Estee Lauder Companies AEL

Morningstar Rating

Stock Research and Analysis

by Erin Swanson, CFA

With 25% share of the global prestige makeup market, Estee Lauder operates with an extensive portfolio of nearly 30 brands, including Clinique, Origins, M-A-C, Aveda, American Beauty, and Ojon. Although weak consumer spending has hurt Estee Lauder's Read more

Bulls Say

Estee Lauder has a well-diversified revenue base, with about 60% of sales resulting from international operations.

Because some consumers equate value with price, several of Estee Lauder's brands are launching products at lower suggested retail price points or adjusting the size of their offerings to appeal to their consumer bases.

Although the Estee Lauder and Clinique brands are mature in the U.S., the firm possesses significant opportunities to expand the distribution of these products overseas.

Clinique's debut on QVC in the U.S. in February 2008 was the largest two-hour beauty launch in the network's history. This program also increased sales of Clinique products in the firm's traditional department store channel. Read more

Bears Say

We expect that traditional department stores will still account for a significant portion of Estee Lauder's sales. This channel has been losing share as shoppers venture to alternative outlets for beauty-care offerings.

Estee Lauder must carefully balance the introduction of new products in order to minimize the cannibalization of sales of its existing products.

The Lauder family owns the majority of outstanding shares, weakening the influence of outside shareholders who might be unhappy with management's decision.

Estee Lauder's travel retail business, which makes up nearly 40% of the firm's sales and just more than 20% of its profits, has been constrained recently by declining air traffic. Read more

Strategy

Estee Lauder is seeking to expand its business through increased marketing of existing brands while also increasing product innovation efforts in areas that are resonating with consumers. In addition, Read more

Management

Fabrizio Freda, 52, was appointed as CEO in June after spending 20 years at the world's largest consumer product firm, Procter & Gamble PG, in various roles. In our opinion, Freda (the first outsider to run Estee Lauder) should bring a fresh perspective Read more

Profile

Over the course of the past 60 years, Estee Lauder has become a leading global manufacturer and marketer of skin care, makeup, fragrance, and hair-care products. Beyond Read more

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