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Estee Lauder Expands in Africa

Zacks Equity Research

Cosmetics maker Estee Lauder Inc. (EL) is geared to bolster its presence in Africa, as per media reporter Reuters. The NY-based cosmetics retail giant will introduce its high-end brands in the sub-Saharan continent to tap the growing middle class of the region.

Estee Lauder has identified several key markets in the region and is eyeing markets with biggest growth potential. Locations like Lagos, Abuja and Port Harcourt in Nigeria, as well as the capitals of Ghana, Kenya, Tanzania, Mozambique and Angola are of  great importance in Estee Lauder’s list of potential African markets.

Estee Lauder has plans to introduce Clinique brand in Nigeria by 2013 and later in Mozambique. It is set to strengthen its position in the sub-Saharan continent with several launches in the pipeline, reports Reuters.

After gaining huge popularity following its launch in Lagos in 2012, Estee Lauder is set to introduce the MAC makeup brand to newer markets in the region and open additional stores in the Lagos region as well. With its broad range of fragrances, MAC will set its footprint in Cote d'Ivoire and open stores in Botswana and Zambia.      

However,Estee Lauder has been witnessing soft sales in the U.S. and European markets due to the ongoing macroeconomic challenges. In its last earnings release, sales in the U.S. and European region inched up only 1% and 3%, respectively.

Moreover, the company is losing its market share to less pricy brands offered by the likes of other cosmetics producers like Revlon Inc. (REV) and Avon Products Inc. (AVP) and consumer products giant Procter & Gamble Company (PG). 

We believe that Estee Lauder, which is scheduled to release its fourth-quarter and fiscal 2013 earnings on Aug 15, will be able to gain market share with the introduction of these high-end brands in the emerging markets. The company holds a Zacks Ran #3 (Hold).

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