The Estée Lauder Companies is updating its fiscal outlook in the wake of the worsening coronavirus crisis, which he conceded would hit financial results in the near term.
Net sales rose +15% year-on-year to US$4.62 billion and by +16% on a neutral currency translation. Net earnings were down -2.8% to US$557 million. Diluted net earnings per common share reached US$1.52, compared with US$1.55 in the prior-year period. Adjusted diluted earnings per common share* rose 21% to US$2.11.
CEO Fabrizio Freda, said: “We delivered superb results in our second quarter, leading to an excellent first half. Our multiple engines of growth generated broad-based gains across all our regions and major categories, as our prestige brand portfolio was well received by global consumers during the Singles Day event and holiday season.
“Our sales growth came from all facets of our business, including the Asia Pacific region, the skincare and fragrance categories, the online and travel retail channels, and the Estée Lauder, La Mer and luxury fragrance brands. Our emerging markets continued to be vibrant and we made progress towards the stabilisation of our North American business despite continued softness in the makeup category.
“Additionally, we completed the acquisition of the Korea-based Dr. Jart+ brand at the end of the quarter, which strengthens our position in global skincare.”
Coronavirus set to hit near-term results
Freda said: “In the wake of the recent coronavirus outbreak, we are first and foremost concerned about the health and safety of our employees, consumers and everyone affected in China and around the world. Our hearts and support go out to the many people working hard to mitigate the health risks of the coronavirus.
“The global situation will also affect our financial results in the near term, so we are updating our fiscal year outlook. With our results to date and our agility in allocating resources, we will strive to deliver full-year growth at least in line with our long-term goals, even in this challenging moment. We will be ready to return to our growth momentum as the global coronavirus outbreak is resolved.”
In its outlook for fiscal 2020 second half and for the full year, the company warned that it expects global prestige beauty to be adversely impacted over the next few months by the coronavirus.
The Estée Lauder Companies said that the guidance includes assumptions on the estimated impact and duration of the outbreak, based on its knowledge at this time “which is still very difficult to predict”. After experiencing continued strong momentum into January, the company has seen a significant decline in air travel and consumer traffic in key shopping and tourist areas.
Estee Lauder says: “Global travel retail, localities most affected by the virus outbreak and destination markets favored by tourists are expected to experience the greatest negative impact in the coming months followed by a gradual recovery later in the fiscal year. The company stands ready to facilitate the recovery as soon as the market dynamics support it.”
Due to the evolving and uncertain nature of the risk related to the coronavirus, the company is only providing guidance for the second half of the fiscal year at this point instead of the quarterly guidance typically issued. The third quarter is anticipated to be the most negatively impacted by the coronavirus with sales declining versus the prior-year period.
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