Estee Lauder Companies Inc (NYSE:EL) Q2 2023 Earnings Call Transcript

The other important reading of China is that during 11/11, our net sales were up 10.9%, and our retail sales were up 11.9% and holding the #1 ranking across various categories. and there was a lot of great success on the brand creative activity in live streaming on innovation. And so the way when the consumers are back in this very difficult volatile period like a situation like 11.11, where there is obviously high traffic our brands respond enormously. And obviously, when the consumers are not back or don’t travel or our site is when, obviously, we have seen some issues. So in total, China is developing the way we planned. And from a market share standpoint, recovering also and is definitely going in the right direction. In terms of the future, the potential of China, we continue to see now the opening to create a gain traffic in Mainland, in brick-and-mortar, we see the continuation of the line success.

And we see the — obviously, the reopening of Hainan. And so the Chinese consumer on all fronts. Also, we see the fact that the Chinese consumer is starting to travel internationally. and this will gradually increase as the governments will agree theses and models of growth. In this moment, there are parts of the world we already opened, others we will open soon Japan, we understand it’s been an agreement, but it’s not yet open, we’ll be in soon. Korea is the 1 where the agreement is not yet finalized, but we are optimistic that in the future, this also would be resolved. So that’s another very important trend. This will have a positive impact, obviously, in our retail channel, but also in the countries of destination, like it’s always been historically happened.

In terms of categories in China, obviously, the most important thing that will happen as the China accelerate on all fronts will be the skin care will accelerate for us. And so the acceleration of Travel Retail Asia, the Aleris China, the acceleration of international travel of Chinese, which we had in front of us in part in quarter 4, but in part in — fiscal year 2024. This will will generate a substantial improvement of our skin care trends that, in turn, will have a positive impact on our margin mix. So that’s obviously an important element of the program. Then other regions of the world. As I commented in my prepared remarks, has been very strong in Europe where we built market share. in most of the European markets. Very strong in the rest of Asia, particularly strong gains in Japan and Australia, as I commented already.

And in Korea, excluding the travel retail impacts, that are particularly heavy on our Dejar brand, which has a big percentage in Travel Retail, excluding that also Korea started progressing very well. So good progress in all the other regions. Then North America. Now in North America, obviously, we also continue to lose share in the quarter. And overall, we would like to accelerate our plan of share recovery. But the good news is there’s been very strong progress in quarter 2. Every single month, October, November and then December, there was progress in top line sales acceleration. First of all, in retail, the quarter in the U.S. ended plus 2%, so on the positive. But December was plus 6.5%, 7%. So in line with our goals of acceleration. So we see the U.S. progressing.