Morningstar

Estee Lauder Posts Robust Sales Growth

In the face of headwinds, the narrow-moat beauty products company enjoyed a decent quarter, but shares aren't yet attractive.

Securities In This Article
The Estee Lauder Companies Inc Class A
(EL)

In the face of an uncertain macroeconomic environment, unfavorable foreign exchange, and a decline in emerging market travelers, narrow-moat

Sluggish traffic trends within U.S. mid-tier department stores--Estee derives more than 10% of its sales from Macy’s alone--as well as lower tourist traffic persist on Estee’s home turf (where sales grew at just a low-single-digit pace, accounting for around 40% of total sales). To ensure its fare is in front of consumers where they are shopping, Estee Lauder announced its intentions to extend the distribution of its product set, including selling Clinique in some Sephora outlets located inside JCPenney stores. While we regard Estee Lauder as a valued partner for retailers given its leading brand mix, we aren’t blind to the fact that efforts to expand its offerings further in mid- to low-tier department stores could ultimately eat away at the prestige (and subsequently the pricing power) inherent in its brands.

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About the Author

Erin Lash, CFA

Sector Director
More from Author

Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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