Estee Lauder Companies Inc (NYSE:EL) Q2 2023 Earnings Call Transcript

And then by category, we see in Travel Retail a strong acceleration of the fragrance category, particularly the high-end fragrance category, which is, again, profitable and very interesting category for the consumers in this moment. We observed many travel retail partners around the world, making more space for the high-end fragrance development in the future of travel retail. So that’s another important positive. And then the last point I want to make is keep in mind that the travel retail is driven by increased traffic and by increased conversion. The numbers that were available before covered in a normalized way in 2019 were depending which part of the world, the travelers to buy as conversion was between 10% and 15%. And — we know also that when there is retail like in China and Korea, so where people can buy online before they go to the airport, this conversion number increased substantially — and there is a lot of retail business that has developed very well in Asia, particularly linked to Hainan.

And so the amount of conversion of these travelers is increasing — and last thing I want to say is that the comeback of Chinese consumers in international travel is very good news because the Chinese consumer, when they travel used to have much more purchase per person than the average travelers from different regions. So the increase in mix of Chinese travelers is very good news for global travel retail as well. So in the post corded world, when will be really postal I think we are going to see some years of exciting opportunity globally in the travel retail development.

Operator: We have time for one more question. It is from Mark Astrachan of Stifel.

Mark Astrachan: Yes, I wanted to ask about the sustainability of growth in some of these categories, which benefited from reopening like fragrances makeup and expectations for skin care improvement, it sounds like you’re obviously talking to improving skin care trends globally, obviously, China as well. And then I wanted to ask the same question around China. So should we expect a similar reopening trajectory? Or are you expecting a similar reopening trajectory in China that we’ve seen around the rest of the world in terms of growth and in terms of the categories which benefit.

Fabrizio Freda: SP-2 So the reopening of China is in China today, the level of sales online is the biggest percentage of the world. So to be clear, the reopening on China will mainly impact the reopening of brick-and-mortar. So will impact 50% of the business in China about will be very positively impacted by the reopening. Obviously, during the period, like the 1 we just lived many since mid-November to mid-January, where the level of infections in China, so COVID were super high. 80% of families had somebody with the virus, et cetera. So the implications were normal. In this period, you see also a reduced consumption. Everything, reduce consumption online, reduce interest for sure it make up in other categories. So, but that’s temporary, obviously.

So your question is more what happened when all this is regular. The only thing I want to clarify that has to be regular, not only the ability to purchase in stores, but also, frankly, to be free of COVID, really free of COVID consumption come back. So when people will be free of COVID as a disease. When they will go back to the brick-and-mortar, we will see at least half of the business in China increasing dramatically on traffic, and we will see a continuous acceleration, a gradual continuous accusation of the online, which is already very strong. There are many new platforms online that have been opened in China as we speak, which are promising, which are doing success. In our case, our success on JD to win has been very, very strong. It’s one of the reasons behind the market share growth and the success of the amazing Tmall events, particularly 11.11 or June 18 have been extraordinary.