The Estée Lauder Companies Inc. recently released their fiscal year 2024 results on 19 August 2024, highlighting a challenging year marked by declining sales and earnings. The company reported net sales of €15,61 billion, reflecting a 2% decrease from the previous year. The fiscal year was defined by ongoing difficulties in key markets, particularly in Asia, coupled with strategic shifts aimed at stabilizing and eventually rejuvenating the business. Despite these hurdles, Estée Lauder remains committed to its long-term growth strategy, focusing on innovation, precision marketing, and a strong emphasis on sustainability.

Financial Performance Overview

Estée Lauder’s fiscal 2024 presented a mixed financial performance, with significant declines across various key performance indicators. The company's net sales decreased by 2% compared to the previous fiscal year, while diluted earnings per share (EPS) saw a dramatic 61% decline to €1,08. Adjusted diluted EPS, which excludes restructuring and other charges, fell by 25% to €2,59, indicating a tough operating environment.

Operating income also declined sharply, falling by 36% to €0,97 billion, primarily due to lower sales volumes and higher goodwill and intangible asset impairments, particularly related to the Dr.Jart+ brand. In constant currency terms, adjusted operating income decreased by 10%, reflecting the ongoing challenges in core markets, particularly in China and the Asia travel retail segment.

Geographically, sales performance varied significantly. The Americas saw a modest 1% increase in net sales, driven by double-digit growth in Latin America, especially in Mexico and Brazil. However, North America’s performance was flat, reflecting a challenging competitive environment and shifts in consumer preferences. Europe, the Middle East & Africa (EMEA) saw a 1% decline in sales, with a stronger performance in the second half of the year partially offsetting earlier challenges. The Asia/Pacific region experienced the steepest decline, with a 6% decrease in net sales, heavily impacted by continued softness in China and a difficult travel retail environment.

Region	Net Sales (in € billions)	Percentage Change	Key Highlights
The Americas	4,58	+1%	Double-digit growth in Latin America, particularly in Mexico and Brazil; flat performance in North America.
Europe, Middle East & Africa (EMEA)	6,14	-1%	Challenges in Asia travel retail; growth in Skin Care, Makeup, and luxury fragrance brands.
Asia/Pacific	4,89	-6%	Significant decline in mainland China; strong double-digit growth in Japan; Hong Kong SAR showed strong recovery.

In terms of product categories, skincare, which is traditionally Estée Lauder’s strongest segment, saw a 4% decline in net sales, largely due to challenges in China and Asia travel retail. Makeup sales were relatively flat, with a 1% decline, while fragrance sales increased by 1%, driven by strong performance from luxury brands like Le Labo and Jo Malone London. Hair care also saw a decline, with sales falling by 4%, particularly impacted by softness in the salon channel in North America.

Brand Portfolio and Distribution Channels

Estée Lauder’s diverse brand portfolio continued to see varied performance across its segments. The company’s luxury fragrance brands, including Le Labo and Jo Malone London, performed well, particularly in Asia/Pacific and The Americas, showing double-digit growth in certain regions. In contrast, core brands like Estée Lauder and Clinique faced significant challenges, especially in China and the travel retail sector, which have historically been strong markets.

The company’s distribution channels also faced notable shifts. The travel retail segment, once a key growth driver, suffered due to reduced consumer spending in Asia. However, Estée Lauder saw growth in other channels, such as specialty-multi and online platforms, particularly in North America, where Clinique’s launch on Amazon’s U.S. Premium Beauty store contributed positively.

Sustainability and ESG Initiatives

Estée Lauder remains committed to advancing its environmental, social, and governance (ESG) initiatives, despite the challenging financial landscape. The company has continued to make strides in sustainability, focusing on reducing its carbon footprint, enhancing product sustainability, and fostering a circular economy.

In fiscal 2024, Estée Lauder announced several key sustainability milestones, including achieving 100% renewable electricity for its direct operations. The company also expanded its sustainable packaging efforts, increasing the use of recycled materials and developing refillable product formats. Furthermore, Estée Lauder continued its investment in responsible sourcing, ensuring that the ingredients used in its products are ethically sourced and that supply chains are transparent and sustainable.

Looking ahead, Estée Lauder has set ambitious sustainability goals for the coming years. These include achieving net-zero carbon emissions by 2030 and ensuring that 75% of its packaging is recyclable, refillable, or reusable by 2025. The company is also focused on further integrating sustainability into its product development processes, with plans to expand its range of sustainable products across all categories.

Conclusion

Fiscal 2024 was a year of significant challenges for Estée Lauder, marked by declining sales and earnings amid a difficult operating environment, particularly in China and the Asia travel retail sector. However, the company remains focused on its long-term growth strategy, leveraging its diverse brand portfolio, expanding its presence in winning distribution channels, and continuing to innovate in product development and precision marketing.

Looking ahead, Estée Lauder is poised to navigate the ongoing challenges in its key markets while capitalizing on growth opportunities in emerging markets and the luxury fragrance segment. The company’s Profit Recovery and Growth Plan is expected to deliver moderate operating margin expansion in fiscal 2025, setting the stage for a stronger financial performance in fiscal 2026.

While Estée Lauder has outlined its strategy for navigating the current challenges, deeper analysis into consumer sentiment in China and the effectiveness of the company’s strategic initiatives in this region could provide valuable insights into its future performance. Additionally, monitoring the recovery of the travel retail sector and the impact of the company’s sustainability initiatives on brand loyalty and consumer preferences will be crucial in assessing Estée Lauder’s ability to achieve its long-term goals.

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Cover Image Courtesy: Estée Lauder Brand Website