Estee Lauder growth driven by online and travel retail
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Estee Lauder growth driven by online and travel retail

Iconic cosmetics company Estee Lauder is experiencing incredible growth: over the past year, the company is up by 62% (a significant outperformance of the industry’s 33% upside). Intelligent acquisitions played a big part in that growth, but they’re not the whole story. Rather, Estee Lauder’s growth is being driven by two worldwide trends that show no signs of slowing down: travel retail and Ecommerce.

Estee Lauder’s share price has risen by 24% so far this year

graph 1806 esteelauder

SOURCE: Yahoo Finance

During the first quarter of fiscal 2017, the company acquired BECCA and Two Faced – these names added to Estee’s prestige portfolio and contributed around 2% of growth to overall sales in fiscal 2018. Prior to this, the company had engaged in a run of similarly lucrative acquisitions: By Kilian, RODIN, Glamglow, Le Labo, and more.

Acquisitions aside, two of the major drivers of Estee’s growth are trends that look set to continue defining the cosmetics landscape.

The company is beating out its peers when it comes to conquering the online space. Estee now has a digital presence in 35 countries around the world, and it is implementing new technologies like online booking for store appointments, omnichannel loyalty programs and touch mobile services. Estee is clearly taking digital seriously, and it’s paying off: in the third quarter of fiscal 2018, the company saw double-digit growth online in all regions.

Travel retail is another area where Estee is cleaning up. A strong focus on this segment of the business saw it propel sales growth in the third quarter, where eight of its brands saw double digit increases, and Asia was a strong point. The key is simple: investing in local markets with fragrances being the main focus.

With both of these drivers looking set to dictate the future of the luxury sector in the near-term, Estee lauder, which has just celebrated is fifteenth straight quarter of earnings beats and its fifth of sales, is in a great position to continue outperforming.

Disclosure

Dominion holds Estee Lauder in its Global Trends Luxury Funds.


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