Finance Equities

In: Business and Management

Submitted By leslielim2012
Words 617
Pages 3
Margin Expansion in Recent Acquisitions

Firstly, there will be a boost of earnings from Estee Lauder’s recent acquisitions announced between October to December 2014. Throughout this two-months period, Estee Lauder has announced and completed a total of three acquisitions – GLAMGLOW, a prestige skin care brand in December 2014, Le Labo, a high end fragrance in November 2014, and RODIN Olio Lusso, a luxury skin care brand in October 2014. The last acquisition for Estee Lauder was in May 2010, when it acquired Smashbox Beauty Cosmetics.

Estee Lauder has revealed that it will be focusing primarily on mergers and acquisitions to increase its revenues. Estee Lauder aims to capture a bigger share of the ultra-prestige consumer market and also to enhance the acquired brands’ global presence and in turn strengthen its own portfolio of offerings.

These brands that EL has been taking over are all luxury brands since the company is focusing more on targeting a high-end customer base. Furthermore, skincare is the most important segment in Estee lauder’s portfolio and skincare products contributed 43% of Estee Lauder’s net sales in FY 2014 (ended June 2014).

As US consumers are expecting innovative products across newer skincare categories, the company’s acquisition of GLAMGLOW also suggests that Estee Lauder also understands the importance of innovative products. By possessing a strong R&D arm in the area of skincare, this might strengthen the recent acquisitions in RODIN Olio Lusso and GLAMGLOW.

The skincare brand acquisitions bring in significant opportunity for Estee Lauder in Asia too, as a big part of the skincare consumption in the world comes from this region. There is a significant impact of Asian travelers on travel retail as well, as Asians are one of the fastest growing outbound travelers in the world. Asian specific demands and new trends render…...

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