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What impact is the coronavirus having on BP’s Top 20 Global Beauty Companies?
March 17, 2020
By: Beauty Packaging Staff
As more cases of coronavirus are reported, more companies in the beauty industry are telling employees to work from home. The good news is that COVID-19 has stabilized in China, but health officials warn that things will get worse before they get better in much of the rest of the world. In financial terms, nearly 200 publicly-traded companies have warned investors of the threat posed by the pandemic. Here’s a look at what Beauty Packaging’s Top 20 Global Beauty Companies are doing to reduce the spread of coronavirus and how the epidemic will impact business in Q1 and beyond. (Last updated May 8) Amorepacific Amorepacific, a South Korean company, immediately took action when the COVID-19 outbreak occurred. In February, the company ordered its employees to telecommute. Approximately 3,500 people work at Amorepacific. The company also took action by donating $287,591 to coronavirus emergency response efforts in Wuhan to bolster inventories of needed medical supplies. Additionally, one of Amorepacific’s haircare brands, RYO, organized shampoos and conditioners to support frontline health workers’ daily needs. The first shipment of donations departed the warehouse on February 27. Avon In March, Avon donated $2 million worth of personal care products such as soap, body wash and skincare products to Feed the Children to support these families in need during the coronavirus crisis. Avon’s partner, Feed the Children, works closely with community partners like schools, civic organizations and food banks to serve the most vulnerable populations and others who may be experiencing difficulty due to a job loss in this uncertain environment. Feed the Children has alerted Avon to the most pressing needs of the most affected communities so it can send vital resources to help keep these families afloat. “Avon is proud to have partnered with Feed the Children since 2004,” said Avon CEO Paul Yi. “Because of our longstanding relationship, it made sense to work with Feed the Children for their COVID-19 relief efforts. They work diligently to get our products to the people who need them most.” Over the last sixteen years, Avon has donated over 15,000,000 pounds of personal care and beauty products, clothing, shoes and home essentials to Feed the Children for distribution to families in need. In the last six months alone, Avon donations totaled over $40 million worth of necessities, bringing relief to nearly a million families including 3.5 million women and girls in 48 states and the District of Columbia. Beiersdorf On March 3, Beiersdorf reported that net sales in fiscal 2019 increased 5.8%, from $8082 million to $8551 million, but the company was unsure about what impact the coronavirus will have. Regarding its outlook for 2020, Stefan De Loecker, CEO of Beiersdorf AG stated, “While the situation of the coronavirus remains dynamic, its impact on our business is not quantifiable yet. We therefore expect stronger headwinds in 2020. But we are optimistic that, with C.A.R.E.+, we have set the right path to follow through on our development potential in the future with targeted measures and a greater willingness to invest.” The C.A.R.E.+ program was launched under De Loecker to realign Beiersdorf’s Consumer Business Segment. With C.A.R.E.+ Beiersdorf sets off a multi-year investment program, with $77 to $88 million in additional investments starting in 2019 to boost the opening of new markets, innovations, digitalization and up-skilling of workforce. On March 17, Beiersdorf postponed the Annual General Meeting that was scheduled for April 29 due to the increasing spread of the coronavirus. A new date will be set soon. Chanel Chanel has scrapped plans for upcoming fashion shows in Asia because of the coronavirus outbreak, which is affecting spending on luxury goods. Chanel said it is monitoring the situation with “the health and well-being of its teams and clients” as a priority. Colgate-Palmolive Colgate’s stock declined by almost 4% on Monday, March 9 and the stock is down by about 12% since February 1, after the WHO declared a global health emergency. Still, analysts don’t expect consumer product sales to take a major hit during the crisis, and sanitary and health care products like toothpaste could even enjoy a surge in sales. Representatives from Colgate-Palmolive, in their fourth quarter earnings call, noted “it seems certain that there will be a negative impact from the coronavirus on our business in China and the total company for at least the first quarter.” Coty In response to the rapidly evolving global situation brought on by COVID-19, Coty has implemented a number of key initiatives focusing on the safety of its key stakeholders while also providing for business continuity and opportunity. The brand is taking measures in all countries in which it operates, in compliance with local public recommendations. A global response team has been set up and is operational. And alongside other industry players, Coty is taking initiatives to begin manufacturing and supplying hand sanitizer to medical and emergency services where needed. On March 20, Coty reported it has been adjusting its business focus as part of its response to COVID-19. First, the open channels and markets are being prioritized, with the acceleration of a number of initiatives, in particular e-commerce. These include activations on Amazon, with sales in the US nearly doubling in recent weeks, as well as launching Kylie skin-care Europe in the coming weeks. The teams are also getting prepared for an increase in demand post-COVID 19 disruptions, starting in Asia. Second, management has increased further its focus on cost control and cash-flow, and is taking a number of additional measures, temporary or structural, to adjust its expenses and protect its cash flow. In light of the impact of COVID-19 on its business, Coty now expects its net revenues for the third quarter of FY20 to decline roughly 20% like-for-like, with a meaningful impact on profit. As the situation evolves, Coty intends to continue actively adjusting its priorities, and has decided to withdraw its guidance for FY20, so as to have the “necessary flexibility.” On March 19, Coty joined the front lines in the US in the battle against the coronavirus. The company assembled a team to manufacture and package hydro-alcoholic gel, a hand sanitizer. Coty is providing it free of charge to local authorities, to get it where it is needed most—in the hands of medical and emergency services. On April 10, Coty said that it expects fiscal third-quarter revenue to fall 20% due to the coronavirus outbreak, with profit expected to take a “meaningful impact.” In response, the company withdrew its fiscal 2020 guidance. In order to manage the pandemic, Coty is recommending to the board that shareholders receive 100% of their dividend in kind for the next two quarters, and JAB, the company’s largest shareholder, is paying off the loan it took for the 2019 tender offer in full. A JAB affiliate, Cottage Holdco B.V., holds 60.7% of Coty shares. CEO Pierre Laubies and CFO and COO Pierre-Andre Terisse are both taking a one-quarter cut in their base salaries for the rest of fiscal 2020. On the other hand, demand for Coty’s products on Amazon.com Inc. has nearly doubled in the US in recent weeks in the wake of the coronavirus crisis. The beauty company is also preparing for a demand increase in Asia post-coronavirus. In Europe, Coty is preparing for the launch of Kylie Cosmetics. The Estée Lauder Companies In February, The Estée Lauder Companies reported favorable financial results for its second quarter. Net sales of $4.62 billion increased 15% from $4.01 billion in the prior-year period. More recently, however, The Estêe Lauder Companies’ stock has been downgraded by financial analysts to sell from hold as the coronavirus outbreak spreads, raising the risk to travel retail. According to CFRA Research, 23% of the company’s fiscal 2019 net sales came from travel retail and 35% came from department stores. Additionally, 32% of the company’s sales came from the Americas, 43% came from Europe, Middle East and Africa, and 25% came from Asia-Pacific, traits that leave Estee Lauder vulnerable to a global slowdown caused by the coronavirus. In the company’s Q2 report in February, Fabrizio Freda, president and CEO, said, “In the wake of the recent coronavirus outbreak, we are first and foremost concerned about the health and safety of our employees, consumers and everyone affected in China and around the world. Our hearts and support go out to the many people working hard to mitigate the health risks of the coronavirus. The global situation will also affect our financial results in the near term, so we are updating our fiscal year outlook. With our results to date and our agility in allocating resources, we will strive to deliver full-year growth at least in line with our long-term goals, even in this challenging moment. We will be ready to return to our growth momentum as the global coronavirus outbreak is resolved.” However, on March 19, the company backpedaled on its previous predictions. In an 8-K filing, Freda announced that the company was withdrawing its 2020 guidance in response to the COVID-19 outbreak. “Our guidance on February 6, 2020 for the fiscal 2020 second half and full year ending June 30, 2020 reflected the best information available to us at the time, as well as our best estimates about the pace of recovery of our then-impacted businesses,” said Freda. “However, most retail stores in North America and Europe are now closing, and our global business is more broadly impacted by COVID-19 than we initially expected. As a result, we are withdrawing our previous guidance that we no longer expect to meet. We expect to provide an update regarding the impacts of COVID-19 on our business and our recovery plans when we report our next earnings scheduled for May 1, 2020.” On March 3, Estée Lauder made a $2 million grant to Doctors Without Borders/Médecins Sans Frontières, to support the organization’s work in response to coronavirus in under-resourced and highly impacted countries. The company also made a grant to support the establishment of the $75 million NYC COVID-19 Response & Impact Fund, administered by the New York Community Trust, which will support New York City-based social services and cultural organizations that have been affected by the COVID-19 crisis. In China, over $800,000 was awarded to relief efforts, including Red Cross Society of China, Shanghai Charity Foundation and Give2Asia. Additionally, $1.4 million worth of in-kind donations were provided to the China Women’s Development Foundation to support front line medical staff. The Estée Lauder Companies also reopened the Melville, New York manufacturing facility to produce hand sanitizer for high-need groups and populations, including front-line medical staff. The company will donate 10,000 bottles of hand sanitizer to NY every week in the weeks to come for which Gov. Andrew Cuomo personally thanked them on Twitter. On April 7, Estee Lauder borrowed $1.3 billion from its line of credit. The beauty company has a total of $1.5 billion in its revolving credit facility, and it had $200 million in commercial paper outstanding as of March 31. The company’s stores have begun to reopen in Asia Pacific and online sales have accelerated, but stores remain closed in the Americas, Europe, Africa and the Middle East. A sharp decline in travel has also depressed sales. On April 15, the company announced announced salary reductions for the executive chairman, CEO, executive leadership team and other management, effective May 1, 2020 through October 21, 2020. Executive chairman William P. Lauder and president & CEO Fabrizio Freda will receive salary reductions of 50%. Henkel US public health officials across the country are imploring citizens to frequently and thoroughly wash their hands with soap. In response, Henkel said it is seeing increased demand for Dial soap, whose sales and marketing are overseen at the company’s North American consumer goods headquarters in downtown Stamford. “People are worried about what they’re hearing about the novel coronavirus. They’re looking for ways to keep their families safe,” said Martina Spinatsch, Henkel’s vice president of beauty care research and development. “Hand-washing is one of the simplest things that you can do in order to help prevent the spread of diseases. The Centers for Disease Control and Prevention has some great messaging on that, and we’re working to amplify those messages.” On March 24, Henkel announced a comprehensive global solidarity program to support employees, customers and communities facing the global COVID-19 pandemic. The program consists of:
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