- 6 months ago
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00:00There's just a lot going on. There's a lot going on in terms of tariffs, in terms of trade.
00:05I mean, you reported some quarterly earnings. Shares plunged, and that's despite actually a boost to the outlook.
00:11So how did you internalize that?
00:12Well, thank you, first of all, Francine, for having me again.
00:15When I laid the strategy a year ago, when we met of Beauty Reimagined, we made a set of promises.
00:22And what I'm very happy is that we've delivered on these promises, first of all.
00:25I think we've moved with speed on consumer coverage.
00:28We've increased our innovation dramatically.
00:30In this moment, in time, consumer wants more innovation.
00:33We've promised that we would go at 25% plus of our sales coming from innovation.
00:38We've also increased our investment because it was needed for us to increase investment to reboost sales.
00:45And as a result, the first six months of our fiscal year, we've actually increased sales for the first time
00:50in three years.
00:51The last quarter, as you saw, we produced 4% organic sales growth, which is the first time in three
00:57years that we are in this position with many markets like China in the U.S.
01:01where we are gaining share.
01:02So we have momentum, and that's very important for us.
01:05You said it.
01:06Over the last 12 months, I think the stock price has recovered close to 50% of its price.
01:11And the interesting thing is, like, obviously, in the last quarter, there was a little bit of a dip, but
01:17the market reacts on the short term.
01:19We are looking at the long term, and I'm really confident that we are putting the right foundation for acceleration.
01:25I know, for example, you gained share in volume in the U.S., but not so much in value.
01:29Is that because of prices?
01:30Are you more sensitive to price increases?
01:32I think there is some with the volatility that we're saying around the world.
01:36We're seeing some consumer confidence being a little bit subdued that it is in China, it is in the U
01:41.S.
01:42But for me, it was really important in the U.S. after many years of market share loss that we
01:46could reignite recruitment.
01:48And that was the most important thing.
01:50And we're seeing the volume going up.
01:52Now, we have a pyramid, as you know, of brands from La Mer all the way to The Ordinary that
01:56allows us to just, like, you know, capture this consumer.
01:58And The Ordinary has been a resounding success for us, like in the U.S. and around the world, that
02:04is moving a lot of units in this moment in time.
02:07So we are tailoring, depending on the consumer confidence in the different places around the world, with the portfolio of
02:12brands, again, from La Mer,
02:14of very luxury tier and also brands like Tom Ford that you've mentioned, all the way to Estée Lauder Clinic
02:19and The Ordinary, where we have some great momentum.
02:22How consumers are buying differently in the U.S. compared to, for example, you know, China, where Asian travel is
02:28a little bit more subdued, except we did have, you know, the Chinese Lunar New Year.
02:33Yeah, no, it's interesting.
02:34I think historically we've always seen consumer buying differently by category.
02:39You know, we are in skin care, in makeup, in Francis and in hair care.
02:43Obviously, the East, China, and many of the other Asian markets are much more indexed in skin care.
02:49And the recovery that we're seeing this year, and we've been able to post double-digit growth in the last
02:53quarter, actually, 13% growth,
02:55shows the strong desirability of our brand, led by brands like La Mer and Estée Lauder, and even The Ordinary,
03:02that is only in its first year of launch.
03:04In the U.S., it's a little bit more balanced between the multiple categories.
03:09And what we've seen is a very strong acceleration of skin care, especially at the entry price point, but also
03:15perfume that has been an astounding category in terms of growth since, like, you know, COVID.
03:21Can you talk to us about tariffs and trade?
03:23I mean, you know, we have all this uncertainty over the last two to three days.
03:27What does it mean for a company such as Estée Lauder?
03:29Look, first of all, the news was announced on Friday, so we are monitoring a lot some of the decisions.
03:34I think it's still too early to understand the impact, but I'd like to say we are entering our 80th
03:39anniversary.
03:40We are 80th young, so we've seen a lot of volatility.
03:43We've seen pandemic.
03:44We've seen trade tariffs.
03:45The good news is that we have a very well-diversified network around the world from the supply and manufacturing.
03:52We have nine manufacturing sites around the world, five in North America, of which two are in Canada,
03:57three in Europe and in the U.K. and one in Japan.
04:01That has allowed us to just use some of the trade tariffs in a way to our advantage and really
04:09just be close to the consumer,
04:10because the strategy for us was always to manufacture close to the consumer,
04:15because we want to be the most locally relevant consumer company in the world, but also to be close to
04:21the consumer.
04:22What can we expect in terms of M&A?
04:24Is there something that you want to get rid of, or are there targets that you'd like to acquire in
04:28the next six months to 12 months?
04:29So it's a very good question, because for us, we are in a period of execution.
04:33It is very important that Beauty reimagine we are at the beginning of this journey.
04:37The first year, we've delivered on our promises.
04:39The second year for me is about now accelerating the growth and making sure that we are simplifying the ways
04:46of working.
04:46We are rebuilding profitability, but at the same time, we are looking at our portfolio.
04:51So we have, and I've been very public on that.
04:54We are looking at the portfolio, and we will always be part of the M&A discussion.
04:59Like, you know, if you look in our 80 years history, we've bought a lot of companies.
05:04Lately, obviously, The Ordinary and Tom Ford were part of it.
05:07But M&A is not only about buying something new.
05:11It's also about incubating new brands, and we are incubating a lot of new brands as part of, like, this
05:16year.
05:16I'm all taking minority investment.
05:18One of the last ones was Zinu, a really fantastic brand that we've taken a minority stake in Mexico.
05:25Stefan, when you say, you know, we're looking at the portfolio, are you going to buy more than you're selling?
05:30So the future will tell.
05:32You know, we are constantly looking.
05:34But, you know, as a CEO, I've been really committed that we are always going to be on movement.
05:38We have fantastic brands.
05:40Our top seven brands, from Estee Lauder to La Mer, Clinique, Mac, Tom Ford, Joe Malone, and The Ordinary, are
05:46fantastic brands.
05:47And, you know, the reality is, like, the market is changing.
05:50Consumer tastes are changing.
05:52And so we are looking in the current place in our portfolio.
05:55But, again, it is going to be about organic growth and inorganic growth.
05:59I think the future is going to be about making sure that we are balancing both.
06:03On Amazon, you were maybe a little bit slower than some of the others to get onto the platform.
06:07How are sales on that platform going and what did you learn?
06:10Well, it's fantastic.
06:11You know, we love, first of all, the partnership with Amazon has been fantastic.
06:14And we are looking at Amazon more so as a marketing platform than only sales platform because it allows us
06:21to just acquire a new consumer, re-engage with lapsed consumers.
06:25Today, we have 12 brands in 10 different markets.
06:28So you noted that we were a bit slow.
06:30But on the execution in the last year, we've been really, really fast.
06:33We have great, great success.
06:35And the first brand that we've launched was Clinique now, like, you know, over a year ago.
06:40And we've deployed many brands in many markets and there's more to come.
06:43What did you learn about, you know, selling on TikTok?
06:45Again, is that different to selling on Amazon, to selling through your retail stores?
06:49Yeah, I think on TikTok and TikTok shop, you have to be on the tram.
06:52And this is what I love about beauty.
06:54You have to be there also to be in culture.
06:57And it's much more impulsive, but you have to be there.
07:00And it's usually what the strategy of Hero product is what works.
07:03For instance, you look at, like, you know, Mac.
07:05We've just launched Mac on TikTok in the U.S.
07:08We've, like, you know, great success and people lashing on the new innovation.
07:11So this is also one of the reasons why I've put the accent on innovation acceleration
07:17because these new social media platforms that is TikTok shop or you have doing in China
07:22and others are really where consumers are discovering what is new.
07:26But it also means it goes really fast.
07:28It goes fast.
07:28So I think one mistake and it's, I don't know whether there's a strike and you're out.
07:33Is it more like roulette?
07:35Well, no, because I think today in the world of AI,
07:37we have a lot more information at the tip of our finger.
07:41We are harnessing, like, millions, if not billions of data points.
07:44And our role is to really send to the consumer but also to anticipate their need.
07:49So one of the reasons why I've put the accent of not only increasing innovation
07:53but also to tripling the innovation that comes to market in less than a year
07:57is really also to just, like, you know, follow this trend.
08:00But at the end of the day, we have a lot of information
08:03that allows us to just increase the rate of success.
08:06And today I can tell that in 2025 and in 2026,
08:10our rate of success on innovation is much greater than in the past.
08:13On what exactly?
08:14Again, is it, you know, is it makeup or is it skin care or is it across the board?
08:19Across the board.
08:19The one category that allows us to just go faster to market is makeup.
08:25Right.
08:25But because skin care, you have, like, you know, set of product
08:27that requires longer testing sometimes.
08:30But definitely, like, you know, makeup allows us to go faster.
08:33What are you most worried about this year and what are you most excited about?
08:36What I'm most excited about is how our team came together.
08:40And we are, you know, in the midst also not only of the transformation,
08:44but establishing our new culture of one ERC.
08:48And this culture allows us to be bolder, to be more agile, to be faster,
08:52to be more entrepreneurial.
08:53And this is what I'm the most excited about, how the team is.
08:57What I'm worried about is the external environment.
08:59But all the time, you cannot control geopolitics.
09:02What I can control is how do we run our business?
09:05How do we react to anything that is happening out there?
09:08Yeah. So, honestly, I feel really good about the momentum that we're having.
09:12And I feel that we can really go and build on it and accelerate for the future.
09:16How much time do you spend with your staff and actually explaining?
09:18I know, for example, you know, after your results and the share price goes down,
09:22again, internally, did you spend a lot of time talking to employees,
09:26making sure that they were okay, that morale was still high?
09:28I spend enormous amount of time with my team, not only traveling, but also in town halls.
09:33I host, like, you know, town halls every quarter with thousands of employees around the world.
09:38This isn't part of my mission.
09:39I've always been like that as a leader.
09:41I believe in close connection with the team.
09:43And this is why it is important in this moment to just evolve also our culture,
09:48because the success of the acceleration is also about the change and the evolution of the culture.
09:54The values of the Estelle Company are what they are, and they are fantastic.
09:58Again, 80 years young of strong values, but we need to evolve our culture and to go faster.
10:04And that's also by touching and speaking to all my teams around the world, which are,
10:08we have a fantastic team, we have a fantastic portfolio of brands,
10:12and I know we are up to a very strong acceleration for the future.
10:16Anything particular in China for the next 12 months?
10:19So China has been really good, actually.
10:21I was with my team in China on the phone this morning, you know,
10:23asking a little bit how things are going as we are finishing Chinese New Year.
10:27So I was trying to leave them alone during Chinese New Year, but very good.
10:30We are off to a very strong start of the calendar year after a very strong finish of last year.
10:36We're seeing really strong acceleration.
10:39You know, one of the things that is exciting for me is to just like, you know,
10:43see how each categories are accelerating.
10:46We're seeing perfume accelerating in China even faster than before.
10:51You know, historically it's been 60 to 70 percent in skincare.
10:55Now we're seeing also many other categories.
10:57And it's a country that is fascinating because we are balancing brick and mortar and online
11:02in a way that you can build experience in a way with the consumer that is like nowhere else.
11:09Stefan, so the last question is on the hot new thing in makeup.
11:11I'm told like 2026 is going back to 2016.
11:15So it's a lot of colors, a lot of outrageous things.
11:18What, I mean, how do you see this?
11:19Well, I see it's interesting because 2016 was about like, you know, bold expression of color.
11:25And 2026 is more about fun and expressive.
11:29And in that case, there's one brand like Clinique with black honey,
11:32which is a product that is like, you know, decades old.
11:34I've always like sustained the test of time.
11:37And you are seeing like, you know, today this product being viral again.
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