Analyst Note
| Rebecca Scheuneman, CFA |Despite many COVID-19-related store closures across continental Europe, Latin America, and Asia throughout Estee Lauder’s September-ended first fiscal quarter, the firm reported 18% organic constant currency sales growth, or 16.5% excluding second-quarter shipments that were pulled forward, handily beating our 12% estimate. While we don’t expect double-digit growth to persist, as the pace was boosted by an easy comparison, demand for Estee’s products remain robust, with organic first-quarter sales 7% ahead of the same period two years prior. All product categories were ahead of prepandemic levels except makeup, which remains 19% depressed, given ongoing mask mandates. We expect Estee’s cosmetics business will fully recover in time as COVID-19 restrictions continue to ease and the firm rolls out a robust pipeline of innovations, backed with solid marketing investments (we forecast 23% of sales in fiscal 2022), continuing to support the firm’s strong brand intangible assets, which serves as the foundation of Estee’s wide moat.