The Estée Lauder Companies Inc. (EL, Financial) is a global cosmetics company based in the United States that manufactures and markets skincare, makeup, fragrance and hair care products. The company owns a diverse portfolio of brands, including Estée Lauder, Clinique, Origins, M.A.C, Bobbi Brown, La Mer, Jo Malone London, Aveda and Too Faced. It sells products in 150 countries through both online and department stores.
The pure-play prestige beauty company announced on Nov. 2 that its quarterly dividend will be increased by 13% to 60 cents per share. The dividend is payable on Dec. 15 to shareholders of record at the close of business on Nov. 30.
The beauty industry has a long runway for growth
The beauty industry has long been considered an industry for all seasons because of its resilience to economic downturns due to the "lipstick effect," a theory that people will continue to buy small luxury items even during recessions. Furthermore, the rise of social media, particularly Instagram and TikTok, has accelerated the growth of the beauty market. Beauty influencers on these platforms are highly sponsored and considered to be more approachable than other types of influencers, which has led to a new generation of social media users who spend more money on beauty items to participate in influencer marketing. In addition, makeup, skincare, haircare and styling tutorials, cosmetics hauls as well as product reviews are among the most popular content categories on YouTube. This popularity of beauty-related content provides a glimpse of the massive market opportunity available for leading companies in this multibillion-dollar industry.
According to Statista, skincare was the most popular category in 2020, accounting for 42% of the global market, followed by hair care products at 22% and makeup at 16% of the market share. The skincare sector alone is expected to generate nearly $177 billion in revenue in 2025.
The rise of e-commerce, which has provided new options for cosmetics manufacturers, is another driver helping the expansionary efforts of Estee Lauder and the beauty industry. Consumers can now buy high-end cosmetics from the comfort of their homes thanks to the emergence of online shopping options. Although the growth of social media has increased competition, it is unlikely to affect Estee Lauder because the company has a long history in the global prestige beauty industry, and has constantly acquired small yet popular brands to gain market dominance.
The reopening of the economy, the continued easing of mobility restrictions and the expectations for relaxed mask mandates create a promising picture of what the future holds for the beauty industry over the next several quarters.
Earnings recap
Estee Lauder reported fiscal first-quarter financial results on Nov. 2, handily beating analyst estimates for both revenue and earnings. The company reported revenue of $4.39 billion, up 23% from the prior-year quarter. Estée Lauder, La Mer and Jo Malone London were among the brands that reported the strongest revenue growth for the period.
The company guided for noteworthy improvements in revenue and earnings for the next quarter as well, suggesting there is strong momentum behind the demand for beauty products currently, possibly as a result of relaxing health guidelines globally.
By integrating with Instagram, WeChat, Snapchat and other social media platforms, the leading prestige beauty company was able to take advantage of the latest social commerce trends as well. The Night Done Right hashtag challenge Estee Lauder started on TikTok generated nearly 12 billion views, which is a testament to the important role played by social media to attract new customers to the beauty products market. The company is moving in the right direction by embracing the latest trends on social media platforms and catering to the increased demand coming in for niche products.
Estee Lauder also partnered with 11 creators to teach younger audiences about the need for nighttime skincare by showcasingAdvanced Night Repair, the brand’s best-selling product. During the quarter, the company also invested in an innovation center in Shanghai and a manufacturing facility near Tokyo to strategically position itself better to cater to the growing demand for beauty products among the youth in this region.
Takeaway
Thanks to its collection of luxury products, Estee Lauder has been able to successfully compete and has delivered strong numbers for many years. As the economy reopens and normalcy prevails, the high-end beauty market is likely to move forward at a stellar pace, and Estee Lauder seems well-positioned to convert this favorable macroeconomic outlook into higher revenue and earnings over the next several quarters.
