QUOTE AND NEWS
Motley Fool  Apr 14  Comment 
Why Coach is replacing Estée Lauder with Interparfums for its fragrance line.
Benzinga  Apr 13  Comment 
In a report published Monday, Stifel analysts maintained a Buy rating on The Estee Lauder Companies Inc (NYSE: EL), with raising the price target from $92 to $99, saying that MAC Cosmetics may drive $4.4bn in incremental company sales from new...
Forbes  Apr 13  Comment 
This week beauty giants L'Oreal and Estee Lauder received the titles of being among the most popular cosmetics brands in two separate studies. In contrast, Avon Products witnessed brand value erosion in a study by Brand Finance, on account of its...
Forbes  Apr 13  Comment 
But what does it really take to flourish in today’s dynamic and continually evolving global beauty industry? Global consumer products powerhouse Procter & Gamble (NYSE: PG) is contemplating the sale or IPO of some of its beauty brands,...
Market Intelligence Center  Apr 8  Comment 
With bullish technical indicators and a 3 STARS (out of 5) hold ranking from Standard & Poor’s, Estee Lauder Companies Inc. (EL) could be an attractive play for investors according to MarketIntelligenceCenter.com's patented option-trade picking...
TheStreet.com  Apr 2  Comment 
NEW YORK (TheStreet) -- Shares of Estee Lauder Cos.  are up 0.71% to $83.75 in early morning trading Thursday after Credit Suisse increased its price target to $90 from $86, while maintaining its "outperform" rating. Estee Lauder is a...
Market Intelligence Center  Mar 31  Comment 
Estee Lauder Companies Inc. (EL) is an excellent choice for either a diagonal spread or a covered call expiring in Jul. '15 at the $82.50 level according to MarketIntelligenceCenter.com’s patented algorithms.A covered call on Estee Lauder for a...
Market Intelligence Center  Mar 27  Comment 
MarketIntelligenceCenter.com's patented algorithms have selected a trade on Estee Lauder Companies Inc. (EL) that returns 6.95% in 112 days for an annualized return rate of 23%. This diagonal spread pairs a short position in the Jul. '15 $80.00...
Benzinga  Mar 25  Comment 
In a report published Wednesday, Piper Jaffray analysts upgraded shares of The Estée Lauder Companies Inc (NYSE: EL) from Neutral to Overweight, with a price target of $100. In the report Piper Jaffray noted, "We have reconsidered our thesis...
Benzinga  Mar 25  Comment 
The Estée Lauder Companies Inc. (NYSE: EL) shares gained 1.97% to reach a new 52-week high of $85.00. Piper Jaffray upgraded Estee Lauder from Neutral to Overweight and raised the price target from $75.00 to $100.00. Stamps.com Inc. (NASDAQ:...




 

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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