Estée Lauder Will Continue to Expand Digital and Social Media Presence to Combat Falling Brick-and-Mortar Sales

A look at the company's second-quarter earnings and how the current global political climate will have an impact in the near future.
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A look at the company's second-quarter earnings and how the current global political climate will have an impact in the near future.
Estée Lauder's skin-care offerings. Photo: @esteelauder/Instagram

Estée Lauder's skin-care offerings. Photo: @esteelauder/Instagram

Estée Lauder Companies will continue to focus on expanding its distribution channels — namely through increasing its online presence and position in foreign markets — in the remainder of 2017, said the company's CEO and president, Fabrizio Freda. On Thursday morning, the cosmetics giant reported its second-quarter earnings for the fiscal year, during which the company's net sales were $3.21 billion — a 3 percent increase over the same time period in 2016. Many of the points Freda discussed in the report are themes he's touched upon in the past: focusing on a millennial consumer base through ramping up digital presence and social media, concentrating on foreign markets, and continuing to expand in both the skin care and fragrance categories are prime examples. Skin care and fragrance proved to be strong areas for the company for Q2, with Tom Ford and La Mer both performing exceptionally well.

The company is well aware of the struggles (or, as Freda put it, "headwinds") it faces going into the third quarter. Freda spoke about soft sales in American department stores — Macy's, which has historically been a top retail partner for Estée Lauder's brands, announced in January that it will close 100 of its locations — and emphasized that the company will be aggressively pursuing e-commerce and ramping up sales targeted to tourist zones in order to counter these effects. "This is the main headwind we have in the business today, soft traffic in mid-tier department stores, and the closures as a consequence of that," said Freda in a phone interview. "This is already in our estimate, so what we're doing to offset this is diversifying our business in different channels. We are growing online and we are growing in tourist stores." He also noted the political climate, both in the United States and abroad (he touched on the impending implications of Brexit, the possibility of terrorist attacks globally as well as the recent attacks in Turkey) as challenges Estée Lauder may have to contend with.

Estée Lauder has focused its growth on acquiring smaller beauty brands — a method that's being employed by many beauty businesses — and so far, that has been largely successful. Freda cited the acquisitions of Becca and, most recently, Too Faced as important steps toward reaching millennials. He also noted that other acquisitions the company has made in recent years — for example, high-end fragrance brands By Kilian and Le Labo — have proven to be successful means for broadening the company's consumer base.

In terms of what shoppers can expect from the company over the next few months, Freda says to expect a focus on multi-channel engagement. "The consumer can expect much more participation from our brands in social media engagement, digital marketing, paid social media and, most importantly, the aspect of unpaid [user-generated] social media," he said. "All our brands are interacting with the consumer now on multiple platforms."

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