EL - Earnings call transcript Q2 2020 | The Estée Lauder Companies Inc.

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Operator

Good day, everyone, and welcome to The Estée Lauder Companies Fiscal 2020 Second Quarter Conference Call. Today's call is being recorded and webcast.

For opening remarks and introductions, I would like to turn the call over to the Senior Vice President of Investor Relations, Ms. Rainey Mancini.

Rainey Mancini

Good morning. Fabrizio Executive and Financial Vice are and Executive Officer. call Travis, Tracey President today's Freda, Chief President Officer, On and Chief me cause with statements. the Since forward-looking where these you press remarks forward-looking our factors SEC, to and refer that differ find let from could release filed many our results you reports today other will to actual of statements, contain materially

business, and the expectations To charges commentary our in our facilitate the in and restructuring discussion constant financial All growth disclosed is adjustments underlying before release. net other of and results currency. press numbers on our sales are

find reconciliations can section in the non-GAAP figures Investors our press of our You GAAP and on between release website. and

to you so all During respond to the can within one question, this we the please Q&A session, call. of we scheduled ask time for that limit you

the Fabrizio. And over now, call I'll turn to

Fabrizio Freda

on the results Thank which I you, delivered We Rainey, elaborate exceptional everyone. and morning quarter, second to shortly. in good will

I want employee and But our we recent by the are affected and in all who outbreak around including to the for China concerned first world. the people consumers coronavirus the acknowledge how of are

what out support go hearts will company steps minutes. discuss them to and is taking Our them our few I a in to

In consumers prestige the second beauty quarter, with globally. our portfolio resonated

grew Our we regions all in categories. multiple fuel of engines based all our successful and on strategy performance growth once as helped major again

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be boosted another it quarter second driver Singles also by includes holiday, Day. our While continues important event now to

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a With disciplined in expense management, diluted adjusted we into per leverage earnings sales XX% increase growth our share.

and greater performance focused Our enhanced a better smart data product of relevance. analytics, advertising, the use reflected digital best strong worldwide local investments marketing, deliberate innovations, including opportunities increased in

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to across million We are effort pledging RMBX support release for needs China. coronavirus

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I to over Now, the will Tracey. turn call

Tracey Travis

and Certainly, you, morning, best managing Thank thoughts a are everyone very China and everyone. through wishes difficult and in globally. with Fabrizio, good our situation

our business stakeholders, committed as impact manage best this and other the employees time. are We while also we we during to can supporting

in Have expect a including acquisition. the our operating Jart+ the commentary results the and Dr. net sales of lag, can month will a new growth Rainey are of time, and constant so interest The for acquired Dr. one future brand in third the results we first Be at beginning the accounting We issued December. currency. impact the my brand reflected largely reminder, for owner today As the from end quarter of purchase this to be be fund expense on the the debt you on recorded periods to call the fiscal is the items for towards mentioned Jart+ of adjusted in & numbers that

with travel expectations. starting quarter online strong driven continue regions So for by in and exceed to North America. our rose XX% second retail sales growth Net quarter in the improvement our results. Sales in international the and Asia, growth

From across standpoint, Asia geographic Greater sales region a the strong China XX% very accelerated, double-digits. our growth with rising in region. Sales broad-based Pacific rose net

broad-based and continued cities, saw China Mainland record on our in and brands, sales to Day. Our brands channels deliver growth Singles categories across results

APAC, declined on expected, double-digit Kong than Among in in delivered we again growth Hong sales As XX%. more this quarter. sales developed Korea markets

increase Asia sales rose contributed Thailand. by in the October VAT quarter. Southeast digits markets led to in And last last emerging high-single-digits double-digit Our growth despite year Japan that mid-single grew Xst,

East growth. Net Middle XX% the sales rose and region to contributing most in with Africa Europe, markets our

driven rapid successful introduction global retail brands online rose by continued and and Le like the pre-ordering like-door Labo newer Our double-digits strong of of travel growth business development KILIAN. largely the

Emerging and region Iberia by by grew led markets European double-digits the Russia. improvement markets Western digits Americas and Germany. X%, the quarter. low led grew a mid-single Net significant from in last sales Italy, to India in rose

Mer Hydra growth weakness strong fragrance category. Origins continued Initial the and by as overall holiday Malone launch Jo helped Estée the makeup new Lauder's to performances Futurist partially La shipments Skin care Lauder, from offset Rescue and driven Moisturizing Estée of showed Tom well Ford. in and good as Makeup

across In sales high-single-digits online rose North our all channels. America,

brick-and-mortar specialty-multi channel remained department the while in grew challenged. double-digits, Our sales store the business

and skin Concentrate growth contributed Mer incremental led such Net Origins again Advanced Repair from growth and From supported BB-gel once Innovations iD hero Intense to accelerated franchises. Regenerating and Lauder Estée The Clinique. Serum contributions care quarter. Night standpoint, Mer, Reset sales Estée Clinique sales Lauder, XX% with La their as category strong a this La

Lauder, Estée makeup in Bobbi led sales and Net grew by Brown. X% Tom Ford

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Americas were across the in grew sales but Fragrance all Asia. in and regions, strongest

from the line X% improvement rose of care the and by at Our bumble. hair and sales products Bumble Nutriplenish launch driven of Aveda

to last incremental Our impact and by gross compared increased and points offset costs. margin partially pricing quarter second XX was the tariffs basis year. of mix higher the Favorable the obsolescence

of improved as sales basis XXX a percentage expenses Operating points.

sales investments capabilities. continue to greater other in We selling store in strategic operating higher and model to leverage our costs and fund advertising and and technology efficiencies

negligible. XX% partially as Operating operating expense increased Adjusted sales XXX well $X.XX, currency compared income margin expected and higher slightly by was the a points. EPS as to and offset EPS by to than translation basis the XX% higher and rate. of year, rose increased growth impact was prior diluted was due management the stronger tax disciplined

The & gain in the million, equity held related primarily in company. investment stake remaining transaction our the $XXX skin Korean-based re-measurement of value. previously acquired resulted of minority we quarter, the to one-time to fair care Have a During Be, the

also of have brands reflection of to four We most of America. prevalent category recorded a North been impairment makeup charges in million in our related the that $XXX continued three challenges makeup the

previously has and increased for retail capability and compelling expertise we While in our increased near as of enhanced strategic the value growth specialty-multi have base opportunities makeup an of these and and share the the slowed remains by media the brand discussed, consumer the market brands momentum evidenced social of the Gen-Z millennials. in as term

to now cash Turning flow.

billion billion the which flat debt. was in the activities, with equity expenditures from We offset remaining level cash invested and $X.XX prior primarily Higher funded in by months, we with interest flows operating roughly year. For in the of Be, was were six which the timing with to million earnings accounts $X.XX generated Have payable. net $XXX acquire cash & capital and

shares return our to $XXX and cash by stock to of million dividends. repurchase continue million million to also pay stockholders $XXX We utilizing to X.X

the of sales of So we in EPS have year well fiscal constant momentum of as ended strong as the XX%, net the work tremendous that with hard strong in adjusted currency a XX% we months our teams of markets. and first consumer of six growth reflection growth our

have is expected of operating the us outbreak. flexibility short-term for growth greater balance by into this our our now in and our agility let's disruption to turn fiscal The outlook of effectively half engines So strategy of the year, manage multiple the the financial year. first strong to our the performance help we built through caused and model to Coronavirus

the the the predict is Due and to to rapid escalation and we the guidance it third of our situation, timing and quarter. explicit not giving the corresponding on for fluidity both Therefore, are the difficult impact complex business.

half could and macro tensions We second also of a Kong's variety such mindful our impact continued that risks in challenges remain ongoing trade retail environment as results. Hong

one For Be. from X% the & impact inclusion fiscal of from the achieve the least of now the This of point we to range year -- is sales at for of strive Have sales to year, in constant currency. growth X% before net growth

Be by pound expected is growth weighted euro, With acquisition. this and the translation $X.XX charges. sales $X.XX average reflecting the negatively reported affect translation X.XX of for dilution for percentage $X.XX the currency includes from between to and X is and Have EPS range to the for for fiscal Currency $X.XX of year. before from expected point approximately dilution rates won the guidance, & This $X.XX restructuring $X.XX and other sales

to currency, of EPS we growth constant In expect X% X%.

XX%, line least from objectives. X% which dilution our Be, with remains growth expected at to is the & EPS be in Excluding Have to long-term

constant X% half, to in are increase second X% the approximately net currency. to sales expected For

percentage expected add is impact the point negatively Have Be of to inclusion percentage growth expected & by and X translation X Currency points. to is

half sales the In cadence negative by terms quarter. in followed the impact we a throughout quarter of the from Coronavirus recovery anticipated gradual the second have the in be greatest fourth third to

Forward of Leading growth. agility We discretionary gives which costs, in critical operations, has sales. areas slowing curtailing percentage effectively us are more our with our manage continuing to of to reduced fixed Beauty greater support severely cost while

the belt restructuring on interest $X.XX the $X.XX impact from from the some debt Have from quarter. includes maximum expect tightening expense includes dilution $X.XX $X.XX Be, Coronavirus & which purchase outbreak, This is benefit EPS forecast I dilution in approximately fourth and between accounting before the the charges. have and previously. to issuance as We currency and mentioned

can While needed is the for to through opportunities maintaining balance is the momentum company. remain for recovery agility established. our the we long-term about We quite once as this difficult outlook believe uncertain, optimistic invest and the prices health growth of year we this regain do manage our the while

Lauder On for affected their incredibly well behalf wishes those Companies, to and efforts in our thank Estée of to hardworking deepest team who entire been this particularly China. have period wonderful manage we and our extend extraordinary the during everyone

our happy questions concludes this at be time. to that And prepared remarks. We'll take your

Operator

floor for ahead. Instructions] Morgan The open Dara [Operator Our Please is first Stanley. question today from with Mohsenian now go comes questions.

Dara Mohsenian

Hi. guys. Good morning,

visibility for you Thanks. to expect after could hoping of look about longer through years? Coronavirus ramp-up to issue the if So guess out an of quickly clarity of how impact just we've not come are in on you how I on impact? thinking you recovery impairs we fiscal beauty I about duration gradual a talked a are pretty after initial the usually year potential more it we growth Should But big over that? sort Or of end. You longevity things term. be that next terms couple bit any pretty longer-term context past just few what seen with about think retail thoughts a wildcard. quarters. this as demands is quickly or and a obviously lot illness know was and back epidemics still the is thinking there's here a the guys of of

Fabrizio Freda

the don't impact your be to about today. obviously, So a this recovery we is which in is have unknown at the term after timing, which and will agreement of But short point. and this habits. health we then come what is will the assumption, will specific with short term an normal period, medical there back know people But are in unknown recovery is this basically definition gradually

end And do our at to the so, recover crisis. we the health momentum expect of

quarters today the assumption the normalization by our terms That's 'XX. to today. our are said. We a affected and with fiscal what assumption of in two we year be in And expect you in line assume impact

The the other activities also mitigation stand will when opportunity, thing right of to to most importantly, that, invest is recovery close support putting needs the by the the and by as to will China ready of health we issue required consumers is the economical in ready important China recovery the of we be the classes today. Chinese that government happening the development the resolution rebuilding recovery place China. market of the of behind name And to team as are consumption all we and of the but current in and stay supporting are our doing, the in the

Dara Mohsenian

helpful. Thank you. Great. That’s

Operator

next will with question Please The ahead. come from go Lauren Lieberman Barclays.

Lauren Lieberman

morning. Good Thanks. a actually very Great. little talk Americas bit strength the quarter, the inflection because we'd this was the was hoping I about notable.

could behind wondering, this in think I and lift news other was incremental and the getting part can key door talk is you of carry holiday? that I how more week. much past about we've holiday about you fragrance through to tied course should then you to being you Macy's in to the just and that And skin say this. a starting had in being closures Or this with promoting proactive if really think bit So are see

on comment if the of year rest So, the in Americas. for the just the Thanks. outlook you can

Fabrizio Freda

Investor the contributed the we in committed been in with So, America remain work -- this to of and we has the the next this stabilization business and said stabilization first And in in strategy of North communicated all, to quarter of continue our as has months. line we Day.

plans all, So activation. to the this granular more first local activate more and our relevance much the what much have as we insight of in used is, happened market anticipated quarter in

got other softness our we the that's of activity the season well particularly we that and the fragrances situation happened, fitting the The during we and have holiday recognized and care makeup thing market that great results. have accelerated we why in overall skin have

So, that to we our contributed in adjusted the you of had good way want -- engines if results. growth a

has innovation the and improved. anticipated been innovation impact pipeline as strong of has Our

all this been positive so, have And a impact.

be will to the continue softness, we direction, of that headwinds. continuing. but softness be makeup to particularly To operate We confront the is in do makeup some color the still clear, have

stores share gradually the on market certain the As Macy's we completely we the lower doors said, with strategy -- strategy, this do the to best do continue operate retailing with making do but you doors where with have the will need focusing I high-performance smaller retain and/or mentioned, that consumer of difficult, of although closures will that. will we the And we the high share we we and performance sure the stopping will but strategy brands. as our support to -- obviously be

under we take working, our efforts extraordinary to will there take headwinds. need improve model also our are be under account to continue but So that to account

strategy remains at So this stabilization. point our

Lauren Lieberman

Chinese just U.S. over outlook? the as not you several months the about Great. next really travelers how follow-up, And in visiting are the just of impact the a thinking of terms

Fabrizio Freda

be have a in important a We will tourists. there months negative the the That's of and reduction two, obviously not Chinese sales obviously at will U.S. to good next that three the actually an Chinese travelers this visiting on impact point. assume least

temporary. moment this clear our slowdown guidance To this a in being coronavirus because in on general the tourists of travel moment is global in Frankly, population. in concern, any assuming be reduced we also are

temporary of temporary sorry reduction taking guidance. our in the assumption under are we this assumption account this So, --

Lauren Lieberman

much. Okay. so Thanks, Great.

Tracey Travis

guidance. release. which relates I And it I within $X.XX just to mentioned to of $X.XX our press want range to the add as is our

half. second I for think I mentioned guidance different a the our number in

Operator

The Credit Please Michael is Suisse. next ahead. from go with question Binetti

Michael Binetti

a really good congrats taking for Thanks guys. quarter. our on question and Hey

dilution. is walk trying through the us off you nature? much we're $X.XX So, possibly you -- starting I you that see guess one-time quarters I Jart+ in business, over on how integrating that of the to ask even to forward much of four when turn Dr. or wear And do accretive the to to an that Could think how want position?

you through the I with you number just the And get a makeup think then the were that think change And the on there? you to on be They last skin for U.S. up psychological you want year little so way? over holiday seem as ask they've think makeup care skin gone medium to they they more or the -- keep fragrance going care in you more the that a two. to structural on and the really that pull pushing as have bit, signs showing warning retailers do term? through accepting out Do I driver are worked strategy back the to want to even is yet to

gains are skin in saw characterize and fragrance, you to as sticky we shelf categories XXXX? to remain that gains those you would as look space calendar into those the are going care and guess I dedicated

Tracey Travis

Yes.

is & dilution, the the in interest which on we have how the in obviously with starting also expense number. one-time is you're So, treating Have inventory that depends Be step-up which

flat would think & if we expect be, is that accounting. Be relatively I forward, What that Michael purchase you say will including Have

and those year. following items So, eliminating accretive next the onetime year

Michael Binetti

Okay.

Tracey Travis

The second makeup question is the question?

Michael Binetti

Yes.

Fabrizio Freda

when the makeup to I said you they? the didn't could subject Sorry understand. you who was repeat

Michael Binetti

but or it a America acceleration. sounds like your the lot we America Yes. quarter you North with meaningful sounds Well, on was for a growth in skin you like which sounds Obviously can the them care. recently few like it like in was over from it great a that number and numbers. got sounds specialty-multi improved pretty guys channel But you this it slowed worked years, it see last

give skin shelf they And through like of look we're change wondering XXXX. you -- that more they've if channel gone care is bigger category just give them space to feel going calendar mental that like driver be sticks the going to feel saying, the that and around I'm

Fabrizio Freda

moment frankly, care care results -- think realizes skin on is to everyone of I power all a power instant because I care for skin and the combined this are with skin growth. of yes, the together working product we makeup leverage skincare and also in

are definitely more shelf of -- about gradual space obviously a there innovation speak you in lot it a But the this. programs way which are So, yes is bit changes. reflecting

advertising there more a this media, more care more So, before skin reflection activity, is the than in social is on results. and

By skincare the only The category for the to is to leverage of results to accelerated big our is foundation meaning what in have in the we partners the future is future in category. makeup the is fragrances way The contributing we well. softer better but reinstate in growth retail innovation to makeup makeup also example this color. is which a for place are doing contribute very importantly, And face doing very, still makeup not category.

up clear, makeup. giving So, to are we all at not be on

the that focusing better interest. category just are we innovating other more in are in consumer We makeup on accepting to reactivate short-term, the and

Michael Binetti

North Congrats Thank getting on positive. you America much. very back to

Fabrizio Freda

you. Thank

Operator

Erinn from come Murphy will question Sandler. next with The Piper

Erinn Murphy

potentially a maybe around reconsider, morning concession guess question as model. If Amazon or like my play ever out, some to talking about using There's something Amazon. beauty? out is for me, would let luxury Great. Thanks. me their recently them a excuse channel Good this to some brands, press consider add evolving luxury was you -- launch my congratulations. I been and model

seeing major shuttered? just since percent been you the in And And have follow-up in online Can physical escalated? the Tracey, business share, are in then you. any China maybe what of Thank change trend doors you on a has China. outbreak

Fabrizio Freda

Okay.

and our answer At build stabilization current a continued channel America is our a Amazon, of our for business. and no. -- question point, North of to is we not first this On considering current partners are the beauty in our we the focusing are channels luxury products

number far question, physical as As that. of is the doors, go Tracey the with I'll let China

Tracey Travis

Yes.

So, as many, many fluid. we've for Year you And our New the that of the can imagine employees. is seen things it's Chinese extended quite one of

malls have stores closed. have closed Our as

were doors and were store on So, very the our department recently closed hours. reduced two-thirds remaining doors of

change Now so fluid very next a that this is could situation. week,

Fabrizio Freda

China moment in part The activity now in second in other homes activities. distribution And are the this the very factories outbreak, in is in question with people working the and moment big the middle same this XXth, absolutely in because for is delivery said the the second stopped. on strong in But for distribution which this we online, the channel February and as other like the suffering situation is China people is non-essential many quarter. of in is the moment also centers of this same also online online system in centers until the in

-- at brick-and-mortar. issues least same short-term the of in online is in having So the

In terms online will the when in role very the future, in online role the that of we play the of recovery a recovery strong happen. recovery will optimistic are in the

Erinn Murphy

the Thank you best. All for context. that

Fabrizio Freda

Thank you.

Operator

will question next go Please UBS. ahead. Steve The come from with Strycula

Steve Strycula

morning. Good Hi.

give first performing retail of Mainland to question think half texture sales versus of wanted the a little business? we just travel you China question. how it's year. my So, to the the are back disaggregate the how Erinn's to Can modeling us follow-up of more part component how on Primarily bit as about

is businesses those the housed of EMEA One segment. within

is business housing other clearly The APAC.

as get texture to more being to want little ones just impacted So more real a time. which bit

Thanks. think history seen like back three recovery use is online before And guide off months it here, as that "contained" you travel the months, path if then would four Any what from retail we call booked? typically do issue being the it flights what post is once moment Fabrizio, from from be appreciated. help come a for how to forward? you've Is about

Fabrizio Freda

Yeah.

if question that what's more XX first what So flights. the context you you most short know the channel. answer will closed probably their give you is think this retail just Because the -- just impacted in happening, moment to the travel airlines to than of

in So this travel cases. China moment of in suspended the out majority and the large of in is

So for out in traffic there of just is of lack China. and --

concern. The tourism a issue. is is general this global prudent, because in in it's outbreak moment global more Second, a

And which And postponing moment so choice of or concerned are speaking touristic travel. travel. their are this many in to some travel I'm reducing the people

place any have Many to -- the virus. but to third any other China, companies a is is to there place there where Then travel factor. also banned

count reducing reasons. so travel for companies containment not cost being is to business And the travel are business many reduced

is travel So of in reduced. amount traffic significantly reduced in this is and moment, airports the

So biggest that's impact. the

Kong, The significance. China have second which itself obviously and biggest reduced Mainland impact is Hong

Greater So the the reasons China have I'm that that already in going to we because of all I discussed repeat. say the would area, remarks prepared not

the not not most until children that work are to not mind in February are people cities February back is thing most keep even until that of But the out are for -- there reasons, at XX of requested back a to not going not not rightly transportations are people of school. essential And where public which so home get contamination. is and to are risk important

And the entire this, because is impact. short-term the So, of in of fundamentally an we expect behaviors the area is changed. this the population second where

part the second your recovery. The is of question

Now the recovery we know. know what you

back particularly things We back, is traffic meaning, have And buy. recovery is cases back, in the hockey the and the the studied people back see the traffic sticks, the we all When what it's to is in when situation. is previous that all traveling. previous tends be

can that to very we're learning where terms travel more that is push by of business making applying Conversion is in the will conversion, meaning, retail that we're in is traffic travel The area the can period the thing retail an -- do by be improvements. many important when and there -- or conversion. before we during built recovery

the time So low, plans in recovery of then for of obviously traffic we use will as the preparing element this be deep our key future a transition will period we are conversion when arrive. where to and reworking mitigating plans are

Chinese. look travel to and for will try and really supporting a of at business. same to Chinese in I will The customers this. this population. at happen don't and to We where as Chinese the are economy in this And the point recovery country our to the the look retail example a see as tune We is want recovery our recovery make just employees of to the we the partners of the to that country contribution the retail some last want -- want

are and but recovery to of the right -- the much to make much us, industry. process possible to partners retail for to going long-term not again benefit to this as as restart only to business them we the retail contribute from sure that close for the recovery to will and momentum And entire start stay our to all the travel regain

Operator

is Teixeira ahead. go from next The JPMorgan. question Please Andrea with

Andrea Teixeira

results. the on And morning. Good your you. Thank to want echo I congrats just

Fabrizio Freda

Thank you.

Andrea Teixeira

also giftable So lines. as marketing -- a care there I putting follow-up behind holidays, on in made you skin you're for that the North natural that think And was the America and the -- comments and more fragrances. putting more prudently Fabrizio it's obviously mix it's more those and

into do Or we So think to that some Thank and have potentially impact that positive into you. quarters? few seasonal quarter? next the maybe second continue innovation of you the build momentum

Tracey Travis

start can add his also I'll then and So Fabrizio comments.

stabilization clearly, was We in globe. the in and towards holiday us a it of strong and strong quarter for parts America. America second And in are North North progressing other

season awfully So responded worked good one consumers about a and make this happy our teams to we're and have holiday that. hard very very

back do touched the the we fact that the half a we're through given that be have situation of managing softer expect to that that at globally. Fabrizio we tourists look we on bit As that the year, business

And I progress. would is North say America making progressive also that

the the not would outcomes acceleration from be continued reflective laid that second all that. of I against year America some good is there. we're out the expect and North that executing necessarily But would of team from last strategies were quarter However, seeing

certainly in better to year quarter than we have America. did expect we last last what year So you we North North America, this was performance told

So that is progression towards stabilization.

announcement. North out Macy's America. North the over to saying of clearly, time, America needs about be time. has believe for brick-and-mortar as for some earlier And we've retailed been that taken asked Lauren been we some

has announced are doors actually Day Macy's closing we already fiscal our what aligned our be were in yesterday. year much their would So in The Investor very guidance. that with included in

Andrea Teixeira

That's helpful.

Operator

question from ahead. next come with Stifel. Please will go The Astrachan Mark

Mark Astrachan

and good morning everybody. Thanks,

related also the But enhanced makes everywhere. e-commerce availability the quantify could benefit from the to now if sales you available wondering up product to quantify obviously the cities visit just would consumption XXX. you're previously product accelerating China. could the words, percentage that And to you if other impact from consumers have of and selling online Just e-commerce in In China.

about readily and if you will of basis and X to that about of think demand, and tense maybe that could you as maybe demand now a think maintaining future online. think dynamic those sales how about, bit past think of terms order So you product X how talk some if about having on How go-forward that readily about just have a how kind cities, helped you -- didn't available in growth? that people can impact accelerating it available, do but you which Tier

Fabrizio Freda

Yes. No, good very a that's question.

phenomenon, brands our a in in is brands, subject As distributed on lower on I very commented other with and XXX in we a much a lot important are have Clinique the because trajectory. China physical and Lauder distribution this most of city today are times growth the which still which coverage city

it the physical of the long-term now at But over in So China in XXX untapped. time, is lot there distribution is demand potential a we in still same cities. know

and yet and strong brands. where cities not physical prestige is Estée prestige distribution there So of Lauder there there for XXX demand is of over luxury are luxury sure

then by Beijing -- Shanghai. So business travel filled within there's like and vacation when the gets China they this travel markets products travel internal like where to amazing can or filled get consumer when or or for they Island X-Tier in like demand also by Hainan online access to go

these these us is way. But and and very cover is So in cities access why lot online to productive that's give a very growing consumers because situation. the strategic, also a it that's

focused important is this productivity It other the positive is can very online there consequence that the dynamic remain rest. productive. The right the can of productively can and remain very where brick-and-mortar cover

reason of are where one X also in that continue results better and comment cities to the has my grow. is Tier phenomenon So physical a we better Tier distribution good yet behind this having not X It is and also the arrived. definitely

grow. In highest continued China It's and online percentage of markets. of of sales, sales percentage versus side terms to on is high it's the other

Operator

We Modi RBC have will time question that for and come Capital one Markets. with more from question Nik

Nik Modi

focusing as burn? wanted for kind question you is on sales these other the dial on referenced? tier of you year those on about really the in that Thanks. Good flexibility everyone. do have have to up some Do How a in control and the you dial to near term? tier morning, generate of cities. to of longer-term some growth Fabrizio. turn to I follow-up of really it just progresses Or the Mark's question. much if turn I'm kind up wanted Thanks the cities just thinking just lower you that much

Fabrizio Freda

supply with selective distribution of – – like online and the I is demand way remember to which our mean, online we activity. coverage and And important. luxury. mean are own I build in build have also means our partners ahead But control Tmall for obviously, we – the distribution, to of our very is us we

gradually demand. build we the So

distribution. reason the was growing advertising the meaning there fast in was while media. Because physical past focused was And city why the local, where so social in today is is cities demand the advertising also in

by media national. Social definition is

that's that So in we sure and consumer of quality we mind. desirability filling you and and and demand we are this the in market good typical demand quality a making experience ahead and concept the dynamic the keep are our where that also high to supply demand is gradually of of luxury give normally high the

So not selling we products. are

can that selling are we We experiences the and when best quality service and to provide full do possible consumer. we only the

dial reveals So gradually, the the have the to answer yes, is short we as itself. opportunity but market capability up

Nik Modi

And And the demand? cities? company a on Lauder has a those quick Of believe general you just consumer follow-up. in many just you a good in very handle Estée cities China's XXX cited do how insights a opportunity, as

Fabrizio Freda

to but that data we analytics these different not give so open you the distribution. we I physical of where data, will Even numbers that buying you can number use we specific cities. I decide consumers from have consumer the tell So to are know

to we to the the use also cities to need elements offer. the to that physical from better make service is demand demand of productive distribution consumer to when sufficient high-touch services our and quality offer demand that and we the So the the the we to the be and provide to strength judge sure of continue strategy the

a gradual development of it's So service. quality

Nik Modi

you. Thank helpful. Very

Fabrizio Freda

Welcome.

Operator

session. That concludes today's question-and-answer

That participation day. Time If hear unable be the a conference through call. please you to join thank X:XX a To good Estée the your today's for for all XX. Lauder like XXX-XXXX. today recording all concludes dial you to you call, at playback and a Eastern available were passcode would entire will February call wish XXX-XXX-XXXX, I PM of

The Estée Lauder Companies Inc. (EL) 6 Feb 202020 Q2 Earnings call transcript