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Estée Lauder: More Prestige Brands/SKUS Are Being Opened to Target and Kohl’s Versus Ulta and Sephora

Thomas Paulson
Nov 4, 2022
Estée Lauder: More Prestige Brands/SKUS Are Being Opened to Target and Kohl’s Versus Ulta and Sephora

  • Last week, we discussed the significant opportunities ahead in fragrance. This week, we turn our attention to cosmetics, which has been one of the strongest performing categories in discretionary retail this year. Year-to-date, prestige beauty is the only industry that is growing in unit sales, per NPD. With a larger proportion of the prestige beauty shopper base having HHI $100K+, these shoppers are more immune to the impacts of inflation and are looking to beauty for a pick-me-up.
  • This week, Estée Lauder reported a soft September-quarter and very weak December-quarter guidance (including expectations that sales will decline 17%-19%) which was less to do with its U.S. operations and more to do with worsening of conditions in China, adverse foreign currency exchange, and the termination of many license agreements (including Tommy Hilfiger and Zegna). These results were substantially below its peers L’Oréal and LVMH.
  • Regarding the U.S., CEO Fabrizio Freda shared, "In the U.S., our freestanding stores accelerated (to mid-single-digit revenue growth), benefiting from both enhanced omnichannel capabilities and greater demand for our high-touch services, be it artistry at M·A·C or personalization at Jo Malone London and Le Labo. Specialty-multi also performed especially well, powered by traditional stores and enhanced by the partnership of Ulta Beauty at Target and Sephora at Kohl's. Clinique, M·A·C and Bobbi Brown led growth. Given excellent results in Ulta Beauty over the last year, M·A·C and Bobbi Brown are further expanding their presence…We remain committed to investing in innovation, advertising and granular consumer acquisition strategies as we aim to best capture the market growth opportunities." (Comments about expanded prestige product at Target and Kohl’s is excellent news for these companies.)
  • Placer.ai shows ongoing robust growth at both Ulta and Sephora on a YoY and Yo3Y basis.

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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