Estee Lauder Companies, Inc. (the) · NYSE:EL
Estee Lauder Companies, Inc. (the) — The Estée Lauder Companies — Barclays Global Consumer Conference 2016
47 slides from Estee Lauder Companies, Inc. (the)'s conference presentation, Sep 8, 2016
Slide 1: Leading Growth in Prestige Beauty
LEADING GROWTH IN PRESTIGE BEAUTY FABRIZIO FREDA PRESIDENT AND CEO THE ESTÉE LAUDER COMPANIES TRACEY T. TRAVIS EXECUTIVE VICE PRESIDENT AND CFO THE ESTÉE LAUDER COMPANIES SEPTEMBER 8, 2016
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION, INCLUDING THOSE CONTAINING WORDS LIKE “EXPECT,” “PLANS,” “MAY,” “COULD,” “ANTICIPATE,” “ESTIMATE,” “PROJECTED,” “FORECASTED,” THOSE IN MR. FREDA’S AND MS. TRAVIS’S REMARKS AND THOSE IN THE “NEAR AND LONGER-TERM GOALS” S
Slide 3: Non-GAAP Disclosures
NON-GAAP DISCLOSURES THESE MATERIALS INCLUDE SOME NON-GAAP FINANCIAL MEASURES RELATING TO: CONSTANT CURRENCY; CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES; ACCELERATED ORDERS ASSOCIATED WITH THE COMPANY’S SMI ROLLOUT; THE VENEZUELA REMEASUREMENT CHARGES; AND INTEREST EXPENSE ON DEBT EXTINGUISHME
Slide 4: Who We Are
WHO WE ARE GLOBAL LEADER IN PRESTIGE BEAUTY $11 BILLION IN SALES 25+ BRANDS 150 COUNTRIES AND TERRITORIES MORE THAN 10 PRESTIGE DISTRIBUTION CHANNELS 46,000 EMPLOYEES WORLDWIDE
Slide 5: Prestige Beauty Is a Global Growth Industry
PRESTIGE BEAUTY IS A GLOBAL GROWTH ESTIMATES CAGR 2010 - 2015 GROWTH 6% 5-Year CAGR INDUSTRY 5% 4% PRESTIGE BEAUTY IS ONE OF THE FASTEST GROWING 3% CATEGORIES 2% ELC IS SOLELY FOCUSED ON PRESTIGE BEAUTY 1% WE LEVERAGE OUR POWERFUL BRAND 0% PORTFOLIO TO PURSUE PRESTIGE MASS & DIRECT HPC HIGH GROWTH A
Slide 6: ELC Has Reinforced Its #1 Position and Grown Share
ELC HAS REINFORCED SHARE OF GLOBAL PRESTIGE BEAUTY #1 14.5% ITS 14% POSITION 13.5% AND GROWN SHARE 13% 12% 2010 2015 ELC ESTIMATES AND EUROMONITOR 2015 FOR PRESTIGE SKIN CARE, MAKEUP AND FRAGRANCES; EXCLUDES TRAVEL RETAIL.
Slide 7: We Have Delivered Strong Results
5 YEAR GLOBAL SALES GROWTH WE HAVE DELIVERED 8% 7% STRONG 6% RESULTS 5% 4% 3% 2% SALES +7% IN CONSTANT CURRENCY; ABOVE INDUSTRY 1% 0% COST SAVINGS THROUGH Estée Lauder Prestige Beauty Mass & Direct HPC Beauty RESTRUCTURING AND IMPROVED FINANCIAL DISCIPLINE 5 YEAR TOTAL SHAREHOLDER RETURN Estée Laude
Slide 8: Results Driven by Our Enduring Strengths
RESULTS DRIVEN BY OUR ENDURING STRENGTHS POWERFUL BRAND PORTFOLIO UNRIVALED CREATIVITY, SERVICE AND INNOVATION BALANCED AND DIVERSIFIED BUSINESS MULTIPLE ENGINES OF GROWTH CULTURE OF ANTICIPATING AND EMBRACING CHANGE AGILITY IN INVESTMENT ALLOCATION
Slide 9: The Power of Our Brand Portfolio
THE POWER OF OUR BRAND PORTFOLIO PREMIUM CLASSIC PROGRESSIVE ENTRY PRICE POINT
Slide 10: We Are Brand Builders
WE ARE BRAND BUILDERS FIT BRANDS TO BEST OPPORTUNITIES ACQUIRE NEW BRANDS STRATEGICALLY
Slide 11: Strength by Category
STRENGTH BY $4,446 CATEGORY SKIN CARE CAGR +3.6% $3,719 ALL CATEGORIES ARE GROWING $4,703 MAKEUP CAGR +6.9% $3,371 MAKEUP STRONG IN ALL REGIONS INNOVATION SUPPORTS GROWTH $1,487 FRAGRANCE CAGR +3.8% $1,236 $554 HAIR CARE CAGR +5.1% $432 FY2016 FY2011 ($ MILLIONS)
Slide 12: We Are the Global Leader in Prestige Makeup
WE ARE THE GLOBAL LEADER IN PRESTIGE MAKEUP 27.7% 13.0% 10.1% 8.7% 5.0% ELC L’OREAL SHISEIDO LVMH KAO EUROMONITOR 2015 GLOBAL PRESTIGE COLOR COSMETICS
Slide 13: Category Growth Supported by Innovation
CATEGORY GROWTH SUPPORTED BY INNOVATION SUPERIOR QUALITY RESEARCH & DEVELOPMENT TECHNOLOGY & INNOVATION PATENT PORTFOLIO +40%
Slide 14: Strength by Geography
STRENGTH BY GEOGRAPHY AMERICAS CAGR 4.4% $3,796 $4,710 ALL REGIONS AND VIRTUALLY ALL MARKETS ARE GROWING EMERGING MARKETS EXCL. CHINA +25% $4,381 U.K. +DOUBLE-DIGITS FOR 3 YEARS EMEA CAGR 6.1% $3,258 $2,173 ASIA/PACIFIC CAGR 4.3% $1,761 FY2016 FY2011 ($ MILLIONS)
Slide 15: Strength Across Multiple Channels
STRENGTH ACROSS 12% Other* MULTIPLE 5% 6% Perfumeries CHANNELS 8% 11% Brand.com 12% Specialty-Multi Freestanding Retail Stores Travel Retail 46% Department Stores FY2016 *OTHER INCLUDES SALONS, SPAS, MILITARY AND PHARMACIES
Slide 16: 10-Year Compass
SUSTAINABLE, RELIABLE GROWTH 10-YEAR COMPASS PROVIDES DIRECTION IDENTIFIES LONG-TERM BEAUTY TRENDS DETERMINES AREAS OF FASTEST GROWTH AND GREATEST OPPORTUNITIES TO FOCUS ON ALLOCATES RESOURCES IN AN AGILE WAY “KEEPS OUR BOAT IN THE WIND.”
Slide 17: Capturing Growth: The Changing Dynamics in Beauty
CAPTURING GROWTH THE CHANGING DYNAMICS IN BEAUTY
Slide 18: Demographic Shifts Inspire Our Business
DEMOGRAPHIC SHIFTS INSPIRE OUR BUSINESS AGELESS, MILLENNIAL, GEN Z
Slide 19: The Rise of Social Media
THE RISE OF SOCIAL MEDIA
Slide 20: Focus on the Biggest Growth Opportunities
OUR LONG-TERM STRATEGY FOCUS ON THE BIGGEST GROWTH OPPORTUNITIES INCREASING OUR REACH TO TARGET CONSUMERS BY CHANNEL AND GEOGRAPHY ENHANCING CONSUMER ENGAGEMENT WITH INNOVATIVE PRODUCTS AND SERVICES
Slide 21: Optimizing Distribution to Expand Consumer Reach
OPTIMIZING DISTRIBUTION TO EXPAND CONSUMER REACH INDEXED DISTRIBUTION Jo Malone • MAINTAIN HIGH PRODUCTIVITY PER DOOR La Mer • BRING BRANDS TO NEW CONSUMERS MAC • GLOBAL OPPORTUNITY Tom Ford • RECRUIT FROM MASS Smashbox Top Brands 0 20 40 60 80 100
Slide 22: ELC Has Further Opportunity in Online Prestige Beauty
ELC HAS FURTHER OPPORTUNITY IN ONLINE PRESTIGE BEAUTY 180 ONLINE VS TOTAL MARKETS DOUBLE-DIGIT GROWTH IN EXISTING SITES 160 E/M-COMMERCE SITES IN ~ 30 COUNTRIES 140 VERSUS MORE THAN 150 WITH BRICK AND 120 MORTAR DISTRIBUTION 100 OPPORTUNITY TO ADD BRANDS TO EXISTING 80 MARKETS & EXPAND INTO NEW MARK
Slide 23: ELC Accelerating in Specialty-Multi Beauty
ELC ACCELERATING IN SPECIALTY- MULTI BEAUTY GROWING DOUBLE-DIGITS IN CHANNEL APPEALING, EXPERIENTIAL RETAILING WIN WITH BRAND PORTFOLIO, SPECIALIZED PRODUCT ASSORTMENT, INNOVATIVE MERCHANDISING, SAMPLING OPPORTUNITY TO ADD BRANDS TO EXISTING RETAIL & GROW WITH RETAILER EXPANSION
Slide 24: Fast Growth Brands Drive Acceleration in Freestanding Retail Stores
FAST GROWTH BRANDS DRIVE ACCELERATION IN FREESTANDING RETAIL STORES GROWING DOUBLE-DIGITS IN ~1,260 COMPANY- OPERATED STORES GLOBALLY ANNUAL STORE INCREASE 250 ENTER MARKETS WHERE PRESTIGE 200 DISTRIBUTION IS UNDERDEVELOPED 150 MARGIN ACCRETIVE BY YEAR 3 100 50 OMNICHANNEL CAPABILITIES 0 FY2012 FY20
Slide 25: Broadening Consumer Reach in Travel Retail
BROADENING CONSUMER REACH TRAVEL RETAIL LOCATIONS IN TRAVEL Kilian Frederic Malle RETAIL Le Labo Darphin Aveda GlamGlow EQUITY DRIVER FOR THE BRANDS Jo Malone Bobbi Brown INTERNATIONAL PASSENGER TRAFFIC RISING Smashbox INCREASE CONVERSION Origins MAC EXPANDING BRANDS WITHIN CURRENT La Mer DISTRIBUTI
Slide 26: Opportunities in Prestige Department Stores
OPPORTUNITIES IN PRESTIGE DEPARTMENT STORES INTERNATIONAL AND HIGH-END DEPARTMENT STORES ARE GROWING RETAILER.COM IS GROWING ALLOCATING RESOURCES TO AREAS OF OPPORTUNITY
Slide 27: Enhancing Consumer Engagement
OPPORTUNITIES ENHANCING CONSUMER ENGAGEMENT HIGH-QUALITY, INNOVATIVE PRODUCTS NEW EXPERIENCES AND SERVICES
Slide 28: Flawless, Fast
l FLAWLESS, FAST Bobbi’s NEW Skin Foundation Cushion Compact SPF 35 gives you joo!
Slide 29: Your Way to Makeup-Ready Skin
AVEDA, tulaSara ’ a radiant oleation oll, buile g'olgation, is ste ALDER iENUINE LOW eben] \ eaicnigSuncenet i exfoliating tonie f GRAVITYMUD™ Your Pre-Makeup Contouring YOUR WAY TO MUP YOREADY SKIN CLINIQUE Pep-start
Slide 30: Fragrance: Artisanal and Experiential
ARTISANAL AND EXPERIENTIAL FRAGRANCE
Slide 31: Portfolio of Luxury Fragrance
PORTFOLIO OF LUXURY FRAGRANCE
Slide 32: Modernization and Efficiency
OUR STRATEGY IS SUPPORTED BY INCREASING MODERNIZATION AND EFFICIENCY COMPLETED MODERNIZATION OF KEY SYSTEMS CONTINUING INFORMATION TECHNOLOGY INVESTMENT LEADING BEAUTY FORWARD INITIATIVE COST LEVERAGE / SAVINGS
Slide 33: Talent Development and Capabilities
OUR STRATEGY IS SUPPORTED BY INVESTMENT IN TALENT DEVELOPMENT AND CAPABILITIES
Slide 34: ELC Is Well-Positioned to Continue to Win in a Volatile World
ELC IS WELL-POSITIONED TO CONTINUE TO WIN IN A VOLATILE WORLD
Slide 35: Leading Growth in Prestige Beauty
LEADING GROWTH IN PRESTIGE BEAUTY
Slide 36: Consistent, Best-in-Class Sales Growth
CONSISTENT, BEST-IN-CLASS SALES GROWTH 5 YEAR GLOBAL SALES GROWTH • PRESTIGE BEAUTY HAS 8% CONSISTENTLY GROWN MID-SINGLE DIGITS 7% • ELC GREW FASTER THAN 6% GLOBAL PRESTIGE BEAUTY OVER 5 YEARS 5% • GOAL TO GROW AT LEAST 1PP 4% FASTER THAN PRESTIGE BEAUTY • ACQUISITIONS TARGETED TO 3% ADD ANOTHER POI
Slide 37: SMI-Enabled Cost Savings and Efficiencies
SMI-ENABLED COST SAVINGS AND EFFICIENCIES $200 180 OTHER 160 140 DEMO 120 PROMO/ COLLATERAL 100 80 A&P EFFECTIVENESS 60 INDIRECT PROCUREMENT 40 20 SUPPLY CHAIN 0 FY2016 • ~$150 MILLION IN SAVINGS TARGETED IN FY2017
Slide 38: Operating Margin Trends
OPERATING MARGIN TRENDS +50 -40 +90 BPS BPS -30 +20 -50 BPS 16.1% BPS +110 -10 15.9% BPS BPS -10 BPS BPS 15.2% BPS 15.5% 14.2% FY2012 FY2013 FY2014 FY2015 FY2016 ORGANIC GROWTH CURRENCY IMPACT ACQUISITIONS COST SAVINGS INITIATIVES CURRENCY TRANSLATION EXPENSE LEVERAGE INVESTMENTS / ACQUISITIONS EFFI
Slide 39: Sustained Double-Digit EPS Growth
SUSTAINED DOUBLE-DIGIT EPS GROWTH REPORTED 16% 12% 3% 5% 6-8% • LEVERAGING TOPLINE CONSTANT 17% 12% 12% 13% 8-10% CURRENCY GROWTH • MARGIN EXPANSION $3.38 to $3.44 • IMPACT OF ACQUISITIONS AND $3.05 $3.20 CURRENCY $2.95 $2.64 • OPPORTUNITIES IN TAX RATE AND SHARE REPURCHASES $2.27 • DOUBLE-DIGIT EPS
Slide 40: Returning Cash to Stockholders
RETURNING CASH TO STOCKHOLDERS $ MILLIONS FY2012 FY2013 FY2014 FY2015 FY2016 OPERATING CASH FLOW $1,127 $1,226 $1,535 $1,943 $1,789 CAPEX 421 461 510 473 525 FREE CASH FLOW $706 $765 $1,025 $1,470 $1,263 DIVIDENDS 204 419 302 350 423 SHARE REPURCHASES 593 388 667 983 890 TOTAL $797 $807 $969 $1,333
Slide 41: Cash Flow Deployment
CASH FLOW DEPLOYMENT $ MILLIONS 580 (5,218) 1,014 7,620 (2,390) (368) 2,491 1,253 Ending Cash Operating Cash Debt Stock Based Dividends / Capital Acquisitions Ending Cash & 2011 Flow Comp/Other Buybacks Expenditures Investments 2016
Slide 42: Near and Longer-Term Goals
NEAR AND LONGER-TERM GOALS FY2017 FY2017 - FY2019 NET SALES GROWTH +6% TO +7% NET SALES GROWTH IN +6% TO +7% +6% TO +8% CONSTANT CURRENCY OPERATING MARGIN FLEXIBILITY +110 BPS TO +150 BPS DILUTED EPS $3.38 TO $3.44 EPS GROWTH IN +8% TO +10% +DOUBLE-DIGITS CONSTANT CURRENCY INVENTORY DAYS IMPROVEMENT
Slide 43: BES 0% ©
BES 0% © The Daily Telegraph NEWS | Many dead in. Brussels terror ittacks ‘ THE DONALD TRUMP INTERVIEW TRUMP VOWS TO MAKE MEXICO PAY FOR BORDER WALL LCM Russia’s Currency Has Worst Fall Since 1998 as Oil Rout Continues = ee ‘TV6| MACY'S CLOSING 100 STORES NATIONWIDE ', ’ > “BAVOID TRAVEL | ane DEPT.
Slide 44: Operating Margin Guidance Evolution
OPERATING MARGIN GUIDANCE EVOLUTION FY2017E FY2018E FY2019E AUGUST 2014 GUIDANCE 17.5% FY2015 FX AND ACQUISITION (0.7) IMPACTS ADJUSTED 16.8% AUGUST 2015 GUIDANCE 16.8% - 17.2% FY2016 FX AND ACQUISITION (0.6) IMPACTS ADJUSTED 16.2% - 16.6% AUGUST 2016 GUIDANCE 16.6% - 17.0% NOTE: EXCLUDES RESTRUCTUR
Slide 45: Lower Our Overhead Cost Base for Annual Net Benefits
INVEST IN BRANDS REDUCE COSTS DESIGN FOR LEVERAGE AND CAPABILITIES • LOWER OUR OVERHEAD COST BASE FOR ANNUAL NET BENEFITS OF $200 TO $300M BEFORE TAX • REDUCE OUR LEVERAGE RATIO • REALLOCATE A PORTION OF NET BENEFITS TO FUND PRIORITY INVESTMENTS • SUSTAINABLE LONG-TERM GROWTH
Slide 46: Creating Value
CREATING VALUE TOTAL SHAREHOLDER RETURN ONE YEAR FIVE YEAR Estée Lauder S&P 500 Peer Avg 200 ESTÉE LAUDER 6.4% +84% 180 +77% 160 S&P 500 4.0% 140 +40% 120 -2.9% PEER AVERAGE 100 80 -10.0% 0.0% 10.0% 2011 2012 2013 2014 2015 2016 SOURCE: BLOOMBERG, S&P 06/30/16. PEER GROUP INCLUDES P&G, AVON, BEIERSD
Slide 47: Estée Lauder Companies
ESTEE LAUDER COMPANIES
The Estée Lauder Companies — Barclays Global Consumer Conference 2016 on 6ix