Estée Lauder Companies said revenues rose in its 2022 fiscal year, despite the impact of Covid-19 disruptions in China on its retail sales and distribution capabilities. However, the cosmetics group warned that it is entering a “volatile period” of record inflation, supply chain disruptions, the strengthening US dollar, risk of a slowdown in many global markets, and the headwind from the recent Covid shutdowns in the Chinese province of Hainan. It forecasts that its net sales growth will slow to between 3 and 5 per cent year-on-year in 2023.
American beauty giant Estée Lauder is teaming up with Nykaa, India’s biggest beauty and wellness e-commerce platform, to launch an incubator for Indian beauty entrepreneurs.Net sales across the group, which owns brands including Estée Lauder, Bobbi Brown, Aveda, Clinique and Jo Malone London, increased 9 per cent to $17.74 billion for the year ended 30 June 2022, driven by the Americas and Europe, the Middle East and Africa (EMEA).
Net sales in Asia Pacific fell 23 per cent year-on-year to $1 billion in the fourth quarter, to 30 June. Overall, net sales slumped 10 per cent year-on-year to $3.56 billion in the fourth quarter. “Hardest hit was Shanghai where the city wide lockdown lasted two months, impacting our distribution capacity serving all of China through the end of May,” said Tracey Travis, executive vice president and CFO, in a call with investors on Thursday. LVMH, Kering, Hermès, Moncler and Prada reported similar challenges in their first-half earnings.
The Covid-19 restrictions in Hainan, which went into lockdown during Estée Lauder’s fourth quarter, further impacted the conglomerate’s retail sales in the region. “Hainan in particular was impacted as stores were closed [for] a portion of the quarter,” said Travis. “Travel was curtailed to the island and courier services for online deliveries were disrupted.” However, Estée Lauder expects China to regain momentum with double-digit growth in the second half of 2023, as local demand for prestige beauty increases.
The company said skincare sales declined during the year after the category was “disproportionately impacted by the temporarily reduced capacity” in Shanghai during the fourth quarter. Group fragrance sales grew by double digits, led by Jo Malone London, Tom Ford Beauty and Le Labo. Makeup also increased by double digits thanks to strong performances from Mac and Estée Lauder. Earlier this month it was reported that Estée Lauder is in talks to buy Tom Ford in a $3 billion-plus deal.
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