By Arriana McLymore and Anuja Bharat Mistry
Nov 2 (Reuters) - Estee Lauder is cutting promotions and ramping up brand investment as its turnaround gathers pace, Chief Executive Stephane de La Faverie said on Monday after the cosmetics maker raised annual forecasts.
A willingness among affluent consumers and younger shoppers to spend on prestige beauty products has boosted demand for luxury fragrance brands such as Le Labo, Tom Ford and Jo Malone London, as well as skincare products, despite broader
economic uncertainty.
Mainland China is a bright spot in Estee Lauder's turnaround efforts. The company expects strong organic sales growth from new and existing products following increased consumer-facing investment.
"We are accelerating our top of the funnel investment to build the desirability, build the awareness of our brand," de La Faverie told a media call on Monday, adding to previous plans to reduce discounts and promotions in China.
"While there continue to be offers that we are giving to the consumer, we are really focusing on creating desirability ... and to be less reliant on promotion overall everywhere around the world," he added.
Estee Lauder hopes to see its cosmetics category return to growth next quarter as brands including MAC and Tom Ford makeup gain market share in mainland China.
Analysts say Chinese consumers are becoming more selective in their luxury spending and increasingly favor brands that build local relevance.
Luxury groups including Gucci owner Kering, LVMH and Hermes are facing fresh headwinds from the expanding conflict in the Middle East and China's tax crackdown on wealthy shoppers, adding to pressure from weak demand in key markets including China and the US.
Prestige beauty products have proved more resilient, however, as China's aspirational middle-class consumers shift spending away from entry-level luxury goods towards higher-end skincare, makeup and fragrance products.
In the Americas, Estee Lauder's organic sales were up 4% compared with a 2% decline a year ago. Organic sales in China increased 9%, matching the growth rate recorded a year earlier.
Analysts expect Estee Lauder, which has said acquisitions remain a tool for reshaping its portfolio across geographies, categories and price points, to focus on smaller niche deals after ending talks to buy Spanish fashion and beauty group Puig.
The company expanded distribution through Amazon's US Premium Beauty store and platforms such as Shopee and TikTok Shop, Tmall and Douyin, helping drive online organic sales.
Under the "Beauty Reimagined" turnaround strategy, Estee Lauder has focused on accelerating innovation, expanding into new channels and markets, using AI to improve consumer insights and marketing, increasing consumer-facing investment, streamlining operations and cutting costs.
The company now expects fiscal 2027 organic sales growth of 4% to 5.5%, compared with its previous forecast of 3% to 5%.
It forecast annual adjusted profit of $3.20 to $3.45 per share, up from a prior range of $3.10 to $3.35.
The company's shares rose nearly 3% in premarket trading. The stock is up about 4% so far this year.
First-quarter sales rose 7% to $3.72 billion, topping analysts' expectations for a 5% increase to $3.65 billion, according to LSEG data.
Adjusted profit of 72 cents per share also beat estimates of 51 cents.
(Reporting by Arriana McLymore in New York City and Anuja Bharat Mistry in Bengaluru; Editing by Louise Heavens and Mark Potter)
