Estee Lauder Hits 52-Week High: What's Driving the Stock?
Shares of The Estee Lauder Companies Inc. EL touched a 52-week high of $212.13, before closing the session a tad lower at $211.62 on Jan 10. In the past three months, shares of this New York-based company have increased approximately 10%, outperforming the industry’s growth of 8%.
Notably, the company is gaining from robust online sales, a solid travel retail network and an impressive emerging market presence. These factors have been aiding its top and bottom lines amid several macroeconomic headwinds.
Let’s take a closer look at the aspects driving this Zacks Rank #2 (Buy) stock.
Factors Narrating Estee Lauder’s Growth Story
Estee Lauder has a strong online business, which is expected to continue being a major growth driver. In the first quarter of fiscal 2020, online business witnessed double-digit growth across all distribution channels. Moreover, the company is continuously implementing new technology and digital experiences — online booking for each store appointment, omni-channel loyalty programs and high touch mobile services — to boost online sales. Further, it has expanded brand presence across various third-party sites to widen market reach.
Also, the company’s travel retail sales have been benefiting, courtesy of rise in traffic, wide assortments, effective launches and impressive marketing strategies. Notably, the company continued to see sturdy travel retail sales in the first quarter with broad-based growth in most brands, regions and categories. In order to enhance travel retail sales, the company is undertaking endeavors like better customer insights, enhanced merchandising and improved digital marketing.
Recently, the company also concluded the acquisition of two-thirds shares of Have & Be Co. — the Seoul-based skin care company — which owns brands like Dr. Jart+ and Do The Right Thing. Dr. Jart+ has become one of the most popular Korean skin care brands globally, especially among millennials in Asia and the United States. This fast-growing brand is expected to help Estee Lauder strengthen its skin care business and expand operations in Asia/Pacific, North America, the U.K. as well as the travel retail network.
Apart from these, the company derives significant revenues from emerging markets like Mexico, Southeast Asia, Russia and Brazil, which keeps it encouraged about making distributional, digital and marketing investments in these countries. In the first quarter of fiscal 2020, it witnessed growth in most emerging markets. This was backed by customer-oriented products and efficient social media operations.
Markedly, China remains a major area of focus for Estee Lauder. In fact, in first-quarter fiscal 2020, the region witnessed double-digit gains across most brands. Sales channels, especially online, grew significantly. Management, as part of its long-term emerging market strategy, has been making constant investments in China for the past 20 years and plans to continue growing market share in the region. Additionally, the company is striving to expand in other emerging regions as well.
We believe that such efforts will continue driving the company’s performance and help it remain a favorite among investors.
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