The Estée Lauder Companies CEO Fabrizio Freda has apologised for advertising claims on specific cosmetics which were found to be false. According to a Bloomberg report, a comprehensive review is currently underway.
In a conference call with analysts, Freda explained that the brand had recently discovered that the testing related to certain product advertising claims was altered by a small group of employees for some time. He added that this “clearly did not meet [the company’s] standards”, but did not mention which products were affected, Bloomberg said, adding that there were no safety issues. Moving forward, some of the companies’ advertised claims will be changes, with varying levels of significance.
“We are sorry this occurred and we take full responsibility for this matter,” Freda said in the Bloomberg report. Following the disclosure, Estee Lauder shares dipped by 6.9% to US$135, the biggest intraday decline since August 2015, the news outlet added. Marketing has reached out to The Estée Lauder Companies for comment.
The admission comes on the back of the company’s strong financial results for its third quarter ended 31 March 2018. This saw the company achieving net sales of US$3.37 billion, an increase of 18%, compared with US$2.86 billion in the prior-year quarter. Net earnings rose 25% to US$372 million, compared with US$298 million last year.
Freda explained in a statement that many areas of the business contributed to its strong first-half results as it continued to thrive in its third quarter, generating 13% sales growth. Among its multiple engines of growth, travel retail, online and Asia again were standouts. In APAC alone, the company garnered US$773 million in net sales, up from US$560 million the year before. Operating income increased significantly, primarily due to improved results in China and Hong Kong driven by higher sales.
The higher sales in China reflected strong double-digit gains in every brand except Clinique, which increased high-single digits. Estée Lauder, MAC, La Mer, Tom Ford and Jo Malone London led the sales growth. The company also generated double-digit sales growth in every major channel, particularly in department stores, online and specialty-multi. Meanwhile, the sales increase in Hong Kong reflected higher domestic consumption and a rise in tourism.
“Each of our three biggest brands grew globally, with exceptional growth in Estée Lauder. These results reflect our strong array of hero products, as well as product and service innovations that resonated well with today’s diverse global consumers,” Freda said.
The company’s products are sold in over 150 countries and territories under brand names including: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, Tommy Hilfiger, MAC, Kiton, La Mer, Bobbi Brown, Donna Karan New York, DKNY, Aveda, Jo Malone London, Bumble and bumble, Michael Kors, Darphin, Tom Ford, Smashbox, Ermenegildo Zegna, AERIN, Tory Burch, RODIN olio lusso, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA and Too Faced.