Nov 4, 2019: Elisabeth King reports on this week’s business news

Strong Q3 sales lift L'Oréal YTD revenues to UD$24.55 billion; Estée Lauder predicts a strong 2020 on double digit Q1 growth; media consolidation in the UK: Future acquires TI Media for AUD$262.89 million; and DIY health and fitness attract major investments from tech giants and fashion brands.

Strong Q3 sales lift L'Oréal YTD revenues to UD$24.55 billion
L'Oréal is on fire in the Asia/Pacific region, travel retail and e-commerce. The French multinational reported like-for-like growth of 7.5 per cent in Q3 to reach global sales of US$8.03 billion. A strong performance that lifted nine month year-to-date revenues to US$24.55 billion.

The L'Oréal Luxe and Active Cosmetics divisions were particularly dynamic in Q3, said Jean-Paul Agon, Chairman and CEO. The launch of two new power fragrances – YSL Libre and Lancome Idole – and a new formula for best-selling serum, Génifique, helped to power the luxury division to sales of US$3.07 billion – a rise of 13.8 per cent. The Active Cosmetics division (La Roche-Posay, Vichy, CeraVe) also enjoyed double digit growth of 14.2 per cent to generate sales of US$677 million through major franchises such as Anthelios suncare and the Effaclar anti-acne range.

Travel retail performed strongly – up 20.8 per cent – and e-commerce sales increased by a massive 47.5 per cent to account for 13.5 per cent of global sales. The Consumer Products division edged up 2.7 per cent to reach revenues of US$3.35 billion, driven by the global rollout of L'Oréal Paris Elvive Dream Lengths, Maybelline Superstay Matte Ink Lip Colour and the Garnier Bio skincare range.

The Asia/Pacific region continued to be the star growth area for L'Oréal –  up 22.6 per cent for the third quarter by contrast to the same period in 2018. Eastern Europe also re-ignited with an uplift of 12.8 per cent. Western Europe  experienced a sales rise of 3.2 per cent. The North American market declined 1.3 per cent in Q3, but has seen growth of 5.9 per cent over the year-to-date.

According to Jean-Paul Agon - "Overall, L'Oréal’s strong performance during the quarter and in the first nine months reinforces our confidence in the dynamism of the cosmetics market, despite a volatile and contrasted environment, and in our ability to outperform it to achieve another year of growth in our sales and profit".

Estée Lauder predicts a strong 2020 on double digit Q1 growth
Net sales increased 11 per cent for the Estée Lauder Companies in the first quarter of its fiscal 2020 to hit US$3.9 billion. Skincare sales led the pack with revenues of US$1.8 billion – up 25 per cent on the same period last year. The core Estée Lauder brand continued to post  vigorous growth through major franchises such as Advanced Night Repair, Micro Essence and Revitalizing Supreme. La Mer enjoyed increases across all regions, fuelled by the re-launch of The Regenerating Serum and continued success of The Treatment Lotion and the Concentrate. Moisture Surge, the Dramatically Different Moisturizing lineup and Smart Clinical propelled a spike for Clinique.

Double digit growth for Estée Lauder, Tom Ford Beauty, M.A.C and La Mer were the main drivers of makeup sales in Q1 to US$1.4 billion. The Double Wear franchise was again a hero for the Estée Lauder brand and M.A.C reported increased sales in China, Japan, Southeast Asia and Latin America. The launch of Tom Ford Beauty on Alibaba's Tmall gave the brand a major boost in the first quarter.

Fragrance sales declined by close to 2 per cent to US$462 million by contrast to the same period in 2018, which included the successful launch of Beautiful Belle. Jo Malone and Tom Ford Private Blend juices and the debut of Metallique were the standouts of the category for the multinational.

The Asia/Pacific region delivered high overall growth of 26 per cent across every market China, Japan, South Korea and Southeast Asia. Outstanding results that have prompted the company to predict net sales growth of 8 to 9 per cent for fiscal 2020. "With our strong start and continued confidence in our ability to execute effectively, we are raising our full year net sales and earnings per share guidance in constant currency", noted Fabrizio Freda, President and CEO of the Estée Lauder Companies.

Media consolidation in the UK: Future acquires TI Media for AUD$262.89 million
Magazine and online digital publisher, TI Media, controls some of the UK's market-leading magazine brands – Marie Claire UK, Country Life, the trendy Wallpaper*, TV Times and Woman's Weekly. The company is better known under its previous name of Time Inc and was acquired by UK private equity firm, Epiris, from the US-based Meredith Corporation in early 2018 for AUD$244 million.

TI's stable has an audience reach of 11.7 million in the UK. Epiris sold off several titles and introduced a cost-cutting program soon after the buyout. Future is a British media company founded in 1985 and is based in the city of Bath. The company publishes more than 50 titles with a major emphasis on gaming and entertainment, films, music and home.

The Australian subsidiary, Future Australia, acquired APC and TechLife computer magazines from Bauer Media in 2013 and PC PowerPlay, Hyper and PC & Tech Authority magazines from nextmedia in September last year. Future also operates in the US and significantly expanded its American footprint last year.

The agreement with TI Media is expected to be finalised in the Northern Hemisphere Spring next year. The AUD$262.89 million buyout will strengthen Future's gaming and entertainment verticals and extend into three new specialist areas –  lifestyle, sport and women's interest. Future plans to develop new digital monetisation models for the TI Media brands and to expand select titles internationally.

DIY health and fitness attract major investments from tech giants and fashion brands
Health and fitness have become the new growth opportunity for some of the biggest tech and retail companies. Google announced last week that it was acquiring Fitbit, the wearable smartwatch brand, for US$2.1 billion. Apple and Amazon have also recently forged into health tech via Apple Watch and Alexa. Hardly surprising, as being responsible for their own health has become a mega-trend among consumers worldwide.

Mirror, the New York-based startup that manufactures an interactive, at-home workout mirror, has raised US$34 million in new funding, led by hedge fund Point 72. Lululemon, the Canadian athleisure retailer with global revenues of US$3.29 billion, and supermodel Karlie Kloss are also investors in the just-closed funding round. Analysts believe the move is a warning shot to boutique workout studios. Mirror interactive mirrors are an exy US$1500, but Lululemon is banking on at-home fitness being a major growth opportunity. The investment will also springboard Mirror x Lululemon classes, starting with meditation.

Snippets from the Wires

  • US private equity firm, Regent, has been on a luxury fashion buying spree over the past year. The company bought the La Senza lingerie brand from L Brands, owner of Victoria's Secret, in late 2018 and acquired Brands4Friends, the Berlin-based online shopping club from eBay in early September. Regent has now inked a deal to buy the German-based luxury fashion brand, Escada. Acquired by Indian steel mogul, Lakshmi Mittal, in 2009, Escada is sold in 24 countries across North America, Europe and Asia and generated sales of 107 million euros (AUD$173.3 million) in 2018. Coty took over the Escada fragrance license as part of its deal to acquire over 40 P&G brands.
  • Walmart and Target in the US have become champions of the clean beauty trend. Carrefour, the French supermarket giant, is following suit  with a new concept store called Sources in the trendy Marais district of Paris. Over 170 clean beauty brands are on offer, which don't contain more than 76 ingredients, including parabens and aluminium.
  • Cosmoprof Asia 2019 will be held in Hong Kong from November 11th to 14th. With 3100 exhibitors and 25 country pavilions, this year's show has achieved double digit growth in registrations in spite of ongoing unrest in the region. South Korea is this year's Country of Honour with a huge 630 exhibitors.