Chinese Survey Has More Bad News Than Good For Estee Lauder

CLSA’s Caroline Levy reported that the fourth cosmetics survey of Chinese women revealed that the purchase rate of Estee Lauder Companies Inc’s EL brands remained flat or improved, while desirability and intent-to-switch rates had declined from the very high levels seen in 2015.

Levy maintained a Buy rating on the company, with price target of $110.

China Survey

“CLSA’s China Reality Research (CRR) conducted its fourth cosmetics survey of Chinese women since 2012,” the analyst elaborated.

The survey revealed that the intent to trade up within the skin care category had declined from 32 percent in 2015 to 17 percent in 2016, while the average number of skin care products used per person had risen from 8.6 in 2015 to 9.2 in 2016.

Ecommerce penetration has also increased as compared to 2015, with 42 percent of the respondents saying that they bought cosmetics online, as compared to 34 percent in 2015, while 28 percent said that there were likely to shop for cosmetics online more in the future.

Loses Top Position

However, the Estee Lauder brand fell from the No. 1 position as the most desired skin care brand, while losing s hare collectively of online purchase preference.

Levy stated, however, that the company’s long term story remained intact and Estee Lauder was expected to see 7 percent sales growth in China in FY17.

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