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00:00It's a great quarter. You took over almost two years ago at the start of 2025. And there were a
00:04lot of questions as to exactly how you get this company back onto a path of organic revenue growth. Four
00:11straight quarters of organic growth with regards to net sales. More than 6 percent in the most recent quarter. And
00:17your guidance for the next fiscal year, the full fiscal year, is three to five percent. You have confidence that
00:23you're going to meet that?
00:23Yeah, absolutely. And I think, like you said, when we announced our new strategy called Beauty Reimagine 18 months ago,
00:30we made a set of promise. And today I'm happy to report that promise made, promise kept. We are reigniting
00:37growth, accelerating our innovation, significantly expanding margin and really investing also in consumer acquisition and behind our brand.
00:46So we are, as you said, like, you know, having great momentum into fiscal 26. We have had four consecutive
00:52quarter of growth. The strongest quarter was the last one at like over five percent growth.
00:57So that gives us good momentum. We have the playbook. We have the right brand. We have obviously the right
01:02team. And we are ready to accelerate in fiscal 27.
01:04There are some concerns, despite the big move that we saw in the share price today, still some concerns about
01:09investors, about some momentum going forward. And when I look at the guidance for the full year, that three to
01:15five percent, I mean, if you hit the low end of that range, that's not really an acceleration in growth.
01:21I'm sure you're aware of that here.
01:23You know, the question you always have to ask CEOs, are you sort of low balling this so that you
01:28can kind of manage expectations and beat that?
01:30So look, in fiscal 26, we had guided the zero to three and we hit the top end of the
01:35guidance.
01:36So our objective, as we see the beauty market and especially the prestige beauty market accelerating around the world, we
01:42want to just take the opportunity of the market accelerating and us accelerating.
01:46We have a slate of new innovation coming to market. My ambition with the team is always to work minimum
01:52to deliver the middle of the top, the guidance, if not more, obviously, if we can.
01:56And, you know, we're putting ourselves, our brand ready in the right channel where the consumers are to obviously like,
02:03you know, accelerate in fiscal 27.
02:05Well, let's talk about those channels. You've done partnerships with TikTok and Amazon, a bit of a departure for Estee
02:11Lauder in the past.
02:12You've cut a lot of jobs, primarily in that sort of, I guess, you know, one on one distribution side
02:17of it.
02:17Is this the future of Estee Lauder distribution?
02:20So I think it's just we are adapting our distribution, obviously, like, you know, as you know, the consumers are
02:27also evolving.
02:28And our job is also to meet the consumers where they are.
02:30That is in China, in the U.S., in Europe, wherever they are around the world.
02:34So our idea was just to rebalance.
02:36And that's the first pillar of Beauty Reimagined is to accelerate the distribution expansion where the growth is, where the
02:42consumers are.
02:43But we always do it by protecting quality and experience that we are bringing with our consumers.
02:49So today we are feeling that we are in a good place.
02:52We're from social commerce to specialty multi to our own direct to consumers.
02:57And obviously, like, you know, the department stores, we have actually the right distribution channel that allows us to capture
03:03both on the recruitment front,
03:06but also on the retention front, all the consumers throughout the spectrum.
03:09Well, with regards to some of those partnerships, I am curious, do you get the same margin?
03:13Are you sort of having to sacrifice a little bit of margin in some of those partnerships as opposed to
03:18the normal retail?
03:19Well, I think what we are always looking at, we want not only the distribution to be margin accretive for
03:26us, but also to be equity driven for our brand.
03:29The decision that we always took is first and foremost, are we going to build desirability and equity with the
03:35brand that we have today?
03:36And today, what we've done, you mentioned Amazon TikTok shop, we have doing in China, many of our brand.
03:42Every single time we are working with our partners to continue to develop the experience and enhance the equity and
03:49the desirability of our brand.
03:50And I follow very closely with my team.
03:53The desirability ranking is one thing.
03:55Market share is another thing.
03:56But brand desirability, brand equity is always the first KPI we look.
04:00So whatever move we do from a distribution to new innovation to campaign, the key indicators is always to create
04:07more brand love with the consumer to keep them for a long time.
04:10Let's talk about the skincare business.
04:12The previous quarter, Q3, fiscal Q3, that was flat.
04:16That rebounded nicely in Q4.
04:18What changed?
04:19Innovation.
04:20The innovation pipeline, and I mentioned it in quarter three, we had a softer innovation pipeline in Q3.
04:26And we ramped it up and we finished in a very strong high note at plus 4% in skincare
04:31for quarter four.
04:33And I mentioned it this morning, like, you know, during the call, we have a slate of new innovations starting
04:37with Estee Lauder, with Clinique The Ordinary that have been going from strength to strength, you know, around the world.
04:43And the good news is that we have innovation at various price points, at the entry price point with The
04:48Ordinary, with Estee Lauder in the middle of Prestige, and obviously La Mer that is going after the luxury consumer.
04:54So sometimes you may have, like, you know, some adjustment, and that's why I always look at the full 12
04:59months of innovation.
05:00And we've guided next year a 200 to 250 basis point improvement on innovation led by skincare.
05:07So you may always have some quarters that are softer than others, but when you look at it on a
05:1312-month rolling, we feel very good about, like, you know, the innovation pipeline coming in the next fiscal year.
05:18How much of that innovation pipeline might actually apply to the hair care business, which was down in the most
05:22recent world?
05:23I was kind of surprised by that.
05:24Is that just some sort of cyclical trend or something secular or something you're doing?
05:28No, I think for hair care, we had to reposition our brand in the right channel.
05:31And we see today, especially if we have a brand like Aveda, we're seeing great momentum in North America being
05:37the largest geography for Aveda, where we're seeing with the move that we've done with Amazon, with TikTok shop, but
05:42also repositioning the brand in the salon network, in the track data salon network.
05:48We're seeing improvement in our performance.
05:50But to answer your question more directly, innovation is also on hair care.
05:55We have innovation on skincare, on makeup, on appliances, and hair care.
05:58Part of the beauty reimagined strategy is the diversification of our growth.
06:03Diversification doesn't come only from channel.
06:05It also comes from category for brands, but also, like, you know, from the type of innovation that we're bringing
06:11to market.
06:12So you're going to see also more coming in hair care going forward.
06:15Your fragrance business, no surprise, was the strongest, at least on a growth basis.
06:20Is this, should we think of Estee Lauder more as a fragrance company going forward, or is your goal to
06:25have everything kind of balanced out between skin, hair care, et cetera?
06:27Again, diversification of growth.
06:30I think in this moment in time, finances is one of the categories that is the fastest growing in beauty.
06:35We happen to have a very strong portfolio of luxury brands from Tom Ford to Joe Malone, Le Labo, Kylian,
06:41that are within our fastest growing brand, like, you know, in the company.
06:44Now, what we're doing in fiscal 27 is not only accelerating what we've done with luxury finances, but also entering
06:52in a much more meaningful way in prestige finances, which is the bulk of the market.
06:56We've started in fiscal 26 with Balmain Beauty, that has been off to a very strong start in markets like
07:02the U.S., the U.K., and continental Europe.
07:04And now, for the first time in over a decade, we have a really strong launch with the Estee Lauder
07:08brand called, like, you know, Glimmer is actually in now in store.
07:12And also, Kylian is launching a new prestige line.
07:15So it allows us to really continue the strong momentum that we have had in fiscal 26 into 27.
07:22And we have had one of the best performing in the market.
07:25And I want to ask you about Glimmer.
07:26That's Haley Seinfeld's brand.
07:28I mean, so is the strategy to kind of build things up within kind of the Estee Lauder system or
07:34to buy?
07:35And I ask that in the context, too, because there was a lot of talk about the potential tie-up
07:39with Pooch, which, you know, went under for a wide variety of reasons.
07:42Were you in favor of that deal?
07:44Yeah, I was basically supporting it.
07:46Look, our philosophy on M&A is very simple.
07:49First of all, we always look at our organic growth internally.
07:52And that's why we are accelerating the diversification that we're having within our own brand.
07:57But when we look at M&A, we look at three things.
08:00First, is it a good brand?
08:01Is it something in front of us that is going to be complementary to the portfolio?
08:05Think about our portfolio, Francis, from Joe Malone to Tom Ford to Le Labo, Kylian, Frederick May.
08:10They're all very different.
08:11They tailor to different consumers.
08:13They have different distribution, different price point, you know, different business model.
08:17So we make sure it's complementary.
08:19The second thing, is it going to allow us to diversify growth somewhere from a geography, from a channel?
08:25But more importantly, at the end of the day, is it at the right price point?
08:29And that's always the right thing that we're doing to do to see is it going to create.
08:32So you walked away from that because of price?
08:34Correct.
08:34It was price.
08:35I am curious, though, the CFO said on the conference call today, talked about deleveraging, talked about CapEx, dividend, no
08:44buyback mentioned.
08:45But I was also curious about M&A.
08:47And there was no explicit talk of that.
08:49But I am curious if you do plan to pursue other M&A deals, assuming the price is right, as
08:55you said?
08:56Yeah, we will always be part of the M&A conversation.
08:58I've been very clear.
08:59Large ones?
08:59Or are these just kind of...?
09:00Look, you know, it needs to be complementary.
09:03But I think one that we've announced recently is Forrest Essential, the leading prestige brand in India.
09:08You know, and for us, I've been very clear that I want to accelerate the penetration of the emerging market.
09:13We see a great potential.
09:14And after the wave of K-beauty that we're seeing around the world, we see Indian beauty getting a great
09:21potential.
09:21So Forrest Essential is the next acquisition we are waiting, like, you know, for regulatory approval to launch the brand
09:28within our portfolio.
09:29But that's the type of acquisition that we are looking at.
09:31Well, let's talk about some of the share that you're making in Asia, Japan, Korea.
09:35The China business had six straight quarters now, I think, of share gains there.
09:40You're relatively well diversified geographically.
09:42And I am curious, though, do you see more opportunity from Asia to expand the business where it becomes a
09:47larger share of total sales?
09:49Yeah, I think what I'm very excited is actually to see the recovery of China.
09:53You know, China as a market is very strong, and we're seeing accelerated in the high single digit.
09:58And the good news, like you said, six quarters in a row, we've been able to gain market share.
10:02So in a very dynamic market, we're seeing acceleration.
10:04We're seeing also market share gain in Japan.
10:07Korea is actually as a market is really also coming back after a few years of softness.
10:12Not only the market is stronger, but we're also strong.
10:15So we are seeing, you know, great potential.
10:17In Asia, they love beauty, and we are always part of that.
10:19But kind of square that.
10:20But you've talked about this idea that China has kind of moved away from just being a growth market to
10:24a more mature market.
10:26How do you fit in?
10:27And I know you have a big R&D center there in Shanghai, the idea of creating things for the
10:31Chinese within China.
10:33That's the strategy.
10:34Absolutely.
10:35Today, we have 30% of our innovation globally that is coming from our R&D center in China.
10:40And the strategy originally was always to create an R&D center that was creating innovation in China for China.
10:47Because the Chinese consumers have different habits.
10:50They have different regimen.
10:51Their skin regimen is very different.
10:53So we're developing a lot more product that is allowing us to be not only more locally relevant, but also
10:59to be more into culture in China.
11:02And this product is really, like, you know, helping us to support, like, you know, the growth that we're seeing
11:07in China and, frankly, across Asia.
11:09A couple more questions here.
11:10Travel retail.
11:11I mean, a few years ago, this almost basically destroyed Estee Lauder.
11:15And it's come back based on the most recent quarters.
11:18Is that going to be a sustainable sort of pocket of growth for you?
11:22Yeah.
11:22I see travel retail.
11:23Today, we are at the right level.
11:24I've said it very clearly.
11:25We have about 15% of our business that is coming from travel retail, which is a much lower percentage
11:31of the business than we used to be.
11:32Which allows us also to just navigate volatility in a much better way.
11:38But today, travel retail is still a window to the world when it comes to, like, you know, discovering our
11:43brands.
11:43And we're seeing a lot of great potential.
11:45Hainan, we're growing, like, you know, double digit.
11:47But we're seeing Korea, Hong Kong, Thailand also, like, you know, growing.
11:51Obviously, Europe has been slightly disrupted in this fiscal year because of, like, you know, the conflict in the Middle
11:56East.
11:57But we're even seeing, for us, America doing very well.
11:59So, I see travel retail as a growth potential for us, but more in line with industry standards, which is
12:07about 15% of our business going forward.
12:09Well, speaking of the Middle East, I mean, can you quantify how much the conflict over there is costing you
12:13business?
12:14Yeah.
12:14For us, when you put the Middle East, Israel, and travel retail, it's about less than 2% of our
12:19business.
12:19So, it has been very manageable for us, like, to navigate it.
12:22And it's also one of the reasons this morning where we called out that while we're going to have stronger
12:27growth in the first half versus the second half due to the innovation pipeline,
12:32it's not correct also in our emerging market because we expect a rebound in the Middle East that will allow
12:37us to just have a stronger second half.
12:38I do have to ask you, you're a Frenchman running probably the biggest, if not the most well-known U
12:45.S.-grown beauty products company out there.
12:50What does that say about why you're there and what Estée Lauder is looking for?
12:54Maybe it's just like a little bit of a clander.
12:56I was born in the U.S., despite my French accent, so I have, like, the dual citizenship.
13:01But I feel very humble and very proud, like, on the 80th anniversary of the Estée Lauder company, to manage
13:07what I believe is one of the most beautiful portfolios of Brown in the world
13:11and certainly an amazing team that is delivering outstanding results in 26.
13:16And I have no doubt that we will continue in 27 and beyond.
13:19And part of that history, you're going to keep up the relationship with Sachs.
13:22You go back to the early days.
13:23This is part of, like, you know, what we do.
13:26You know, history is very important.
13:28And we are working with our historical partner to continue to reinvent experience in the store.
13:33At the end of the day, Estée was the first one who created this notion of eye touch in the
13:38U.S.
13:38and creating beauty as we know it in so many ways.
13:41And we'll continue to do it.
13:42But we'll use new channels, new media to be able to just connect with consumers and delight them wherever they
13:48are.
13:48And just to be clear, your relationship with this sort of new Sachs, which is out of bankruptcy now, it's
13:52good.
13:53You're providing product to them.
13:55Absolutely.
13:56We have, like, you know, resume shipping and we're very happy with the partnership that we have with Sachs.
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