Estee Lauder CEO: Skin care, e-commerce and Asia are key drivers of business amid pandemic

"Skin care is working well because the Asian populations are the most demanding consumers in terms of skin and they're driving most of this global trend," Estee Lauder CEO Fabrizio Freda said when discussing results from the company's fiscal second quarter. To see the full interview with Freda sign up for a free trial to CNBC Pro: https://cnb.cx/3panG4x

Estee Lauder saw sales increase for the first time since the coronavirus pandemic upended global economies nearly a year ago, snapping a string of three straight quarterly declines on the top line.

Shares of the New York-based cosmetics company had their biggest day of trading since March after revenues grew 5% in the holiday quarter, beating both management’s and Wall Street’s expectations.

Estee Lauder reported $4.85 billion of sales in its fiscal second quarter and earnings per share of $2.61, above analyst estimates of $4.49 billion on the top line and $1.69 EPS. The beauty brand had issued guidance for about $4.48 billion of revenue on the high end.

In an interview Friday on CNBC, CEO Fabrizio Freda said skin care sales, e-commerce and Asian markets were key drivers.

“Consumers are using more skin care,” he told Jim Cramer, host of “Mad Money.” “During the pandemic when most of us are working from home, closed in our homes, we have time to pamper, we need more skin care benefits ... This is working around the world, particularly in Asia.”

Estee Lauder’s business in the Asia/Pacific region more than made up for the lost sales around the rest of the globe. Though year-over-year sales plummeted 14.5% in the Americas and 2.4% in Europe, the Middle East and Africa, the company grew 34.6% in the Asia market. Sales rebounded in the region after initially dipping in the January-March quarter of 2020, the first period affected by the coronavirus pandemic.

Second-quarter sales in the Americas dropped to $1.05 billion from $1.23 billion a year ago.

Freda attributed the decline in consumer demand for makeup to closed restaurants and fewer in-person events, such as parties, that people tend to dress up for. The use of teleconferencing applications, such as Zoom and Cisco’s Webex, however, are driving demand for skin care products, he said.

Skin care sales made up for the decline in Estee Lauder’s makeup segment. Skin care products sales grew nearly 28% in the quarter, while makeup sales decreased 25%. Skin care has been Estee Lauder’s best segment since the start of the global health crisis.

“Skin care is working well because the Asian populations are the most demanding consumers in terms of skin, and they’re driving most of this global trend,” Freda said. “The other big driver is online. As you can imagine, many, many people started shopping more online, and we were ready, and we’ve been able to pivot to online around the world very fast.”

Prior to the three-month period that ended Dec. 31, Estee Lauder’s quarterly revenue had fallen nearly 17% from pre-pandemic levels.

Due to ongoing uncertainty around the health crisis, Estee Lauder declined to provide guidance for the fiscal 2021 full year.

Shares of Estee Lauder rallied more than 7% on Friday, closing at an all-time high of $272.81. The stock now claims a gain of 2.5% this year, extending its gains of 29% from last year.

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