Estee Lauder Posts Robust Sales Growth

In the face of an uncertain macroeconomic environment, unfavorable foreign exchange, and a decline in emerging market travelers, narrow-moat

Sluggish traffic trends within U.S. mid-tier department stores--Estee derives more than 10% of its sales from Macy’s alone--as well as lower tourist traffic persist on Estee’s home turf (where sales grew at just a low-single-digit pace, accounting for around 40% of total sales). To ensure its fare is in front of consumers where they are shopping, Estee Lauder announced its intentions to extend the distribution of its product set, including selling Clinique in some Sephora outlets located inside JCPenney stores. While we regard Estee Lauder as a valued partner for retailers given its leading brand mix, we aren’t blind to the fact that efforts to expand its offerings further in mid- to low-tier department stores could ultimately eat away at the prestige (and subsequently the pricing power) inherent in its brands.

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