By Karina Dsouza and Vibhuti Sharma
Nov 1 (Reuters) – Estee Lauder shares hit a record high on Wednesday after the cosmetics maker forecast holiday-quarter sales ahead of market expectations, banking on demand for recently acquired makeup brands that are popular with millennials.
The strong forecast followed better-than-expected sales and profit in the first quarter ended Sept.30, as sales in the Asia Pacific region and Europe soared by 18 and 20 percent respectively.
Powered by a 4 percentage-point gain from two youth cosmetics brands it bought last year – Too Faced and BECCA – that also reflected an 18 percent rise in makeup sales for lazabet the world’s second largest cosmetics firm.
Shares of the New-York based company jumped nearly 9 percent to $121.63 after it published its results and the new outlook.
“We benefitted from a continued acceleration in China, Hong Kong, travel retail and global online,” Chief Executive Fabrizio Freda said.
Business for makeup companies is booming across Asia and the Pacific, especially China, as a growing middle class travels and spends more, visiting beauty retailers more often and shopping more at duty-free stores at airports.
In the United States, though brick-and-mortar sales have been falling, Estee Lauder’s acquisitions and greater use of pure play cosmetic retailers Ulta Beauty and LVMH’s Sephora have helped it offset any hit to profits.
“We believe Estee Lauder continues to prove that it is successfully pivoting distribution in the U.S. away from non-performing department stores,” J.P.Morgan analyst Andrea Teixeira said.
“(That) should continue to bolster performance going forward.”
Overall sales were $3.27 billion in its first quarter ended Sept. 30, beating Wall Street expectations.
The company forecast second-quarter sales – which takes in the Thanksgiving and Christmas holiday seasons – at $3.63 billion to $3.69 billion, topping an average analyst estimate of $3.56 billion, according to Thomson Reuters I/B/E/S.
On a post earnings call with analysts, Freda said he expected the Asia business to grow further, benefitting from the recent launch of MAC cosmetics on Lazada, an online shopping platform owned by Alibaba.
Excluding certain items, Estee Lauder earned $1.21 per share, soundly beating analysts’ average estimate of 97 cents per share.
For fiscal year 2018, the company expects an adjusted profit of $4.04 to $4.12 per share.It had previously forecast an adjusted profit of $3.87 to $3.94 per share. (Reporting by Karina Dsouza and Vibhuti Sharma in Bengaluru; Editing by Sai Sachin Ravikumar and Sayantani Ghosh)