Organic net sales decreased by 2%, primarily reflecting ongoing softness in overall prestige beauty in mainland China and a decline in Asia travel retail driven by the decrease in the first half of fiscal 2024. This reflects actions taken by ELC and its retailers to reset inventory levels and lower conversion. Partially offsetting these declines was growth in Hong Kong SAR.
Overall, in the markets of Europe, the Middle East & Africa (“EMEA”), Japan, and Latin America performed similarly to last year.
Fabrizio Freda, President and CEO said,
“For fiscal 2025, we anticipate continued declines in the prestige beauty segment in China, mainly reflecting persistent weak sentiment among Chinese consumers. We intend to drive share gains in a market that continues to hold strong long-term promise. In the rest of our business, we are planning to deliver improved performance across both developed and emerging markets. To fuel this, our priorities are reigniting Skincare, capitalizing on the multiple growth drivers of high-end Fragrance, moving faster in leveraging winning channels, launching accretive innovation inclusive of new, big opportunities, and enhancing our precision marketing capabilities. From La Mer’s entry into night-specific consumption, to The Ordinary’s expansion into new markets and more brands debuting in new channels, like on Amazon’s U.S. Premium Beauty store, we have a rich slate of initiatives to drive new consumer acquisition and continue to leverage our strength in retention. Alongside this work, we are realizing initial benefits of the Profit Recovery and Growth Plan as we right size our cost structure and simplify the organization to be more agile and faster to market.”
2024 Results
Reported net sales decreased 2%, including royalty revenue from the fiscal 2023 fourth quarter acquisition of the Tom Ford brand, the impact of foreign currency translation, and returns associated with restructuring and other activities.
During the fiscal 2024 second quarter, the company identified and corrected prior-period misclassifications of net sales and operating income between certain of its product categories.
As a result, product category net sales and operating income have been adjusted from the amounts previously reported for comparability purposes.
The misclassifications had no impact on the current-period or prior-period consolidated statements.
Total reported operating income was $0.97 billion, a decrease of 36% from $1.51 billion in the prior year. In constant currency, adjusted operating income decreased 10% to $1.64 billion.
Skincare
ongoing softness in overall prestige beauty in mainland China caused skincare net sales to decrease by 3% in fiscal 2024.
Net sales declined in Asia travel retail, driven by the decrease in the first half of fiscal 2024, and in part, in response to changes in government policies that began in the second half of fiscal 2023, and lower conversion.
Excluding the declines in mainland China and the company’s global travel retail business, reported and organic net sales increased 3%.
La Mer net sales increased by high-single-digits, benefiting from hero products, such as The Treatment Lotion and The Eye Concentrate, and the new product, The Moisturizing Fresh Cream.
The Ordinary net sales grew by double digits, driven by growth across all geographic regions and from the continued success of hero products, new product innovation, such as the Soothing & Barrier Support Serum, and targeted expanded consumer reach.
Net sales from Estée Lauder, Clinique, and Dr.Jart+ declined, primarily due to continued challenges in mainland China and Asia travel retail.
Declines were partially offset by Dr.Jart+ net sales, which more than doubled in EMEA and increased to double digits in The Americas. Estée Lauder’s net sales also grew mid-single-digits in The Americas.
Fragrance
Fragrance net sales increased 2%, primarily driven by mid-single-digit growth from the company’s Luxury Brands, which increased double digits in Asia/Pacific and The Americas, partially offset by a decline from Estée Lauder.
Estée Lauder’s net sales declined, reflecting softer retail sales during the holidays and key shopping moments and pressure in the company’s Asia travel retail business that led to lower shipments for replenishment orders.
Le Labo net sales grew strong double digits, nearly doubling in Asia/Pacific, owing to hero product franchises. Net sales from Jo Malone London increased, led by double-digit growth in The Americas.
Makeup
Makeup net sales decreased 1%, mostly due to the company’s global travel retail business and a benefit in the prior year as a result of changes to M·A·C’s take-back loyalty program, partially offset by growth overall in the markets of EMEA as well as in Latin America and Asia/Pacific.
Reported and organic net sales increased by low-single digits in the second half of fiscal 2024, primarily driven by Estée Lauder and Clinique.
Clinique net sales increased by double digits, reflecting strong growth across all geographic regions, primarily driven by continued strength across the lip and mascara subcategories.
Haircare
Haircare net sales declined 4%, primarily due to Aveda in North America, reflecting softness in the salon channel and the Company’s direct-to-consumer distribution channels.
Haircare’s operating results decreased primarily reflecting the decline in net sales, partially offset by disciplined expense management.
