The Estee Lauder Companies Inc. EL has a strong foothold in the beauty space, courtesy of its robust growth endeavors such as focus on buyouts, travel retail network, effective launches and robust online sales. These factors also helped Estee Lauder to deliver sturdy second-quarter fiscal 2019 results, wherein both the top and bottom line improved year over year and surpassed the Zacks Consensus Estimate. Additionally, management raised its sales and earnings view for fiscal 2019. Let’s take a look at these factors
Acquisitions: A Key Catalyst
Estee Lauder has made several strategic acquisitions to strengthen its portfolio. Evidently, the acquisitions of BECCA and Too Faced (during first-quarter fiscal 2017) have bolstered its fastest growing prestige portfolio. Notably, sales of BECCA increased significantly in the fiscal second quarter owing to a robust holiday season.
Furthermore, the investment in DECIEM — a fast-growing multi-brand company — is likely to aid beauty sales. Apart from these, the buyout of sophisticated Paris-based brand, By Kilian, and the takeover of key prestige skin care brands — RODIN olio lusso and GLAMGLOW — have proved conducive to the company. Such acquisitions aided the company to enhance its portfolio apart from helping it attain the respective loyal customer base.
Robust Online Business
Estee Lauder, which shares space with Coty COTY, Helen of Troy Limited HELE and Nu Skin Enterprises NUS, has a solid online business. The company expects this business to be a major growth driver for the company in the upcoming years. Additionally, Estee Lauder is 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 driving online sales, thereby providing a boost to the top line.
During the second quarter of fiscal 2019, Estee Lauder’s e-commerce sales rose in double digits across all channels — brand.com, retail.com and third-party websites. Estee Lauder also focuses on widening its global online presence by adding new sites and expanding retailer distributions.
Travel Retail Business on Track
Estee Lauder has been intensely focusing on enhancing its travel retail business, which is a major sales driver for the company. Travel retail sales remained sturdy in the second quarter of fiscal 2019, with 13 brands depicting solid growth. Markedly, Estee Lauder’s travel retail sales have been gaining from rise in traffic, effective launches, impressive marketing strategies and unique product range. The company also expects the travel retail business to benefit from rising passenger traffic, favorable fundamentals and higher conversions. Well, the company is committed toward undertaking more efforts to enhance conversions through strategic initiatives.
We note that a tough macroeconomic scenario due to various store closures, tariff impacts and currency woes are weighing on Estee Lauder’s performance. Nevertheless, the company is likely to overcome such hurdles on the back of the aforementioned well-chalked initiatives. Moreover, management expects continued growth opportunities in the global prestige beauty industry.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Nu Skin Enterprises, Inc. (NUS) : Free Stock Analysis Report
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
Helen of Troy Limited (HELE) : Free Stock Analysis Report
Coty Inc. (COTY) : Free Stock Analysis Report
To read this article on Zacks.com click here.