Estée Lauder raises full-year forecast on strength in skincare, China

Estée Lauder Cos Inc raised its annual profit forecast after posting better-than-expected quarterly results on Tuesday, driven by strong growth in China and higher demand for skincare brands such as La Mer, sending its shares up 10 percent.

A double-digit sales growth in the Asia-Pacific, higher sales through online and travel retail channels and increased demand for brands such as M.A.C. and Origins fueled a robust quarter, the cosmetics maker said.

“Despite a volatile and challenging backdrop, we are optimistic about our company’s long-term outlook,” Chief Executive Officer Fabrizio Freda said.

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Sales in the Asia-Pacific region grew 17 percent, crossing $1 billion for the first time, as the company benefited from its efforts to expand its business in international markets, particularly China.

In China, the company has collaborated with local celebrities such as Yang Mi and Fei Fei Sun and has been selling on Alibaba’s online marketplace Tmall, while also using the country’s social media channels to lure the Chinese consumer.

“The (results) reduce concerns that China and travel retail consumption could have potentially decelerated,” J.P. Morgan analyst Andrea Teixeira said.

“The print marks another positive result for the luxury cosmetics industry.”

Sales in the company’s skincare business - its biggest - grew 16 percent in the quarter to $1.73 billion.
Overall, net sales rose 7 percent to $4.01 billion, also topping analysts’ average expectation of $3.92 billion, according to IBES data from Refinitiv.

Net income attributable to the company rose four fold to $573 million in the second quarter ended Dec. 31, 2018, from a year earlier, when the company incurred a tax-related charge.

Excluding items, it expects annual sales to grow between 8 percent and 9 percent, as opposed to the previously issued range of 7 percent to 8 percent.

Shares of the New York city-based company rose nearly 10 percent to $149.50 before the bell on Tuesday.