Tuesday, November 03, 2015

Consumers Are Focused on Cosmetics, and Estée Lauder is Responding Accordingly

Consumers Are Focused on Cosmetics, and Estée Lauder is Responding Accordingly:

Pencils from MAC Cosmetics. Photo: Fulvio De Filippi/Getty Images
Pencils from MAC Cosmetics. Photo: Fulvio De Filippi/Getty Images
Just last week, the research firm NPD Group published a short report on the rise of contouring and strobing within the cosmetics world, a trend that's coincided with a period of weak skin care sales. While that doesn't mean women are ditching their facial serums in favor of highlighting their way to a glowing face, the two don't seem to be unrelated. "The outstanding sales increase and shifts in the face makeup category indicate that many consumers are currently prioritizing makeup as the means to instant results," wrote NPD beauty analyst Karen Grant.

Estée Lauder's latest sales results back up that assessment. During the first quarter of the financial year, which ran through Sept. 30, the company's skin care sales grew just 2 percent to $1.1 billion. Makeup, however, broke past that mark to $1.16 billion in sales — a 14 percent increase relative to where the category was last year. Across all its brands, which include MAC and Clinique, Estée Lauder's sales were up 8 percent to $2.8 billion.

That cosmetics would save Estée Lauder's butt this quarter owes in part to a flexible model of in-house investments. When consumers are leaning toward a particular category, like makeup, the company tries to accelerate that business; when they're slowing their roll on another, like skin care, the company won't push that area, so as to avoid burning through cash that's not going to have a good return. In a phone interview Monday morning, Estée Lauder CEO Fabrizio Freda gave me the following as an example: Having clocked an influx of Chinese tourists to Japan, the team reallocated Estée Lauder brand products that are strong in China to Japan, hired more Chinese-speaking sales consultants and trained its makeup artists in techniques that would be of interest to Chinese shoppers. All of that happened in the span of about a month. Move quick, and all that.

With consumers' interest in makeup at a relatively high point, it's also helpful that Estée Lauder owns the powerhouse that is MAC Cosmetics, along with brands like Smashbox, Bobbi Brown and Clinique. Responding to a question on Monday's earnings call about the company's volatility, Freda stressed the diversity of Estée Lauder's portfolio. With nearly 30 global brands spanning fragrance, hair, makeup and skin care, no one macro trend is going to have a major impact on its business, he said.

As for that recent investment Estée Lauder did make in skin care — that is, taking a stake in Have & Be Co., the Korean parent company of Dr. Jart+, last week — Freda said that the deal was an opportunity to support the brand's international expansion, since Dr. Jart+ is only available in Korea, China and the US at the moment. Keep an eye out for that.

Posted by Nelio Inacio at 8:15 AM

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