Estee Lauder raises annual forecasts on recovering cosmetics demand

By Aditi Sebastian and Ananya Mariam Rajesh

(Reuters) -Estee Lauder Cos Inc raised its annual revenue and profit projections on Thursday as price hikes and a recovery in demand for its makeup products blunt the hit from surging costs.

Sales of the cosmetics maker rose in every region in the last three months of 2021 and demand for most of its products grew from pre-pandemic levels, powering the company’s second-quarter earnings above Wall Street expectations.

Makeup sales jumped 11%, continuing their recovery as consumers venturing out more to gatherings after the easing of curbs splurged on Estee’s foundations and MAC lipsticks.

The company also benefited from the reopening of brick-and-mortar stores and a return to office in the United States and the United Kingdom, which led sales growth among its Western markets.

The La Mer maker expects reported net sales to rise between 13% and 16% for the full year, compared with its previous forecast of a 12% to 15% increase.

Still, it continues to face pressure from higher costs wrought by industry-wide supply chain problems and raw material inflation. Its margins were flat year-over-year in the second quarter at 77.9%.

“Inflationary pressures in our supply chain are expected to begin to more prominently impact cost of goods in our fiscal third quarter … however, the benefit of pricing and cost mitigation efforts are helping to offset some of the inflation impacts” Chief Financial Officer Tracey Travis said.

The company forecast current-quarter adjusted profit between $1.55 and $1.65 per share, below expectations of $1.92, according to Refinitiv IBES data.

Edward Jones analyst John Boylan said higher prices and solid demand should help the company, but cautioned the “positive factors might not entirely offset higher costs in the shorter term.”

Estee shares were down about 3% in a weaker overall market, after rising about 39% last year.

(Reporting by Ananya Mariam Rajesh and Aditi Sebastian in Bengaluru; Editing by Aditya Soni)