Lauder Tuning Out Noisy New Competitors To Focus On Proven 'Heroes'
This article was originally published in The Rose Sheet
"In the end, the profitable brands are still the big brands with great hero products with great repeat, and not the many small brands that generate a lot of noise on trial," Lauder CEO Fabrizio Freda asserted during the firm's third-quarter earnings call. MAC's announced rollout to Ulta doors is among efforts the company is undertaking to reassert hero franchises in new channels and markets.
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Driven by Estee Lauder and Clinique, the firm achieved gains in North America in fiscal 2018, despite continued brick-and-mortar retail erosion, while capitalizing on China’s growing appetite for luxury beauty. In a call with analysts, CEO Freda provided a succinct update on the company’s review of potentially flawed product claims, an issue raised last quarter that now is expected not to be material.
The beauty giant's second-quarter performance reflects global momentum in specialty retail and online channels and accelerating growth in China in particular. Analysts previously expressed concerns that increased distribution away from department stores could dilute Lauder's prestige positioning, but the firm consistently has defended the shift as essential to its future with younger consumers
The firm plans to maintain its brands’ prestige positioning by judicious partnering with e-commerce distributors and a “digital-first mindset” that extends to the in-store experience. Lauder reports 9% sales growth for its latest quarter and 5% for its fiscal 2017, driven by double-digit gains in travel retail, online and specialty- and multi-channel retailers and from growth across geographies and categories except haircare.