Estee Lauder (EL)
is the very model of a diversified luxury brand stock. Aside from the namesake brand, it markets a half-dozen others across varied demographics and sells cosmetics for clothing brands looking to expand their brand equity. Its strength, however, can be considered a weakness, as the upscale clientele to which all these brand names cater become wary of the economy’s outlook.
Estee Lauder is one of the world’s leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. Its products are sold in more than 150 countries and territories under a number of well-known brand names, including Estée Lauder, Aramis, Clinique, Origins, M-A-C, Bobbi Brown, La Mer and Aveda.
Estee Lauder is also the global licensee for fragrances and cosmetics sold under brand names such as Tommy Hilfiger, Donna Karan, Michael Kors, Sean John and Coach. Each brand is distinctly positioned within the market for cosmetics and other beauty products.
“We sell our prestige products principally through limited distribution channels to complement the images associated with our brands,” EL management said in a recent release.
“These channels, encompassing over 30,000 points of sale, consist primarily of upscale department stores, specialty retailers, upscale perfumeries and pharmacies and prestige salons and spas. In addition, our products are sold in freestanding company-operated stores, our own and authorized retailer websites, stores on cruise ships, direct response television, in-flight and duty-free shops and certain fragrances are sold in self-select outlets.”
Estee Lauder has a market cap of $21.26 billion in a sector, personal products, where the average company size is $1.75 billion. Its trailing 12-month P/E ratio is 25.68 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.75.
Its projected earnings per share growth for the coming year is 14.22 percent, compared to a sector average of 15.94 percent.
Analysts are generally positive on EL, with buy or outperform calls from Caris & Company, Merrill Lynch, Jefferies, UBS, Stifel Nicolaus, and Standard & Poor’s Equity Research.
“Aggressive promotions coupled with innovative marketing strategy ensured wide acceptance of the new launches globally,” wrote the analysts at Zacks Investment Research in early July, rating the stock neutral.
“However, slow recovering developed economies, slow job growth, high interest rates and still tightened credit availability continues to hurt consumer discretionary spending.”
Estee Lauder next reports on Aug. 13.
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