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The Estee Lauder Companies Inc Class A EL

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Another Round of Store Closures Is a Near-Term Setback for Estee Lauder, but Long-Term Trends Intact

Analyst Note

| Rebecca Scheuneman, CFA |

Estee Lauder’s fiscal 2021 organic constant-currency sales grew 9% to $16.2 billion, missing our $16.5 billion estimate, as an increasing number of COVID-19 cases resulted in another round of store closures across Europe, Latin America, and Asia (excluding China). Even so, fiscal 2021 sales are 6% above fiscal 2019 revenue (adjusted for acquisitions), supported by Estee’s ability to pivot to e-commerce, which increased to 28% of fiscal 2021 sales, compared with 15% in 2019. The travel retail channel has remained surprisingly resilient, which increased to 29% of fiscal 2021 sales, versus 23% in 2019. While international travel is largely curtailed, domestic trips have been strong, particularly in China’s Hainan province. Other factors that helped the firm return to prepandemic sales levels despite continued store closures are Estee’s strong brands (which underpins its wide moat rating) and the firm’s expertise in developing compelling new products, with innovations representing 30% of fiscal 2021 sales, well above the 15% targeted by many consumer products companies. Skin care is well above prepandemic levels, but makeup continues to lag, as mask mandates curb demand. But the firm has promising innovations and marketing programs lined up that it will rollout as mandates relax.

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Company Profile

Business Description

Estee Lauder is the world leader in the global prestige beauty market, participating across skincare (52% of 2020 sales), makeup (33%), fragrance (11%), and haircare (4%) categories, with popular brands such as Estee Lauder, Clinique, MAC, La Mer, Jo Malone, Aveda, Bobbi Brown, Too Faced, and Origins. The firm operates in 150 countries, with 26% of revenue stemming from the Americas, 44% from Europe, the Middle East and Africa, and 30% from Asia-Pacific. The company sells its products through department stores, travel retail, multibrand specialty beauty stores, brand-dedicated freestanding stores, e-commerce, salons/spas, and perfumeries.

Contact
767 Fifth Avenue
New York, NY, 10153
T +1 212 572-4200
Sector Consumer Defensive
Industry Household & Personal Products
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jun 30, 2022
Stock Type Classic Growth
Employees 62,000

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