Estee Lauder 2Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Having now completed 4 successful years of our long-term strategy, let me give you a sense of our progress. Sales has climbed 40%, and our operating margin more than doubled. We completed a 4-year restructuring program, saving $781 million, which was more than 50% greater than the original forecast. Some of that savings, along with better managing the growth in expenses, freed up substantial resources to invest in advertising and marketing. Since 2009, we have increased advertising, merchandising and sampling by almost $900 million, which went to developing creative print, TV, digital advertising and exciting in-store displays. This model has created greater awareness for our brands and helped lift sales significantly.”

“To fuel the growth, we will exploit our best opportunity for our brands. They are: to win in large markets and in core department store channel, further penetrate smaller cities in emerging markets, create exciting innovations, be locally relevant, re-energize the fragrance business, advance our retailing concept and gain in high-growth channels. To expand our leadership in our heritage markets, we plan to look for granular opportunities to target multiethnic consumers more effectively because they are expected to drive the majority of prestige beauty growth through 2020. In the U.S. and the U.K., we will continue to work with our important department store customers to refine our assortment to reflect regional differences in trend, consumer ethnicities and distribution.”

“Long term, we see good potential to build up makeup, which is only used by 16% of Chinese women regularly today, and also fragrance, which 47% of Chinese women use only occasionally.”

“Having established a firm foundation, we are in an even better position today to focus on our top line growth, with the added advantage of having greater advertising firepower to ignite our brands and promote their latest innovations.”

“distribution in Brazil remains challenging. Department stores are nonexistent, perfumeries are fragmented and losing share, and the new prestige distribution is still emerging. Going forward, our distribution strategy in Brazil will focus on freestanding stores, specialty-multi and our e-commerce business.”

“In terms of our advertising and promotional spending, we are very deliberate and strategic about the resource or location. We have a very thorough internal process to measure the return of these investments, and they vary a lot depending on, for example, which area of the world we are launching. If we do a big launch in China, this is normally more advertising intense than the Middle East, as an example. Or which brands. If we have a launch in M-A-C, it’s obviously less advertising intense than Estée Lauder.”

“we are pretty happy of our trends in China and pretty satisfied for the fiscal year that we are closing, meaning fiscal year ’13. We grew 20-plus percent in China, again, at retail, and our same-door grew 5% at retail. So China is doing pretty well.”