Estée Lauder's All-Important Skincare Sales Slip, Led by Downturns in Korea and Hong Kong

But this doesn't indicate a long-term problem with that portion of its business, Estée Lauder CEO Fabrizio Freda says.
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Eliza Brooke
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But this doesn't indicate a long-term problem with that portion of its business, Estée Lauder CEO Fabrizio Freda says.
One of Kendall Jenner's recent advertisements for Estée Lauder. Photo: Estée Lauder

One of Kendall Jenner's recent advertisements for Estée Lauder. Photo: Estée Lauder

For Estée Lauder, skincare is big business, outstripping makeup, fragrance and haircare on the basis of sales. But due to some problems in Asia, the category hit the skids in the final quarter of fiscal 2015 (which ended June 30), with revenue dropping from $1.2 billion last year to $1 billion this time around. Overall sales for the quarter fell, too, down from $2.7 billion in 2014 to $2.5 billion this year.

The reason for the downturn in skincare is a "very specific external issue," Estée Lauder CEO Fabrizio Freda told Fashionista on a phone call Monday morning.  Decreased consumption in Hong Kong and Macau, along with this summer's outbreak of MERS in Korea, put a damper on consumer spending. (The Wall Street Journal reported in June that South Korean department store sales fell 17 percent in the first week of that month, with venues like amusement parks faring even worse.) Those are big markets for Estée Lauder's skincare business, which Freda said accounts for between 50 and 60 percent of sales in Asia. He wouldn't, however, say what percentage of total skincare sales come from the region.

Freda doesn't think the popularity of skincare products is waning, though. "It's a very solid long-term category with a short-term issue," he said.

Makeup, meanwhile, is showing some upward movement, having seen its sales rise 7 percent to $4.3 million over the course of the full year. Among other regions, it's doing nicely in Estée Lauder's emerging markets, including Turkey, Brazil and South Africa. But each market favors particular products, Freda says. In Turkey, it's all about makeup and fragrances, and within makeup, eyeshadows and lipsticks are a strong trend. In Brazil, MAC specifically is taking off, led by its lipsticks. And while Americans are buying a lot of eyeshadow and French women are snapping up lipsticks, the highest consumption of mascara per capita comes from the Nordic countries.