Visitor numbers and product shipments to duty-free shopping destination Hainan were curtailed during the period
Tom Ford Beauty was one of the brands driving net sales growth in ELC's fragrance category
Net sales were US$4.62bn for the quarter ended 31 December 2022, down from $5.54bn in the prior-year period
The luxury beauty giant blamed the quarter’s lacklustre results on the evolution of the Covid-19 environment, specifically the now-lifted restrictions in mainland China.
This resulted in tourism and product shipments to duty-free shopping destination Hainan remaining curtailed.
These challenges, said ELC, were partly offset by a strong performance from its fragrance business, as well as a good performance during the 11.11 Global Shopping Festival.
Fragrance net sales grew in every region, driven by the Estée Lauder, Le Labo and Tom Ford Beauty brands, while hair care net sales were up 4%, reflecting growth from both The Ordinary (which launched its first hair care skus in March 2022) and Aveda.
However, there were net sales declines for ELC’s skin care and make-up segments.
Skin care net sales slipped 20% due to the tightening of inventory by certain retailers in Asia travel retail and limited retail traffic in mainland China, as well as lower replenishment orders in the US.
Growth from The Ordinary and Bobbi Brown was offset by declines from Estée Lauder, La Mer, Dr.Jart+ and Clinique.
Make-up decreased 3% overall, but MAC and Clinique both performed well in this sector, with the social media-led demand for Almost Lipstick in Black Honey boosting net sales for Clinique's make-up.
Looking forward, Fabrizio Freda, President and CEO of ELC, warned that continued pressure on the company’s travel retail busines means its return to growth has now been shifted to the fourth quarter of fiscal 2023.
“For fiscal 2023, we are lowering our outlook given the November and December disruption to travel and staffing levels in Hainan that slowed the expected normalisation of inventory and the recently-announced potential roll-back of Covid-related supportive measures in Korea duty free,” said Freda.
“Together, these are creating a near-term, transitory pressure to our travel retail business.
“In the third quarter, this is more than offsetting the initial positive impact from the resumption of international travel by Chinese consumers, as well as favourable trends from our second quarter results,” he added.
“All told, our return to growth has shifted to the fourth quarter.
"We remain focused on investing in our brands, including for innovation, advertising and entry into new countries, among others, to fuel our multiple engines of growth strategy.”