Estee Lauder 2Q14 Earnings Call Notes

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. Full transcripts can be found at Seeking Alpha

Strong sales in China

“in China, our sales climbed double digits, and we remained the largest prestige beauty company”

UK business was exceptionally strong

“In our established markets, our UK business was exceptionally strong, led by M-A-C. and Jo Malone. We gained share by seeking opportunities in smaller cities and underserved areas in catering to multicultural consumers”

Accomplished some big things in 5 years

“Our fiscal 2014 performance build upon the dramatic progress we’ve made in the past five years. Over that period, our sales grew by $3.5 billion, excluding the accelerated orders in fiscal year 2014. This was a compound annual growth rate of 8.1% and twice as fast as global prestige beauty on average.

We oriented the company distribution to high-growth channels. As a result, our online sales have tripled, our travel retail business more than doubled and we have added nearly 220 freestanding store, bringing our account to almost 950 directly owned store today across the globe. We eliminated more than $800 million of costs which enabled us to reinvest in business driving activities including substantially increasing advertising. We increased our operating margin by 910 basis points faster than we expected allowing us to raise our long-term operating margin targets.

We posted double-digit EPS growth every year. We increased our dividend rates sharply and all told, our stockholders saw a total return on investment of 383%. As I noted, this five years period is a solid foundation for our future growth and underscores the confidence in our strategy, that we are updating our long-term operating margin goal to 17.5% in fiscal year 2017 with at least a 50-basis-point improvement on average each year.”

Measuring the digital audience

“M-A-C also expanded its digital audience through successful social media channels. It became the largest beauty brand on Instagram, and increased its Facebook fans by 25% in fiscal 2014.”

“Bobbi is also rapidly and successfully embraced the digital world. Its e-commerce site in the United States is its number one door worldwide, and it is accretive and outstanding social media results with 72 global digital platforms that are followed by a subscriber base of 4.5 million consumers. The brand has been number one ranked branded beauty channel on YouTube with videos that have been viewed globally 10 million times.”

Growth is in tier 2-3 cities in China

“Again, I explained it that the big cities, because of the development of your line, because of the saturation of the market are now growing anymore in same-door sales for sure. While the big expansion is in secondary city in – Tier 3, Tier 4 cities and online, basically expanding their reach of the many interested Chinese consumers and being able to sell to them. And that’s what we are doing, and that’s why we are successful. We continue build the reach. So, we get new consumers into our brands, new Chinese consumer into our brands every quarter.”

Retailers that do well offline tend to do well online too

“There is a clear strong connection between success of a retail online and success of the same retailer in brick and mortar. So we are participating to the development of the business of our retail partners both in brick and mortar and online’

Estee Lauder 2Q13 Earnings Call Notes

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.”