The Estée Lauder Companies Inc. announced its fiscal 2024 second-quarter results, reporting net sales of $4.28 billion for the period ending December 31, 2023. This represented a decline of 7% compared to the prior-year period, which had recorded net sales of $4.62 billion.
The organic net sales also experienced an 8% decrease, reflecting anticipated challenges in Asia travel retail and ongoing softness in the overall prestige beauty market in mainland China. Additionally, the company faced a 1% headwind due to business disruptions in Israel and other parts of the Middle East. However, the company reported net earnings of $313 million for the second quarter, compared to $394 million in the same period of the previous year.
Fabrizio Freda, President and Chief Executive Officer, expressed “For the second quarter of fiscal 2024, we delivered our organic sales outlook and exceeded expectations for profitability. The Ordinary and La Mer in Skin Care, Clinique in Makeup, and Le Labo and Jo Malone London in Fragrance performed strongly. Many developed and emerging markets around the world continued to grow organically and at retail. While mainland China and Asia travel retail declined, our retail sales trended ahead of organic sales, and these businesses are poised to return to organic sales growth in the second half.”
In the second quarter of FY2024, Skin Care net sales reached $2.173 billion, reflecting a 10% decline. This decrease was primarily due to the ongoing actions taken by the company and its retailers to reset retailer inventory levels in the Asia travel retail business. It was also influenced by lower conversion rates of travelers to consumers and the softness in overall prestige beauty in mainland China.
Net sales from Estée Lauder, Clinique, and Origins declined, mainly due to the challenges faced in Asia travel retail and mainland China. However, Estée Lauder experienced double-digit net sales growth in The Americas, driven by the success of the Advanced Night Repair product franchise and the launch of new products like Advanced Night Repair Rescue Solution and Nutritious line.
Makeup net sales amounted to $1.167 billion, representing an 8% decline. This decline was primarily attributed to challenges in the Asia travel retail business. However, M·A·C saw double-digit net sales growth due to the successful launch of the Hyper Real franchise line of products. Net sales also increased in Latin America and several markets in Asia/Pacific, driven by new product innovation.
Fragrance net sales remained flat at $737 million, as the growth from luxury brands Le Labo and Jo Malone London was offset by a decline from Estée Lauder. Hair Care net sales declined by 6%, primarily reflecting softness in North America, particularly for the Aveda brand.
Despite these challenges, Le Labo experienced strong double-digit net sales growth, driven by robust consumer demand for its hero product franchises and successful holiday performance. Jo Malone London also saw an increase in net sales, thanks to compelling holiday offerings and social media activations.
Also for the first six months, Estée Lauder Companies net sales were down 9% year-over-year to $7.797 billion, with net sales in the skincare segment down 16% year-over-year to $3.813 billion, in the Makeup segment down 4% year-over-year to $2.229 billion, in the fragrances segment up 3% year-over-year to $1.373 billion, and in the Hair Care segment up 3% year-over-year to $321 million, down down 6%.
In terms of regions, The Americas region reported a 1% decrease in net sales, with North America experiencing a low-single-digit decline. However, Latin America saw net sales increase in nearly every country, driven by Makeup, Skin Care, and Fragrance.
In Europe, the Middle East & Africa, net sales declined by 14% due to the impact of the company’s Asia travel retail business and business disruptions in Israel and other parts of the Middle East. However, the region showed mixed performance by market, resulting in flat growth.
Asia/Pacific net sales decreased by 7%, primarily driven by ongoing challenges in mainland China. However, other markets, including Hong Kong SAR, experienced growth. The net sales decline in mainland China was mainly attributed to lower sales and mixed performance during the 11.11 Global Shopping Festival. Hong Kong SAR, on the other hand, saw strong double-digit growth due to the reopening of borders and the resumption of travel.
Despite the challenges faced, the Estée Lauder Companies remains optimistic about the future. They expect their retail sales in mainland China and Asia travel retail to return to organic sales growth in the second half of fiscal 2024. The company continues to focus on innovation, product launches, and disciplined expense management to drive growth and profitability in the coming quarters.
