Strong demand for makeup drives Estee Lauder’s glossy sales forecast

Estee Lauder Cos Inc (EL.N) forecast fiscal 2022 sales largely above estimates on Thursday, boosted by a rebound in demand for makeup products at its brick-and-mortar stores as people start venturing out following the easing of COVID-19 curbs.

Shares of the cosmetics maker rose 2.5%, as sales in its makeup division climbed for the first time in more than a year, surging 76% in the fourth quarter.

Sales of the M.A.C brand owner’s foundations and lipsticks rebounded after a year of pandemic-induced lockdowns, which have now eased with people returning to offices and stepping out for events.

“Makeup and hair care are poised to gradually reignite as growth engines,” Chief Executive Officer Fabrizio Freda said on an earnings call.

The company, however, maintained a cautious stance at a time when U.S. cities are reintroducing mask mandates due to COVID-19 resurgence worldwide.

“It will be a bit choppy for makeup. We’ve planned for that, but we do believe that we’ll see a progressive improvement in the makeup category throughout the year,” Chief Financial Officer Tracey Travis said.

Estee still projected its net sales to increase between 13% and 16% in fiscal 2022, versus Refinitiv IBES estimates of 14% growth. It also forecast adjusted earnings between $7.23 and $7.38 per share, above estimates of $7.14.

Sales in duty-free shops are also expected to benefit from an increase in international travel, while Estee’s presence in the recently opened Sephora (LVMH.PA) sections in Kohl’s (KSS.N) stores as well as Ulta Beauty (ULTA.O) shops inside Target (TGT.N) stores would also boost the topline.

Net sales in the reported quarter rose 62% to $3.94 billion, beating market estimates of $3.75 billion. Excluding items, it earned 78 cents per share, above estimates.