“For full-year fiscal 2023, we delivered organic sales growth and prestige beauty share gains in many developed and emerging markets, but Asia travel retail pressured results, particularly in Skin Care, and we continued to experience softness in North America,” explained Fabrizio Freda, president and CEO.
A Difficult Operating Environment
For the full fiscal year, the operating environment continued to be disrupted by the impact of the Covid-19 pandemic, says the company.
Most notably, the pace of recovery in Asia travel retail and mainland China was slower than anticipated. In Hainan, prolonged store closures initially presented a headwind and, thereafter, low levels of conversion occurred when travel resumed. This was compounded by inventory tightening by certain retailers.
In Korea, the travel retail business slowed during the transition to post-Covid regulations. In addition, the slower than anticipated resumption of international flights, granting of visas, and organized group tours further challenged the Asia travel retail recovery. As a result, the Company’s Asia travel retail business was challenged throughout the fiscal year by the slower than anticipated recovery.
In mainland China, the Company’s performance in the first half of fiscal 2023 was hindered by low retail traffic as a result of Covid-related restrictions and the rise in Covid-19 cases.
Elsewhere, the recovery from the Covid-19 pandemic progressed across markets globally over the course of the fiscal year as restrictions lifted. In the West, the Company’s recovery from the pandemic continued with strong organic net sales growth in nearly all markets in EMEA and in Latin America. In Asia/Pacific, the Company’s markets emerged strongly into recovery across the fiscal year, to deliver broad-based organic net sales growth throughout the region.
In the United States, organic net sales growth was unfavorably impacted by the slower than anticipated pace of the Company’s improvement at retail and the tightening of inventory by certain retailers in the first half of fiscal 2023 due to inflationary pressures and recession concerns.
Finally, the Company’s business was also pressured by the strong U.S. dollar, inflation and recession concerns globally.
Skin Care net sales fell 14%, primarily reflecting the challenges in Asia travel retail, including the slower than anticipated recovery from the Covid-19 pandemic, as previously mentioned. Net sales declined for Estée Lauder, La Mer and Dr.Jart+, partially offset by strong growth from The Ordinary, M·A·C and Bobbi Brown Cosmetics.
Makeup net sales were virtually flat compared to the prior year and performance increased sequentially each quarter, to growth of 13% in the fiscal 2023 fourth quarter, reflecting growth in most markets as they continued to evolve in recovery and as usage occasions increased, offset by the challenges in Asia travel retail, including the slower than anticipated recovery from the Covid-19 pandemic, as previously mentioned. Net sales growth from M·A·C and Clinique was offset by the declines from Estée Lauder, TOM FORD and La Mer.
Fragrance net sales rose 14%, reflecting double-digit growth across every region and led by TOM FORD, Estée Lauder and Le Labo.
Hair Care net sales rose 6%, primarily reflecting growth from both The Ordinary, due to the recent launch of the brand’s hair care products, and Aveda.
Outlook for Fiscal 2024
The Company aims to return to net sales growth in fiscal year 2024 and over the next few years progressively rebuild its margins. It also plans to continue to strategically invest in areas to support recovery, share gains and long-term profitable growth.
Reported net sales for fiscal 2024 are forecasted to increase between 5% and 7% versus the prior year.