The Estee Lauder Companies Inc. EL looks well-positioned on the back of its robust growth-oriented strategies. In this context, the company’s solid e-commerce business and the presence in emerging markets are yielding. Also, Estee Lauder’s cost-saving efforts amid the coronavirus outbreak are aiding it.
Solid Emerging Market Presence
Estee Lauder has a strong presence in emerging markets that insulates it from the macroeconomic headwinds in the matured markets. The company derives significant revenues from emerging markets like Thailand, India, Russia and Brazil, which keep it encouraged about making distributional, digital and marketing investments in the countries. Markedly, China is a major area of focus for Estee Lauder. Recently, the company piloted emerging business model for online and offline stores in the Mainland China region, which is yielding.
E-commerce Business: A Key Driver
Estee Lauder, which was the first global prestige beauty company that went online with the Clinique brand in the United States in 1996, now boasts a solid digital business spread across nearly 50 markets. 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. The initiatives and the company’s digital-first mindset have been aiding its online sales.
Moreover, Estee Lauder’s brand teams have been fully committed to enhancing consumer experiences online since the coronavirus outbreak-induced lockdowns have been imposed. In this regard, they have been focusing on proper product placement and showing cases tools, including virtual try-on, to ease decision making. Markedly, the company’s online sales rose sharply since the end of March and continued to climb through April. We note that products like La Mer, Crème de la Mer Treatment Lotion and Estee Lauder's Advanced Night Repair among others have been witnessing solid demand online amid the pandemic. Apart from these, management is on track with expanding brand presence across various third-party sites, rolling out new digital payment technologies and enhancing its loyalty programs as it continues to widen market reach.
Efforts to Fight Coronavirus Woes
Estee Lauder shut the majority of its retail storesin the wake of the coronavirus outbreak. This primarily affected the company’s third-quarter fiscal 2020 performance, wherein both top and bottom lines deteriorated year over year.
Nevertheless, Estee Lauder, which shares space with Coty Inc. COTY, undertook various expense-control measures that included suspending travel, meetings, consulting, non-essential recruits and cutting certain employee costs in the fiscal third quarter. The measures have resulted in nearly $250 million of savings during the third quarter. Moreover, Estee Lauder expects the cost-control measures to deliver increased benefits in the fourth quarter.
On Apr 15, the company resorted to other measures like salary cuts for senior executives and other management employees along with furloughing workers, among others. These along with other cost-control measures implemented in the third quarter are expected to reduce operating expenses by $500-$600 million in the fourth quarter.
We believe that Estee Lauder’scost-saving endeavors together with the aforementioned upsides are likely to help this Zacks Rank #2 (Buy) company remain in investors’ good books. Estee Lauder’s shares have gained 20.2% in the past three months, almost in-line with the industry.
Other Cosmetic Picks
Helen of Troy HELE, which currently sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 4.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nu Skin Enterprises NUS, which currently sports a Zacks Rank #1,has a long-term earnings growth rate of 1.7%.
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