Estée Lauder braces for further supply chain disruption in 2022

By Becky Bargh 3-Nov-2021

To deal with the global shipping and labour crisis, Clinique owner will be forced to hike the prices for its cosmetics

International beauty major Estée Lauder Companies (ELC) has outlined a number of measures it will take in an effort to side step the difficulties facing global supply chains.

In its fiscal Q1 2022 report, the beauty owner cited port congestion, labour and container shortages and shipment delays as key challenges that are forecast to negatively impact the business.

The Clinique owner warned that higher transportation and logistical costs will impact the cost of sales and operating expenses for the remainder of the financial year.

In order to deal with the crisis, one course of action will be an increase in cosmetic prices – something already being adopted by other cosmetics players to deal with rising costs and inflation.

Meanwhile, ELC also said it will turn to air freight to bypass overcrowded ports, and for the ships that it does have to use, it will attempt to streamline the process.

To add to ELC’s woes, Covid-19 is continuing to blight the bounceback of retail.

According to the group, many areas in Europe, Latin America and most of the Asia/Pacific regions have had to shutter stores due to the rapid spread of the Delta variant of the virus, a much more contagious strain of Covid-19.

ELC also said that in areas where stores were open globally, consumer traffic has not recovered to pre-pandemic levels, which has hampered its comeback.

In spite of the trading difficulties, ELC has reported strong growth for the three month period with net sales up 23% on the same period in 2020, with fragrance and make-up the best performing categories.

Speaking about the company’s successful quarter, Nina Mowak, Senior Researcher at GlobalData said: “Estee Lauder’s impressive 23% growth in net sales demonstrates the recovery of the cosmetics and toiletries market, after a difficult period that forced the industry to take a new look on brand strategies, product positioning, and retail models.

“This substantial growth can also be credited to the recovery of the make-up category, fueled by post-lockdown demand for colour cosmetics. Indeed, GlobalData’s survey found that nearly half (48%) of global consumers described their current spend on the category as ‘high’ (22%) or ‘medium’ (26%).”

The cosmetics maker now expects its net sales to grow between 11% and 13% on a year-on-year basis, while full year fiscal net sales are predicted to increase between 12% and 15%.

“We delivered excellent performance to begin fiscal 2022, despite the increased volatility and variability globally during the quarter, by virtue of our dynamic multiple engines of growth strategy,” said Fabrizio Freda, President and Chief Executive of ELC.

“Looking ahead, we remain focused on the safety and wellbeing of our employees and consumers.

“For fiscal 2022, we continue to expect strong net sales and adjusted earnings per share growth with margin expansion.

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“Our confidence in the long-term growth opportunities for global prestige beauty and our company is reflected in the announcement today to raise the quarterly dividend.”