Beauty giant Estée Lauder hails ‘powerful’ innovation amid record profitability

The company’s adjusted operating margin expanded 80 basis points to an “all time high” of 19.7% over its 2022 fiscal year, as the beauty giant invests in innovation to support its pricing.

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Estée Lauder has hailed its innovation investment as a “powerful catalyst for growth” over its 2022 financial year, as the beauty giant behind Mac Cosmetics, Clinique, Jo Malone and its flagship Estée Lauder brand reports record sales and profitability.

Innovation represented over 25% of sales in 2022, CEO Fabrizio Freda told investors on an earnings call today (18 August). Branding this a “powerful” and “efficient” percentage, Freda said the business plans to maintain this level next year, as it continues to invest in “foundational capabilities for the future”.

Much of this innovation has focused on Estée Lauder’s hero strategy, which includes “high repeat, loyalty inducing products” such as Clinique’s Take The Day Off range.

“Breakthrough” launches over the year included Mac’s MACStack mascara and Estée Lauder’s Re-Nutriv Diamond Serum, which drove “favourable” earned media value and “strong” new consumer acquisition.What’s the future for innovation in the age of inflation?

The company reported net sales of $17.7bn (£21bn) for its fiscal year ending 30 June, up 9% on 2021. Adjusted operating margin expanded 80 basis points to an “all time high” of 19.7%. However, net earnings fell almost $500m (£417m) to $2.4bn (£2bn).

According to Freda, innovation has been key in driving Estée Lauder’s pricing and price increases, even as inflation bites.

“Innovation often is about improving product, improving product performance [and other] benefit areas that are important for the consumer. They’re willing to pay more,” he explained. “Innovation will continue to be a very strong driver.”

Innovation was “strongly supported” by media investment over the year, Freda added. Advertising investment is expected to increase next year on an absolute level.

Meanwhile, the group plans to achieve estimated annualised gross savings of between $390m and $410m in 2024 before taxes. A portion of these savings will be reinvested in capabilities that “sustain long term growth”, including data analytics, online and advertising.