Yahoo Finance Why Estée Lauder’s Fiscal 3Q16 Skincare Segment’s Revenue Fell
Why Estée Lauder Has Fallen 2 Weeks after Its Fiscal 3Q16 Results
Skincare’s fiscal 3Q16 revenue
Estée Lauder’s (EL) skincare segment’s net revenue fell 2.5% in reported terms and remained unchanged on a constant-currency basis at $1.1 billion in fiscal 3Q16. The fall was due to the unfavorable impact of foreign currency translation.
However, in constant-currency terms, the skincare segment’s net sales were helped by double-digit gains from its online business and from Genaissance de La Mer The Serum Essence, one of the company’s luxury skincare brands.
Operating income
The operating income of EL’s skincare segment fell 6.5% to $0.2 billion in fiscal 3Q16. The fall was primarily due to lower results from the Estée Lauder brand, partially offset by higher results from La Mer.
The skincare segment is a dominant beauty category in China and Hong Kong. However, the challenging macroeconomic trend within the Asia-Pacific region, especially in Hong Kong, has contributed to the category’s slower global growth.
Coty’s (COTY), L’Oréal’s (LRLCY), and Avon’s (AVP) revenues have also been affected by the negative impact of foreign currencies.
In addition, according to Estée Lauder’s CEO Fabrizio Freda, the increased consumer spending shift from skincare to makeup and the difficult comparison to the company’s greater launch activity in fiscal 3Q15 resulted in fiscal 3Q16’s lower sales.
Leverage on GLAMGLOW
The company continues to focus on consumer-preferred products across different regions. Estée Lauder’s skincare innovation is more focused on “instant benefit skincare versus long-term antiaging,” according to Freda. MAC’s and Bobbi Brown’s skincare lines rose by double-digits in fiscal 3Q16.
In addition, EL is focused on investing in fast-growing channels. Estée Lauder launched GLAMGLOW in Korea and is using social media to leverage and draw new consumers from other parts of the globe. Apart from launching E&M (electronic and mobile) commerce sites and opening freestanding stores, the company is selling its GLAMGLOW products on Nordstrom’s (JWN) website.
EL makes up 0.7% of the iShares MSCI USA Quality Factor ETF (QUAL).
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