“In our second quarter we continued our strong momentum and generated stellar results,” Fabrizio Freda, the company’s president and CEO, says in a press release.
He goes on to emphasize that, “In constant currency, our sales grew 14%,” and notes that “in the holiday season, our brands achieved outstanding results from their e-commerce businesses, and customizable gift options were significant contributors.”
In the Americas region the company’s Q2 sales amounted to $1,308m, a figure that’s up 5% year over year.
Notably, “sales in the company’s online and specialty-multi channels grew strong double-digits,” according to the release. The La Mer skin care brand did particularly well for the company. And the Estée Lauder brand saw good growth in both fragrance and skin care.
Where sales decreased for the company’s brands Estée Lauder attributes the decrease to lower foot traffic in retail stores.
The recently passed tax reform bill (also known as the TCJA) cost the company this quarter, but going forward, Estée Lauder expects to benefit from the new policy.
“Our strong results, combined with future benefits we expect from the passage of the new Tax Cuts and Jobs Act, further enhance our ability to strategically invest in faster-growing areas of prestige beauty to attract new consumers,” Freda says.
Estée Lauder’s press release explains what the reform meant for the Q2 results:
“The second quarter provision for income taxes included the following amounts related to the TCJA. These amounts, which are provisional, may require adjustments as anticipated guidance is issued and as additional analysis of the provisions of the TCJA is completed:
• $325 million charge related to a tax on historical foreign earnings that have not been repatriated to the U.S. (Transition Tax).
• $51 million charge related to the remeasurement of U.S. net deferred tax assets at the lower statutory rate.
• $18 million charge to reflect the establishment of a net deferred tax liability for foreign withholding taxes on planned repatriation of certain foreign earnings.
• The Company’s reported effective tax rate in the fiscal 2018 second quarter is approximately 82%. The effective tax rate excluding the impact of the Transition Tax, the revaluation of U.S. net deferred tax assets, the net deferred tax liability for foreign withholding taxes related to the planned repatriation of certain foreign earnings and restructuring and other charges would have been approximately 24%.”
The Estée Lauder Companies is optimistic and realistic about the future. “We are mindful of risks related to social and political issues, geopolitical tensions, terrorism, currency volatility and economic challenges affecting consumer spending in certain countries and travel corridors. The Company is also cautious of the decline in retail traffic, primarily related to some brick-and-mortar stores in the United States,” according to the press release.
Still, Estée Lauder is confident that prestige beauty will be key in the next two quarters and that digital marketing can help grow sales and revenue as well.
“The Company expects its sales growth to benefit from loyalty to our high-quality products, strong innovation, outreach to new target consumers and growth from recent acquisitions, while continuing to emphasize a digital-first marketing approach and a strong focus on fast-growing markets and channels as consumer preferences evolve.”
Deanna Utroske, CosmeticsDesign.com Editor, covers beauty business news in the Americas region and publishes the weekly Indie Beauty Profile column, showcasing the inspiring work of entrepreneurs and innovative brands.