$1 Bln in Beauty: Estée Lauder’s China Campaign Pays Off with Sales Surge

Sales of Estée Lauder Companies Inc. beauty products crossed $1 billion in the Asia-Pacific region in the last quarter, for the first time in the company’s history, as efforts to grow its global business, specifically in China, appeared to pay off handsomely.

Investors and brands may be fretting over an economic slowdown in China, but this last quarter has been kind to quite a few companies that have benefited from Chinese consumers. Following positive earnings announcements from French luxury powerhouse LVMH Moët Hennessy Louis Vuitton and beverage company Diageo, the Estée Lauder Companies Inc has surprised investors with a sales surge in China.

The beauty brand has benefited from what analysts call the “lipstick effect,” which is when consumers forego luxury items but switch to splurging on expensive cosmetics. The company’s major brand Estée Lauder, of course, has made a significant marketing push into China, selling on Alibaba’s Tmall and marketing on China social media channels.

The company released limited edition lipstick in China for Christmas as well as special products for November’s Singles’ Day shopping holiday. Estée Lauder has also worked with various Chinese influencers to promote their products to consumers, and the company expects these partnerships to continue driving sales in the country.

Net income (attributable to the company) rose four-fold from the previous year to $573 million in the second quarter ended Dec. 31, 2018, when the company incurred a tax-related charge. Earnings per share in the quarter were $1.55 compared to $0.33 in the same quarter the previous year.

The company also raised its outlook for the year — it now guides that revenue will grow 5-6 percent year-on-year, an increase of 1 percentage point from its previous forecast.

Shares in the Estée Lauder Companies Inc. closed up 11.6 percent on Tuesday to $152.02.

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Beauty & Health, Earnings Brief