Quarterly beauty earnings calls kicked off this week, with all signs pointing to a strong and consistent recovery for the industry. Whether it was through brick-and-mortar stores, travel retail or e-commerce, multiple companies reported sales and foot traffic increases. Sally Beauty Holdings was the first to report its earnings, followed by E.l.f. Beauty Inc. and The Estée Lauder Companies.
Below, Glossy breaks down the highlights of each company and its performance.
Sally Beauty Holdings Inc. held the earnings call for its first-quarter fiscal year 2022 on Tuesday, February 2, revealing a strong sales quarter. Consolidated net sales increased 4.7% to $980 million year-over-year with a comparable sales increase of 6.1%. Global e-commerce sales were $81 million, representing 8.3% of net sales. The company operates primarily through two business units, Sally Beauty Supply and Beauty Systems Group. The latter is a network of stores and direct sales consultants selling exclusive professional salon brands to licensed beauty professionals.
In the quarter, e-commerce sales increased 22% year-over-year, making up 8.3% of total sales. They were mainly driven by BSG ‘s refreshed e-commerce platform. Additionally, Sally Beauty’s U.S. and Canada stores helped fulfill 35% of e-commerce sales, through the buy-now, pick-up in-store; two-hour delivery and ship-from-store services. BOPIS accounted for 19% of e-commerce sales, while two-hour delivery was 10% of sales, and ship-from-store was 6%. Denise Paulonis, CEO of Sally Beauty as of Oct. 2021, said on the earnings call that the aim is to push overall e-commerce sales for Sally Beauty and BSG to 15% or more of overall sales “in the coming years.” On the store level, Paulonis said that the Covid-19 Omicron variant has only marginally impacted sales and operations. Employees had to call out sick toward the end of 2021, as the variant surged, but “normalization is starting to happen [now],” she said.
“We saw fairly high [Covid] case counts, so I won’t say it’s completely behind us, at this point. I think that there’s a little bit more to go,” she said on the earnings call. “Sally [Beauty], because it’s a retail business and has a lot more stores and a lot more team members operating in that environment day-to-day, saw a little bit more pressure than the BSG business did.”
Sally Beauty’s overall plan to increase sales is focused on four pillars: leveraging digital platforms, driving loyalty and personalization, delivering product innovation and advancing its supply chain. In the first quarter, approximately 75% of sales at Sally Beauty U.S. and Canada stemmed from its loyalty programs. The active member count stood at an all-time high at the end of the quarter, according to Paulonis. Additionally, approximately 9% of BSG sales in the quarter came from a rewards credit card launched in 2019, a growth of 1% compared to the previous quarter.
“There’s a notable change in vision, discipline and controls in the business that, for years, had been somewhat lacking. [It’s] a positive development,” wrote Stephanie Wissink, equity research analyst at Jefferies. “Execution remains key to driving the model higher, and the backdrop remains unpredictable.”
E.l.f. Beauty Inc.
E.l.f. Beauty announced third-quarter earnings for fiscal year 2022 on Wednesday, February 2. The company achieved its twelfth consecutive quarter of sales growth, with net sales increasing 11% to $98.1 million and a net income of $6.2 million. The company also raised its overall fiscal year 2022 guidance, expecting between $372 million to $379 million in net sales, an increase from $364 million to $370 million as previously forecasted.
“This [success] came from our ability to launch meaningful innovation and engage consumers by continuing to fire on all cylinders, both digitally and with our national retail partners,” Tarang Amin, CEO of E.l.f. Beauty, told Glossy.
Amin added that he was pleasantly surprised to see that cutting E.l.f. Beauty’s holiday program did not have as significant an impact as expected. In order to prioritize container capacity for the company’s core assortment, E.l.f. Beauty minimized its limited-edition holiday packaging and kits for its E.l.f. Cosmetics, W3LL People and Key Soulcare brands, which typically drive approximately $12 million in sales. But, instead of declining sales, the brand saw that customers merely opted to purchase non-holiday items instead, said Amin. He added that E.l.f. may approach future holiday programs similarly, with a less-is-more concept.
As the company heads into the fourth quarter of fiscal year 2022, Amin said a headwind is competing against the 24% year-over-year sales increase in fiscal year 2021, as a driver was the last of the stimulus checks provided by the federal government. With that in mind, E.l.f. Beauty is still expecting growth, in part aided by E.l.f. Cosmetics’ recent announcement to become a 100% clean mass beauty brand. The announcement, made Jan. 25, states that all formulations will adhere to European Union Cosmetics Regulation and FDA requirements, and that there are now over 1,600 ingredients that E.l.f. Cosmetics does not use. While many of E.l.f.’s products were already clean, over the past several months, the brand has reformulated over 350 items.
Amin also said the company plans to raise prices on about two-thirds of its products in the U.S. in mid-March, due to shipping cost increases, tariffs, and foreign currency exchanges. Previously, E.l.f. Beauty raised prices on two-thirds of its products sold internationally in 2021.
The Estée Lauder Companies
The Estée Lauder Companies reported its second quarter of fiscal year 2022 earnings on Thursday, February 3, citing net sales of $5.54 billion, an increase of 14% year-over-year. Net sales grew in every region and product category, reflecting early stages of recovery in brick-and-mortar retail stores, primarily in Western markets, and strength in online sales. Organic net sales increased 11% year-over-year, while net earnings were $1.09 billion, compared with net earnings of $870 million the prior year.
Fabrizio Freda, CEO of The Estée Lauder Companies, said during the earnings call that 11 brands achieved double-digit organic sales growth, including Estée Lauder and MAC Cosmetics in makeup, and La Mer and Clinique in skin care. Too Faced and Smashbox also saw double-digit sales growth in makeup. Freda also said that “product innovation,” which typically refers to newly launched products, contributed nearly 25% of sales across the brand portfolio.
“[Our] brands excelled in every region and across major channels, cheered by loyal consumers and embraced by a new cohort of consumers, including more men,” Freda said on the call.
Travel retail was also a main focus of the earnings call. The global travel retail business grew in the low double-digits, as travel restrictions eased globally and international passenger traffic progressively improved. Travel retail continues to be led by the Asia-Pacific region, where demand from Chinese consumers remains strong.
“In Asia, there were some elements of acceleration. But I want to also underline that there was strong growth in North America. That was linked to more traffic during holidays in these regions, despite the Omnicon variant,” said Freda on the call. “This is a very important sign, because the reactivity of travel retail sales to traffic increase is extraordinary. Where traffic increases, travel retail responds very, very fast.”
Coty Inc.’s second quarter 2022 earnings will be held on February 8. L’Oréal Group’s fourth quarter 2021 earnings will be held on February 9. Unilever’s fourth-quarter 2021 earnings will be held on February 10. And Ulta Beauty’s fourth quarter of 2022 earnings will be held on March 10.