Daily Brief: Estée Lauder’s Quarterly Results Have A Sultry Pout

Daily Brief: Estée Lauder’s Quarterly Results Have A Sultry Pout

over 1 year ago3 mins

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Beauty giant Estée Lauder gave a disappointing sales outlook for the year on Thursday.

What does this mean?

There’s a phenomenon called the “lipstick effect” that tends to emerge in times of economic hardship, where shoppers scale down their luxury purchases to something smaller – hence lipstick – rather than stop them altogether. That dynamic was in full flow last quarter: Estée Lauder’s fragrance and make-up sales lifted its revenue in the US, Canada, and Latin America by 12% from the same time the year before.

So it was a shame about China, whose shopping districts sat empty due to ongoing Covid restrictions. That left Estée Lauder’s brands – including Clinique and La Mer – with piles of unsold stock, which dragged down sales in the Asia-Pacific region by 23%. So even though the company managed better-than-expected overall sales of $3.6 billion last quarter, its full-year sales and profit outlook still came in well below expectations.

Estee Lauder sales growth

Why should I care?

Zooming in: Handbags and gladrags.

Estée Lauder is also reportedly thinking about buying luxury company Tom Ford for $3 billion. But while the latter’s beauty and fragrance businesses would be a good fit, clothing and accessories would be more of a stretch. For one thing, Estée Lauder doesn’t have the expertise required to run a fashion house, which it might need to remedy by partnering with someone who does. And for another, Tom Ford’s handbags are a small part of its product line – not ideal given that handbags are the real money-spinners in the industry.

Estee Lauder stock

The bigger picture: Just you watch.

There are some luxury shopping habits that the lipstick effect can’t explain, and the boom in watches is one of them: data out on Thursday showed that Swiss watch exports hit a near-record $2.3 billion in July. Stranger still, the highest-end pieces were the biggest draw, with those worth $500 or more representing 95% of that total.

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Cisco Is Here For All Your Internet-Based Needs

Cisco image

Cisco reported better-than-expected quarterly results earlier this week.

What does this mean?

Cisco is the biggest maker of the hardware that runs the internet and corporate networks, and it provides much of the security technology that companies need to operate day to day. So even though the wider PC industry has been struggling, demand for Cisco’s services has remained in fine form, with no signs of customers cutting back. The company’s “secure, agile networks” segment – which makes up around half the company’s revenue – posted expectation-busting revenue, as did its web conferencing segment. Cisco said it was seeing hints that the chip shortage was easing up too, which suggests it’ll fill more orders going forward. That might be why it thinks revenue will be as much as 4% higher this quarter than the same time last year – a big win considering analysts weren’t expecting any growth at all.

Cisco stock
Source: Google Finance

Why should I care?

The bigger picture: Cisco optimizes itself.

Cisco is right to be heady with confidence: there were 15% more orders in the pipeline last quarter than the one before – a key metric that gives investors some idea of future sales. That’s partly down to its hallmark networking equipment, sure, but it’s also down to its forays into new sources of revenue – like selling ways to optimize internet-based services – that have gone from strength to strength in the last year.

Zooming out: From chip shortage to chip oversupply.

Cisco might be finding it easier to get its hands on chips because demand for them has fallen off a cliff lately, as companies get antsier about the prospect of an economic slowdown. That’s caused analysts to slash their estimates of global chip sales growth, even though the US government just passed $52 billion worth of grants for the industry. The situation is so bad, in fact, that chipmaking heavyweights including Intel and Micron have both said they’re planning to cut their spending plans over the next year.

Global chip sales
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