Estee Lauder sees strong quarter in China, lifts guidance… AGAIN!
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Estee Lauder sees strong quarter in China, lifts guidance… AGAIN!

It’s a great time to be an Estee Lauder investor (which, if you invest in Dominion’s Luxury Fund, you are). The company reported earnings that smashed analysts’ expectations this week, demonstrating strength in China (many had expected to see a slowdown in the country), and raising its guidance for full-year sales and earnings again! That’s the second time Estee has made such a revision as a result of greater confidence in the future… and we’re not even half way through the year yet!

Estee’s share price doesn’t need any help looking attractive: +31% so far this year

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Source: Yahoo Finance

Let’s get to the main financial stuff: analysts had hoped to see net sales increase to $3.57 billion in the first quarter of 2019. Estee’s reported figure came in above that estimate at $3.74 billion, representing an 11% increase against the same period in the previous year. When it came to earnings, Estee outperformed by a greater margin, returning $1.55 per share against the Street’s predictions of $1.30 per share. Net earnings rose by almost 50%, year on year, to $557 million.

A real driver of this growth remains Asia Pacific – which is the company’s smallest, but fastest growing, segment. Sales there rose by 25% year on year - and if you strip out currency effects, it did even better: up 31% during the quarter. As is the case for the luxury sector as a whole, China is the main player here, and Estee’s CEO, Fabrizio Freda, was pleased to report that the expected slowdown simply failed to materialise. He said: “We had anticipated a gradual moderation of growth in China and travel retail starting in the quarter, which didn’t happen, and that contributed to our overachievement.”

As a result of this strong performance, Estee raised its guidance yet again. For the full year, it now expects adjusted earnings to come in between $5.15 and $5.19, and net sales to increase by 10% to 11% (excluding currency effects).

Disclosure

Dominion holds Estee Lauder in its Global Trends Luxury Fund.


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