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Becca, Too Faced and a Focus on Digital Strategy Seem to Be Paying Off For Estée Lauder

The beauty company reported net sales of $11.82 billion, a 5 percent increase over the previous year.
The ELC lineup. Photo: @esteelaudercompanies/Instagram

The ELC lineup. Photo: @esteelaudercompanies/Instagram

The Estée Lauder Companies has been on somewhat of an acquisitions spree over the past year or so — and it appears to be paying off. The global beauty giant shared its 2017 fiscal year-end results with investors on Friday, reporting net sales of $11.82 billion, a 5 percent increase over the previous year. What's more, the company's digital sales showed impressive success. While e-commerce has historically grown at a rate of 25 percent per year for Lauder, the rate was 33 percent for the 2017 fiscal year, meaning e-commerce accounted for $ 1.3 billon in sales globally.

Fabrizio Freda, President and CEO for The Estée Lauder Companies, said in a statement:

"Throughout the fiscal year, our momentum accelerated, culminating in an outstanding fourth-quarter performance that completed another year of strong net sales and earnings per share growth. These results reflect our success in pivoting our business to the fastest-growing areas of prestige beauty to align with consumers' changing shopping preferences. With our leading brands, quality innovations and the acquisition of two makeup brands, we attracted new consumers globally. Our business accelerated in our online direct-to-consumer and retailer e-commerce sites, as well as in the travel retail and specialty-multi channels, and we built momentum in key geographies, like China and Italy, aided by enhanced digital and social media communications. Additionally, we began to further improve our organizational efficiency and effectiveness through our Leading Beauty Forward initiative. Importantly, we delivered this performance in the face of external global volatility and one of the biggest moments of change in our industry."

Freda's reference to the "acquisition of two makeup brands" is a nod to Too Faced and Becca, both millennial-targeted cosmetics brands the company brought on within the past year to help solidify its base with shoppers from the younger generation. He is steadfastly optimistic about what all of this will mean for the coming year. "We are well-positioned to deliver strong profitable growth as we deploy our prestige brand portfolio to new consumers globally through our hero product franchises and robust new product pipeline, new digital-first marketing approach and focused expansion for our smaller to mid-sized brands," he said.

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Dennis McEniry, President of Estée Lauder Companies online, is similarly pleased with the company's success in the digital space. "We feel from our results that it's definitely winning," he said in a phone interview after the investor presentation. "Consumers like the experience of buying from us online, and we spend a lot of time studying and listening to consumers and their feedback." He cites marketing, merchandising and delivery as the key digital strategy priorities for the company right now, and also notes that there is a focus on streamlining online payments by tailoring them to local shopping preferences. 

McEniry also stresses that ELC sees itself as a "digital-first" company that's using a mobile-first approach to its expansion. "We've gone through several generations already in our mobile efforts... [We once took existing sites and] mobile-optimized them, but now we design sites for the mobile environment, and at some point late in the project, we PC-enable it as opposed to the opposite," he explains.

The company is also learning from the established online presence of its acquisitions, Becca and Too Faced, says McEniry. "I think that what was super-attractive to us about Too faced and Becca was their social media momentum, and their understanding of how to use social to connect [to consumers] in very effective and fast ways, and that's what we're learning from the Too Faced and Becca teams. We've had all of our brands exposed to how do they do it — and not just what the technical aspects of social media are, but how do you take the learnings and adapt them to each brand?" he says.

While Lauder's more established digital brands for the most part thrived in the fiscal 2017 year, not all of them did. Take, for example, the short-lived, millennial-targeted Estée Edit, which will slowly be removed from Sephora shelves come September. When asked directly about what went wrong there, the company notes that it was a simple matter of seeing what consumers were actually gravitating toward. While The Estée Edit was created to draw millennials to the company's portfolio, it turned out that more millennial shoppers were actually entering it via The Estée Lauder brand, with lines like Double Wear and Advanced Night Repair. McEniry points to the fact that the company was able to take this feedback and pivot as a response to it as a success rather than a misstep. "Having access to the data in real time allows us to make decisions that we wouldn't have been able to five years ago," he explains. "The feedback loop was so long to get that information, but today we get it in real time, every hour. That helps us make better decisions to be more relevant to consumers."

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