rising inflationary pressures and supply chain disruptions are hurdles.
Let’s discuss this in details.
Online Business: Key Driver
The Zacks Rank #3 (Hold) company is benefiting from a strong online business. The company has been implementing new technology and digital experiences, including online booking for each store appointment, omni-channel loyalty programs and high-touch mobile services. These initiatives and the company’s digital-first mindset have been boosting online sales. The company has been expanding its omnichannel capabilities to provide flexible and convenient shopping options for consumers.
In its last earnings call, management highlighted that it expects online business to remain strong. Online organic sales increased in single digits during the second quarter of fiscal 2023, led by several brands like La Mer. Meanwhile, its retail sales growth in the online channel significantly outperformed the industry with solid prestige beauty share gains.
Image Source: Zacks Investment Research
Solid Emerging Market Presence
The Estee Lauder Companies company has a strong presence in emerging markets. The company derives significant revenues from emerging markets like Thailand, India, Russia and Brazil, encouraging it to make distributional, digital and marketing investments in these countries. The Estee Lauder Companies is investing in catering to consumer demand in China and Asia. To this end, it bought Korea-based skincare brand Dr. Jart in 2019.
In its second-quarter fiscal 2023 earnings call, management highlighted that several developed and emerging markets globally outpaced its expectations to counter COVID-related issues across China. The company posted strong double-digit organic sales growth across several emerging markets like India, Brazil, Turkey and Malaysia.
The company is on track to expand its consumer reach in productive distribution across high-growth channels while strategically expanding brands into new countries. In this regard, management strengthened its manufacturing, distribution and innovation capabilities. The company opened the China innovation labs, its first plant in the Asia Pacific and a new DC in China. The company also announced its partnership with brands like Tom Ford and Balmain Beauty.
What’s Hurting The Estee Lauder Companies?
COVID-19 continued affecting The Estee Lauder Companies’ operating environment throughout the second quarter of fiscal 2023. Results were affected by increased inflation, concerns surrounding the recession and unfavorable currency rates.
Management anticipates the rest of fiscal 2023 to be dynamic, including uncertain consumer recovery in travel retail, evolving COVID-19 situation, inflation, supply chain-related issues and slowdown risk across some markets worldwide. For fiscal 2023, management projects net sales to decrease in the band of 5-7% year over year. Adjusted earnings per share (EPS) are expected in the band of $4.87-$5.02, suggesting a 31-33% decline from the year-ago period’s levels. The bottom line is expected to decline 27-29% at constant currency.
That being said, the upsides mentioned above are likely to offer some respite.
The company’s stock has gained 6.7% in the past three months compared with the industry’s 10.6% growth.
Inter Parfums currently sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 15%. IPAR has a trailing four-quarter earnings surprise of 36.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings per share (EPS) suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.
e.l.f. Beauty, operating as a cosmetic and skin care products provider, currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of almost 105%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 39.1% and 69.1%, respectively, from the prior-year reported numbers.
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 34.8%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 119.6% from the year-ago reported number.
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Solid Online Business Aids The Estee Lauder Companies (EL)
The Estee Lauder Companies Inc. (EL - Free Report) has a strong online business, which is proving to be a major growth engine. The beauty company’s solid presence across emerging markets is impressive. That said, rising inflationary pressures and supply chain disruptions are hurdles.
Let’s discuss this in details.
Online Business: Key Driver
The Zacks Rank #3 (Hold) company is benefiting from a strong online business. The company has been implementing new technology and digital experiences, including online booking for each store appointment, omni-channel loyalty programs and high-touch mobile services. These initiatives and the company’s digital-first mindset have been boosting online sales. The company has been expanding its omnichannel capabilities to provide flexible and convenient shopping options for consumers.
In its last earnings call, management highlighted that it expects online business to remain strong. Online organic sales increased in single digits during the second quarter of fiscal 2023, led by several brands like La Mer. Meanwhile, its retail sales growth in the online channel significantly outperformed the industry with solid prestige beauty share gains.
Image Source: Zacks Investment Research
Solid Emerging Market Presence
The Estee Lauder Companies company has a strong presence in emerging markets. The company derives significant revenues from emerging markets like Thailand, India, Russia and Brazil, encouraging it to make distributional, digital and marketing investments in these countries. The Estee Lauder Companies is investing in catering to consumer demand in China and Asia. To this end, it bought Korea-based skincare brand Dr. Jart in 2019.
In its second-quarter fiscal 2023 earnings call, management highlighted that several developed and emerging markets globally outpaced its expectations to counter COVID-related issues across China. The company posted strong double-digit organic sales growth across several emerging markets like India, Brazil, Turkey and Malaysia.
The company is on track to expand its consumer reach in productive distribution across high-growth channels while strategically expanding brands into new countries. In this regard, management strengthened its manufacturing, distribution and innovation capabilities. The company opened the China innovation labs, its first plant in the Asia Pacific and a new DC in China. The company also announced its partnership with brands like Tom Ford and Balmain Beauty.
What’s Hurting The Estee Lauder Companies?
COVID-19 continued affecting The Estee Lauder Companies’ operating environment throughout the second quarter of fiscal 2023. Results were affected by increased inflation, concerns surrounding the recession and unfavorable currency rates.
Management anticipates the rest of fiscal 2023 to be dynamic, including uncertain consumer recovery in travel retail, evolving COVID-19 situation, inflation, supply chain-related issues and slowdown risk across some markets worldwide. For fiscal 2023, management projects net sales to decrease in the band of 5-7% year over year. Adjusted earnings per share (EPS) are expected in the band of $4.87-$5.02, suggesting a 31-33% decline from the year-ago period’s levels. The bottom line is expected to decline 27-29% at constant currency.
That being said, the upsides mentioned above are likely to offer some respite.
The company’s stock has gained 6.7% in the past three months compared with the industry’s 10.6% growth.
Solid Staple Picks
Some top-ranked consumer staple stocks are Inter Parfums (IPAR - Free Report) , e.l.f. Beauty (ELF - Free Report) and Post Holdings (POST - Free Report) .
Inter Parfums currently sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 15%. IPAR has a trailing four-quarter earnings surprise of 36.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings per share (EPS) suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.
e.l.f. Beauty, operating as a cosmetic and skin care products provider, currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of almost 105%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 39.1% and 69.1%, respectively, from the prior-year reported numbers.
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 34.8%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 119.6% from the year-ago reported number.