Press Release: The Estée Lauder Companies Reports Outstanding Fiscal 2021 Second Quarter Results
The Estée Lauder Companies Reports Outstanding Fiscal 2021 Second Quarter Results
Net Sales Increased 5% and Diluted EPS Rose 56%
Net Sales Grew 3% and Adjusted Diluted EPS Increased 21% in Constant Currency
The Company Plans to Resume Its Share Repurchase Program During the Second Half
The Estée Lauder Companies Inc. (NYSE: EL) today reported net sales of $4.85 billion for its second quarter ended December 31, 2020, an increase of 5% on a reported basis, and 3% in constant currency, from $4.62 billion in the prior-year period. Incremental net sales from the Company's acquisition of Have&Be Co. Ltd. ("Dr. Jart+") contributed approximately 3 percentage points of net sales growth. The Asia/Pacific region, travel retail and global online net sales growth was partially offset by lower foot traffic in open stores and, to a lesser extent, temporary retail store closures attributable to COVID-19.
The Company reported net earnings of $873 million, compared with net earnings of $557 million in the prior-year period. Diluted net earnings per common share was $2.37, compared with $1.52 reported in the prior-year period. Excluding the benefit of currency translation, adjusted diluted earnings per common share, which excludes items detailed on page 3, increased 21%.
Fabrizio Freda, President and Chief Executive Officer said, "We are proud to have returned to growth in our second quarter, earlier than we anticipated, demonstrating the enduring success of our multiple engines of growth strategy. The powerful engines of Skin Care, Fragrance, Asia/Pacific, Travel Retail in Asia, and global Online fueled our performance despite the increasing complexity of the pandemic.
Ten of our brands grew, signifying the broad-based strength of our portfolio, hero products and innovation, led by double-digit sales growth from the Estée Lauder and La Mer brands. For holiday and key shopping events, we welcomed new consumers and deepened relationships with existing consumers. We successfully combined technology and data with our talented beauty advisors to deliver high-touch services, enriching the online shopping experience. We invested in our growth engines and employed strict cost discipline in other areas, driving double-digit adjusted earnings growth."
Freda emphasized, "Our performance this quarter gives us confidence, as we delivered strong sales and earnings growth amid the pandemic while living our company values and investing in technology for new capabilities to support accelerating growth drivers. We still expect to deliver sequentially improving sales growth each quarter for the remainder of fiscal 2021 as we continue driving recovery."
The COVID-19 pandemic continued to cause significant disruption in the Company's operating environment, temporarily impacting retail traffic and certain consumer preferences in the second quarter of fiscal 2021. The resurgence of COVID-19 cases later in the quarter in various parts of the world led to renewed government restrictions to prevent further spread of the virus. These restrictions included the temporary closure of businesses deemed "non-essential," curtailment of travel, social distancing and quarantines.
Most brick-and-mortar retail stores globally that sell the Company's products, whether operated by the Company or its customers, were open during the second quarter, although consumer traffic was significantly reduced as compared to the prior-year period and some retail stores were temporarily closed due to the resurgence of COVID-19 cases. In addition, international travel has remained largely curtailed globally due to both government restrictions and consumer health concerns that continue to adversely impact consumer traffic in most travel retail locations.
During the second quarter of fiscal 2021, online(1) sales growth remained strong in every region as the Company and its retailers activated digital strategies to capture consumer demand online. Travel retail net sales rose single digits, driven by increasing travel within the Asia/Pacific region. Mainland China delivered strong growth, while Korea and several smaller markets in the Asia/Pacific region also grew and many other markets improved sequentially.
The COVID-19-related closures of offices, retail stores and other businesses and the significant decline in social gatherings have also influenced consumer preferences and practices. Demand for skin care, fragrance and hair care products has generally been more resilient than the demand for makeup. Double-digit growth from Estée Lauder and La Mer during the second quarter of fiscal 2021 reflected the continued demand for innovative products within hero franchises. Consumers re-engaged with luxury and artisanal fragrances during the holiday season, contributing to double-digit total net sales growth from Le Labo and Editions de Parfums Frédéric Malle as well as solid increases from Jo Malone London and Tom Ford Beauty.
In response to the ongoing impacts from COVID-19, the Company continues to implement strict cost control actions to effectively manage the changing business environment. These expense actions primarily included advertising and promotion activities, travel, meetings, consulting, and certain employee costs. The Company delivered strong operating margin expansion year-over-year reflecting operating leverage on higher net sales, the mix of sales and strict cost controls.
Fiscal 2021 Second Quarter Results
Adjusted diluted earnings per common share excludes restructuring and other charges and adjustments as detailed in the following table.
The fluctuations in exchange rates between the U.S. dollar in relation to most currencies had a favorable impact on net sales and operating income in the Company's product categories and regions outside of the United States. The Company's reported effective tax rate in the fiscal 2021 second quarter was 14.9%, compared with 30.8% in the prior-year period. The lower tax rate was primarily attributable to the retroactive impact of the recently finalized global intangible low-taxed income ("GILTI") U.S. tax regulations, as well as the impact of nondeductible goodwill charges recognized in the prior-year period.
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February 05, 2021 06:45 ET (11:45 GMT)