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China drives Estee Lauder's growth

Estee Lauder (EL) reported its full-year 2017 earnings on August 18th, 2017, showing strong results, with investors rewarding it with a pop in the stock price.  Total sales were up 5%. Driving that growth was China, with sales were up 40% for the year. China e-commerce was up 50% y/y.  Estee Lauder has invested heavily in China in recent years, with a multi-faceted effort to increase its presence among mobile and online shoppers in China, including launching dedicated flagship stores on Tmall.com. And they are reaping strong results: So, just how well is Estee Lauder on Tmall?  Quite well, as it turns out, with no sign of slowing down:

  Estee Lauder leads its peers in both y/y sales growth, as well as blended ASP. Our recent analysis of cosmetics trends on Tmall.com show Chinese consumers upgrading to higher-end products, benefitting Estee Lauder's premium position in the cosmetics space.  A comparison of y/y growth among the top brands over the past several months reveals Estee Lauder and LVMH brands to be leading the pack:  

  It's clear that Estee Lauder is performing well on Tmall.  While not shown here, it's worth noting that our analysis of JD.com data (

), shows a similar trend. However, while online is clearly important and only growing more so, the offline channel is still quite meaningful for cosmetics sales in China, especially in department stores. Looking at the department store data reveals the following:  

An analysis of the key department store channel shows Estee Lauder gaining momentum over the last few months, handily beating the rest of the sector in terms of y/y growth from April - June 2017. Estee Lauder's own guidance has said that while it doesn't expect another year of 40% y/y growth in China going forward, Sandalwood data are showing that the company is off to a strong FY18. We will continue to monitor the cosmetics sector in China, including the ongoing impact of the Thaad missile dispute on the K-beauty sector. For more data about Estee Lauder or the Chinese cosmetics market, please contact us 

. Sandalwood Advisors is Asia’s first alternative data platform. You can also follow us on Twitter 

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