QUOTE AND NEWS
Forbes  Jul 9  Comment 
Goya, Orkin, L.L. Bean, Budweiser, Estee Lauder Are Among The Dozens Of Brands That Helped Make America’s Billion Dollar Clans So Wealthy
TheStreet.com  Jun 26  Comment 
NEW YORK (TheStreet) -- Estee Lauder shares are down -0.7% to $74.50 after B. Riley downgraded the apparel company to "neutral" from "buy" and cut the company's price target down to $81 from $88. Must Read: Warren Buffett's 25 Favorite...
Forbes  Jun 10  Comment 
In the last five calendar years, Estèe Lauder had expanded its market share from 11.5% to 13.5%. What is interesting is its ability to gain share despite weak consumer discretionary spending in most developed markets.
Benzinga  May 15  Comment 
In a report published Thursday, Morgan Stanley analyst Dara Mohsenian reiterated an Overweight rating and $87.00 price target on Estee Lauder Companies (NYSE: EL). In the report, Morgan Stanley noted, “We rate EL OW, as believe positives are...
Market Intelligence Center  May 8  Comment 
The option-trade picking algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center have selected a covered-call trade on Estee Lauder Companies Inc. (EL) that includes 3.80% downside protection. Sell one contract of the Jul....
Market Intelligence Center  May 7  Comment 
MarketIntelligenceCenter.com’s patented option-trade picking algorithm found two trade ideas on Estee Lauder Companies Inc. (EL) today after it traded between between $73.05 and $73.75 before closing at $73.55 on Tuesday. For more conservative...
Benzinga  May 5  Comment 
In a report published Monday, Morgan Stanley analyst Dara Mohsenian reiterated an Overweight rating on Estee Lauder Companies (NYSE: EL), and raised the price target from $84.00 to $87.00. In the report, Morgan Stanley noted, “EL adj. Q3 EPS...
TheStreet.com  May 5  Comment 
NEW YORK (TheStreet) -- Estee Lauder  has been downgraded to "market perform" from "outperform," BMO Capital said Monday. The firm said the company is facing difficult comps. A $76 price target was set. Must Read: Warren Buffett's 10 Favorite...
Benzinga  May 5  Comment 
Analysts at Oppenheimer downgraded Sina (NASDAQ: SINA) from “outperform” to “underperform” and removed the target price of $90. Sina's shares closed at $48.15 on Friday. Analysts at JP Morgan downgraded WESCO International (NYSE: WCC)...
USAToday.com  May 2  Comment 
Global demand and growth in emerging markets lifts beauty product sales.




 

The Estee Lauder Companies (NYSE: EL) manufactures and sells skin care, makeup, fragrance, and hair care products in 140 countries. EL distributes its products through a variety of different channels, including large department store retailers, smaller boutique retailers, beauty salons and spas, and direct-selling through company-owned stores, online websites, and TV informercials. [1] For fiscal 2010, EL reported net sales of $7.80 billion and net income of $478.3 million.

EL's sales figures were affected by a poor global retail environment, which resulted in fewer sales of its heritage products as well as adverse currency exchange rates. EL posted decreases in sales throughout all of its product segments seeing its net income drop over 50% in the 2009. [2] Notably, FY2009 saw a strong increase in its Asian markets, with sales increasing 10% from 2008.[2]

However, as EL continues to acquire more brands, especially in its fragrance division, its products face the risk of cannibalization by competing with each other for clients from the same market segment. Competition in the mid to low-end markets also continues to be a challenge for EL.


Business Overview

The Estee Lauder Companies is a manufacturer and retailer of skin care, makeup, fragrance, and hair care products worldwide. EL distributes its products through various channels appropriate for the market position and audience of its different products. These channels include department stores such as Macy's, beauty retailers such as Sephora, perfumeries and pharmacies, beauty salons and spas, and direct-selling through company stores, online websites and TV infomercials. [1]

EL owns more than 20 skin care and makeup brands as well as a variety of fragrance brands. Its core cosmetics brands include Estee Lauder, Clinique, Prescriptives, Origins, MAC, Bobbi Brown, Darphin, La Mer, and Tom Ford. EL also owns global licenses to market fragrances under brand names such as Tommy Hilfiger, Donna Karan Cosmetics, Sean John Cosmetics, and Aramis. [1]

Business Segments

Geographic Presence

EL markets its products in 140 countries around the world. A breakdown of geographic sales is below:

Fiscal 2010 Performance (ended June 30, 2010)

  • Estee Lauder reported net sales of $7.80 billion, a 6% increase compared with $7.32 billion in 2009.
  • EL reported net income of $478.3 million for the year, compared with $218.4 million last year.[4]

Trends and Forces

Diverse Brand Names Target Different Market Niches

EL's primary strength lies in the variety of brands that it has acquired in the last two decades, since each brand has its own market niche, brand image, as well as regional appeal. Skin care brands Clinique and Origins appeal to customers that want products with organic, natural, and allergen-free ingredients. Makeup lines M.A.C. and Bobbi Brown target fashion-conscious customers who prefer professional-grade makeup products and tools. In the high-end market, La Mer and Darphin have substantial brand recognition as prestige skin care and makeup brands, while the newly acquired brand BeautyBank, with makeup brands and products such as AmericanBeauty and Flirt, targets more low-end consumers. The popularity of its professional-grade makeup brands and high-end products have helped to offset the hit from the global economic downturn. [1]

Spending on Discretionary Items Projected to Recover

As a member of the discretionary item industry, EL saw sales and income decrease during the poor economic climate as consumer confidence and disposable income both decreased dramatically. This increase is in line with many of the discretionary item companies that have seen sales drops during the 2009 recession. A better economic climate and an increase in disposable income will mean that EL will see its prices increase.

In 2009, EL launched a four-year strategical program to cut its costs and improve operating margins. The program includes re-size and reorganize the organization and exit unprofitable operations.

Large Presence in Global Market Exposes EL to Currency Fluctuation Risks

Since 53% of EL's sales revenues come from markets outside of the United States, exchange rates play a major role in EL's sales performance. As the firm doesn't engage in any significant hedging activity against exchange rate risk, the final amount of its sales and profits are greatly exposed to fluctuations in the value of the U.S. dollar . weakening of the dollar against foreign currencies would allow AVP products to become more competitively priced in global markets, thus positively affecting sales revenue from foreign markets; however, a weak dollar would also mean higher costs for products manufactured overseas.

Competition

EL's brands face substantial competition in the cosmetics industry. Although its professional makeup brands such as M.A.C and Bobbi Brown face little competition due to the specialized clientele that it targets, its all-natural brands face competition from Bare Essentials, and its most popular mid-end brands such as Estee Lauder face competition from the myriad of products from Revlon, Avon, and Elizabeth Arden. In addition, the cosmetics industry faces challenges from small, private companies with specialized offerings that can also fight for market share. [5]

Major Competitors

References

  1. 1.0 1.1 1.2 1.3 EL 2008 SEC Filing 10-K
  2. 2.0 2.1 Estee Lauder 2009 Annual Report
  3. http://media.corporate-ir.net/media_files/irol/10/109458/2010AR/ELC-AnnualReport2010-web/index.html
  4. http://media.corporate-ir.net/media_files/irol/10/109458/2010AR/ELC-AnnualReport2010-web/index.html
  5. Estee Lauder's Competitive Landscape
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