What Helped EL’s Haircare Segment’s Performance in Fiscal 3Q16?

Why Estée Lauder Has Fallen 2 Weeks after Its Fiscal 3Q16 Results

(Continued from Prior Part)

Haircare segment’s revenue

Estée Lauder’s (EL) haircare segment’s revenue rose 1.4% in reported terms and 3% on a constant-currency basis to $0.1 billion in fiscal 3Q16. Aveda and Bumble and Bumble contributed to this revenue rise.

Estée Lauder’s haircare segment’s revenue rose due to its Aveda brand’s expanded global distribution, primarily in salons, freestanding stores, and travel retail. Bumble and Bumble’s revenue also contributed to the segment’s rise with its increased presence in specialty-multi brand retailers and salons.

According to EL’s chief financial officer Tracey Thomas Travis, Aveda’s new Invati for men benefited from initial shipments and delivered strong salon sales in Western Europe.

Operating income

Operating income for the haircare segment rose 52.1% in fiscal 3Q16. This rise was due to strong results from Aveda, namely its Thickening Tonic and Shampure dry shampoo. Continued growth in the Invati brand also contributed to the rise.

In addition to its four segments, Estée Lauder also sells ancillary products and services. These sales rose 141.5% in reported terms and 100% in constant-currency terms in fiscal 3Q16.

Competition from other brands

Estée Lauder faces stiff competition from international and regional brands in the haircare segment. International brands such as L’Oréal (LRLCY), Procter & Gamble (PG), and Unilever (UL) supply haircare products in large format retail stores such as Walmart (WMT) and Macy’s (M) as well as in beauty salons, depending on the brand.

Omni-channel expansion

Estée Lauder aims to expand its retail store footprint through omni-channel initiatives and specialty multi-retailers. In fiscal 3Q16, the haircare segment’s Aveda brand added salons and freestanding stores and continued sales in travel retail in Europe.

In addition, EL launched numerous pilot programs. It’s building the omni-channel capability to begin to seamlessly connect consumers across its brand sites and its freestanding stores globally. Bumble and Bumble experienced solid growth in the specialty multi-channel space.

EL makes up 0.2% of the iShares Russell 1000 Growth ETF (IWF).

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Why Estée Lauder’s Stock Has Risen 6.2% Year-to-Date

• Part 2 - How Estée Lauder Outdid Its Earnings Estimate for the 19th Time

• Part 3 - How EL’s Fiscal 3Q16 Revenue Compared to Analysts’ Expectations