Estée Lauder issues cautious forecast as CEO departs while Coty revenue reverses

21 Aug 2024 --- The Estée Lauder Companies (ELC) beat analysts’ expectations with its latest quarterly report but warned of lower future sales while Coty saw progress with its turnaround efforts amid declining quarterly revenue after dropping its Lacoste fragrance license.

ELC saw fourth-quarter adjusted earnings rise US$0.64 per share from revenue of US$3.87 billion. The company blamed lower sales on “ongoing softness” in overall prestige beauty in mainland China and a decline in Asia travel retail from the decrease in the first half of fiscal 2024. 

Looking ahead, ELC is cautious about future sales which could be under pressure in the new fiscal year due to headwinds in China with soft consumer sentiment likely to impact its makeup business. Longtime ELC CEO Fabrizio Freda is also set to retire. The company says it is “well advanced” with plans to replace Freda. 

Earnings by sector

ELC Skin Care net sales decreased 3%, also partially due to a decrease in mainland China. Excluding the declines in mainland China and the company’s global travel retail business, reported organic net sales increased 3%.

Makeup net sales decreased by 1%, driven by the company’s global travel retail business and a benefit in the prior year as a result of changes to MAC’s take-back loyalty program. This was in part offset by growth overall in the markets of EMEA, Latin America and Asia/Pacific. Reported and organic net sales increased by low-single digits in the second half of fiscal 2024, primarily driven by Estée Lauder and Clinique.

Coty achieved lower revenue after divesting its Lacoste license.Fragrance net sales increased 2%, mostly from mid-single-digit growth from the company’s luxury brands, which increased double digits in Asia/Pacific and the Americas, partially offset by a decline from Estée Lauder. Hair Care net sales declined 4%, primarily due to Aveda in North America, reflecting softness in the salon channel and the company’s direct-to-consumer distribution channels.

Coty revenue reversal

 Coty reported a fourth-quarter earnings loss from revenue that edged up to US$1.36 billion but still missed analysts’ expectations. The parent company of Cover Girl said it continued to deliver “balanced reported net revenue growth,” including a jump in both Prestige and Consumer Beauty. However, that was partially offset by a foreign exchange issue and lower revenue after divesting its Lacoste license. 

Prestige net revenues grew 13% on a reported basis and 14% on an LFL basis. Coty reported its net revenue growth in Prestige was fueled by growth in fragrances, cosmetics and skin care. 

The last quarter saw Prestige net revenues increase on a 6% LFL basis, which included a mid-single-digit headwind from elevated comparisons tied to retailer restocking in the prior year. Prestige reported net revenue growth in Q4 was driven by growth in fragrances and cosmetics and included a 4% negative impact from the divestiture of the Lacoste license and a 2% negative impact from FX.

In FY24, Consumer Beauty revenues increased 6% on both a reported basis and LFL basis, with growth in color cosmetics, mass fragrances and mass skin and body care. In the second half of FY24, the segment’s net revenues increased 4% on a reported basis, supported by growth in color cosmetics, mass fragrances and mass skin and body care, and 5% on a LFL basis.

By Sabine Waldeck