Higher Passenger Traffic From Asia-Pacific Should Bolster Estee Lauder Travel Retail Sales

Apr 3 2014, 8:28am CDT | by

In FY2013, prestige beauty product maker Estée Lauder reported sales of approximately $10.2 billion compared to $9.7 billion in sales in FY2012, a 5.2% increase. The company sells its products through various upscale departmental stores, specialty retailers, prestige salons and spas. In total, Estée Lauder estimates it has close to 30,000 points of sale within these distribution channels, generating sales of its beauty products across the world. Additionally, the company also markets its products through freestanding stores, duty-free and travel retail outlets worldwide, and also its own and other authorized retailer websites.

In this note, we provide an analysis of Estée Lauder’s travel retail business, underlining various factors that impact the division’s performance and its potential value contribution to overall top line for the company. We have a $75 Trefis price estimate for Estée Lauder, which stands at an 11% premium to its market price.

See Our Full Analysis for Estée Lauder

A Look At Estée Lauder’s Travel Retail Business
/>

Travel retail sales for Estée Lauder increased to over $1 billion in FY2012, driven by the increase in global passenger traffic. For fiscal 2013, sales from the travel retail channel grew at thrice the pace of global passenger growth rate. According to data from the IATA, global passenger demand expanded 5.2% in 2013, from close to 3 billion passengers in 2012. This should put Estée Lauder’s travel retail sales growth rate at over 15% for fiscal 2013, to stand at approximately $1,156 million. Much of the 15% growth rate in travel retail comes from the sale of skin care products. As a percentage of overall revenue, this marks a sizable 11.4% contribution from the travel retail channel for Estée Lauder.

Asia-Pacific Passenger Traffic Growth Should Support Strong Travel Retail Expansion
/>

A major factor for travel retail revenues standing at three times global passenger traffic is the combination of expanding disposable income in the Asia-Pacific region, along with strategic positioning of travel retail outlets by Estée Lauder. The main customer base for a travel retail outlet is the global passenger, and hence, positioning such outlets in high traffic corridors is key to having a higher growth rate.

International passenger demand is the highest for the Middle Eastern region at 12.1% in 2013. Similarly, emerging market regions of Latin America, Africa and Asia-Pacific registered growth rates of 8.1%, 5.5% and 5.3% respectively, in international passenger demand. Meanwhile, developed economies of Europe and North America had growth rates of 3.8% and 3% in international passenger demand. The Asia-Pacific region, in addition to outpacing passenger demand from developed economies, leads the world passenger traffic with a 29% share according to Airbus, followed by Europe and North America at 26% and 25% respectively.
/>

Estée Lauder has capitalized on the strong demand for international travel from Asian customers and is the leading travel retailer in the Asia-Pacific market. By the end of fiscal 2012, the company had a total of 1,600 travel retail outlets worldwide. However, we believe a majority of these travel retail outlets to be situated in travel corridors popular among Asian customers, given their expanding discretionary wallet share. Going forward, the company could continue to establish itself as a strong travel retailer within the Asia-Pacific region by opening more stores.

Travel Retail Investments Should Lead To Market Share Expansion For Estée Lauder

Going forward, Airbus expects domestic travel within China and India to drive overall Asia-Pacific passenger demand, with annualized growth rates of 7% and 10% respectively through 2032. In addition to strong domestic travel growth, international travel corridors (such as Intra Asia, Asia – Middle East, Asia – PRC and Central Europe – Western Europe) are expected to see a higher demand in passenger traffic than the global growth rate of 4.7% annually through 2032. This burgeoning demand surrounding the Asia-Pacific and Middle East regions should drive future investments into travel retail from cosmetics companies.

We expect Estée Lauder to increase its investments into the travel retail business in the future, driven by the higher revenue growth rate from the division. Through its travel retail channel, Estée Lauder has achieved a 15% top line growth rate compared to 4% for overall revenues in CY2013. Additionally, growth in travel retail is primarily resulting from the sale of skin care products. At the end of CY2013, we estimate Estée Lauder’s skin care market share to stand at approximately 7.6%. However, higher investments into travel retail should be able to drive future revenues and expand its skin care market share in the future.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
///>

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Mali confirms two new Ebola cases
United Nations, Nov 26 (IANS) Mali has confirmed two new cases of Ebola, bringing to total number of cases in the West African nation to eight, days ahead of the opening of a new UN Ebola response office.
 
 
Merkel warns of recession in Europe
Berlin, Nov 26 (IANS) German Chancellor Angela Merkel Tuesday warned that Europe could slide back into recession, media reported.
 
 
India, Nepal ink nine deals; Modi inaugurates trauma centre, bus service (Roundup)
Kathmandu, Nov 25 (IANS) Nepal's happiness "gives us joy", Prime Minister Narendra Modi said here Tuesday on his second visit to the Himalayan country in 100 days as both sides inked nine agreements, further cementing their close ties.
 
 
India, Nepal ink 10 deals; Modi inaugurates trauma centre, bus service (Intro Roundup)
Kathmandu, Nov 25 (IANS) Nepal's happiness "gives us joy", Prime Minister Narendra Modi said here Tuesday on his second visit to the Himalayan country in 100 days as both sides inked 10 agreements, including on $1 billion assistance to Nepal.
 
 
 

Latest from the Network

Mali confirms two new Ebola cases
United Nations, Nov 26 (IANS) Mali has confirmed two new cases of Ebola, bringing to total number of cases in the West African nation to eight, days ahead of the opening of a new UN Ebola response office. The UN...
Read more on Business Balla
 
Paris Hilton hugs cubs of big cats
Mexico, Nov 26 (IANS) Socialite Paris Hilton, who loves animals, was spotted cuddling lion and tiger cubs on her visit to a big cat sanctuary here. The 33-year-old couldn't resist sharing several videos and...
Read more on Celebrity Balla
 
Don't Miss these Black Friday Deals and Sales
Black Friday 2014 will end in 4 days. The biggest release of deals is still to come, but there are already many Black Friday 2014 Sales underway. Thanksgiving Day mark will be the big launch day for online and in-store...
Read more on Black Friday Countdown
 
Taylor Swift cautious of fake friends
Taylor Swift has no time for fake friends. The 'Shake It Off' hitmaker says she's not interested in being friends with people who are only keen on spending time with her because she's rich and famous. She explained: ''...
Read more on Celebrity Balla
 
Cyber Monday Deals better than Black Friday Deals?
Black Friday 2014 Sales are underway. We count over 12 Black Friday 2014 sales that either have fully launched or offer a selection of the advertised Black Friday deals. Each year there is discussion about if Black...
Read more on Black Friday Countdown
 
Shia LaBeouf abides by plea deal
Shia LaBeouf is abiding by the plea deal he reached with Manhattan prosecutors after his drunken meltdown in June. The 'Fury' actor appeared in Manhattan Criminal Court earlier today (25.11.14) to submit proof he's been...
Read more on Celebrity Balla
 
The Best Laptop Deal in Black Friday 2014
Black Friday 2014 is here and the first Black Friday 2014 Sales are already underway. The full push of Black Friday 2014 deals happens on Thanksgiving Day. So there is still a little time to make your shopping lists. If...
Read more on Black Friday Countdown
 
Cheryl Fernandez-Versini blasts Simon Cowell over weight comments
Cheryl Fernandez-Versini has blasted Simon Cowell for commenting on her weight. The 31-year-old beauty said it was ungentlemanly for a man in his 50s to suggest she'd gained weight prior to her brief appearance on the...
Read more on Celebrity Balla
 
Nick Cannon denies links to Amber Rose
Nick Cannon has denied having any romance with Amber Rose. The 34-year-old entertainer recently separated from Mariah Carey, whom he married in 2008, and has since been romantically linked to Amber Rose, 31, who filed...
Read more on Celebrity Balla
 
The Best TV Deals on Black Friday
Black Friday is one of the best times to buy TVs. It is the best time to get your hands on bargain TV deals like a $79 32-inch TV or a $119 40-inch TV. You see such deals never during the year. You also do not see such...
Read more on TV Balla