Yahoo Finance EL’s Fiscal 3Q16 Standout: Europe, Middle East, and Africa
Why Estée Lauder Has Fallen 2 Weeks after Its Fiscal 3Q16 Results
Europe region’s revenue and travel retail
Estée Lauder’s (EL) Europe, Middle East, and Africa (or EMEA) region’s fiscal 3Q16 net revenue rose 7.7% in reported terms and 11% in constant-currency terms to $1.0 billion.
The rise was driven by the United Kingdom and a number of emerging markets, including the Middle East, Central Europe, South Africa, and Russia.
Travel retail (XRT) also benefited from new launch initiatives, global airline passenger traffic growth, and expanded distribution in this region. Despite the softness of key foreign currencies, operating income for the Europe region rose 3.9% to $0.2 billion in fiscal 3Q16, driven by the Nordic region, Central Europe, the Balkans, and Italy.
Sales and income in the Americas
The Americas region’s fiscal 3Q16 net revenue rose 0.2% to $1.1 billion. This was driven by new product introductions by Tom Ford, Jo Malone, Smashbox, and Bobbi Brown. In addition, expanded distribution of MAC helped to drive revenue growth in Brazil and Mexico.
Operating income for the Americas region rose 1.9% to $0.1 billion in fiscal 3Q16. The rise was benefited by EL’s favorable expense management, promotional activity by its Clinique brand, and investment spending by its Estée Lauder brand.
Asia-Pacific region results
Revenue for the Asia-Pacific region rose 0.2% in reported terms and 5% in constant-currency terms to $0.5 billion. The rise was due to strong results in almost every country, including Korea, Japan, Australia, and Taiwan. Hong Kong was the one exception.
The Asia-Pacific region’s operating income fell 9.6% due to the adverse effect of foreign currencies and lower results from Hong Kong and China. Other companies L’Oréal (LRLCY), Shiseido (SSDOY), and Avon (AVP) also face foreign exchange headwinds, as they have presences outside the United States.
Growth in emerging markets
Estée Lauder aims to strengthen its growth in emerging markets. According to chief financial officer Tracey Travis, the company’s E&M (electronic and mobile) commerce sales in China rose 70%, which helped in its overall 5% sales growth.
The company aims to generate growth in other emerging markets such as sub-Saharan Africa and Zambia through prestige products and personalized services.
EL makes up 1.4% of the PowerShares Dynamic Large Cap Growth ETF (PWB).
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