Unscrambling Monday's Egg

Unscrambling Estee Lauder

Putting Estee Lauder through the Chicks' Dozen
by Chick Cheryl

On my last birthday, I made a conscious decision that I was not going to dread it, instead it was going to be my year. No lipo, no augmentations, no lifts, just a facial and some beauty products. (Remember, I work in Hollywood, a face lift at 36 is not all that rare.scary, huh?) So I go to the spa, get my little facial and when I start to buy the products specially formulated for my "dry, dehydrated" skin", I discover they want $90 dollars for the eye cream! Are they kidding? I've also got a nose, cheeks, forehead, chin and neck to buy for! I know this is "my" year and all, but come on!

As I left, doomed to be a "prune face" forever, I remembered a product that I had used some time ago and had really loved.Aveda. I remembered their products didn't cost an arm and a leg, were all natural (no synthetics) and best of all, use no animal testing. We happen to have an Aveda spa near us, so off I went. The salesperson mentioned that Aveda was bought by Estee Lauder in 1995, a light bulb went off in my head, it's a stock! What Chick doesn't use some sort of makeup or skin care product? I couldn't wait to get home and run it through the dozen.

1. Buy What You Know

When I first got online and brought up their company profile, my jaw dropped - this company owns everything (in the make up world, at least)! Practically my whole make-up bag is a subsidiary of The Estee Lauder Companies Inc. without my even knowing it. Check out these brand names for yourself: Estee Lauder, Clinique, Aramis, Prescriptives, Origins, M.A.C., Bobbi Brown essentials, Tommy Hilfiger, La Mer, jane, Donna Karan, Aveda, Kate Spade, Stila, Jo Malone and Bumble and Bumble. Pretty impressive, huh? As I said, in my own home I currently have Estee Lauder Sport Tint, Clinique eye pencil, Prescriptives brushes, M.A.C. lipstick and blush, and Origins "Clean Sheets" candle and room freshener, to name a few! Now, if only they owned L'Oreal, then I could include the Chicks favorite mascara "L'Oreal Le Grand Curl!!

2. Keep It Simple Sister (KISS)

Chicks and make up need no further explanation!

3. Industry

Its industry is listed as: Consumer/Non-cyclical. We Chicks can relate to the "consumer" part since that's what we are, but it's the "non-cyclical" part that I like. check out #5, Repeat Profitability, for further explanation.

4. Leader In Its Field

The company manufactures and markets quality skin care, makeup, fragrance and hair care products, selling in over 120 countries and territories. As far as competitors go, my goodness, if this company feels a little competition it looks like they buy them! Actually, acquiring smaller companies as it has, gives them a better stronghold against competition with other giants like L'Oreal S.A. (owner of Lancome, Ralph Lauren, L'Oreal, Maybelline and Plenitude).

5. Repeat Profitablility

We want a company that makes a product that people buy all year round. (Not that there aren't good cyclical stocks.) I might wear less make-up in the summer, but I certainly make up for it in sunscreen and skin care purchases. Most people use make-up, skin care, and hair products year round.

Note: For the following formulas, the figures I used can be found at www.marketguide.com. I used quarterly numbers from the income statement and balance sheets for the quarter ending 9/30/00.

6. Gross Margins

Well above 50%, EL boasts a GM of 77.64%!

(Sales - Cost of Goods Sold) / Sales

(1,177.7 - 263.3) / 1,177.7

914.4 / 1,177.7 = .7764

.7764 x 100 = 81.4%