Estee Lauder withdraws annual forecasts on uncertain China recovery

By Ananya Mariam Rajesh

(Reuters) -Estee Lauder pulled back its 2025 sales and profit forecasts on Thursday on reduced spending for its luxury makeup and fragrances in major markets, mainly China, sending its shares tumbling 23% before the bell.

The company, which named insider Stephane de La Faverie as CEO on Wednesday to revamp its business, also nearly halved its quarterly dividend payout.

"We anticipate still-strong declines near-term for the industry in China and Asia travel retail," outgoing CEO Fabrizio Freda said. The new CEO will take charge on Jan. 1.

Demand in the beauty sector in China has slowed in the past year as shoppers shun purchases of even "affordable luxuries" such as lipsticks and fragrances.

The China government had earlier this month pledged stimulus to revive its economy, but analysts and investors have said it could take time to seep into businesses through consumer spending.

Estee said it was "cautiously optimistic" about the medium- to long-term growth opportunities from the stimulus, but it does not expect a boost in the second quarter performance.

A slow recovery in Asia travel retail - sales at airports or travel destinations like Korea and China's Hainan - has continued to impact luxury companies such as Estee.

Its first-quarter sales in the Asia Pacific region fell 11%, compared to a 3% decline in the fourth quarter of fiscal 2024.

"There really is no end to the softening of demand in China as well as in the U.S.. They have been facing a great deal of competition," said eMarketer analyst Sky Canaves.

Last week, European peer L'Oreal, which missed quarterly sales expectations, flagged poor spending for beauty products in the region as well as travel retail.

L'Oreal CEO Nicolas Hieronimus called weak sales in Hainan as an "unexpected turbulence", which was expected to improve over the summer.

Estee Lauder (NYSE:EL ) said it was pulling its forecasts also to account for several leadership changes. Its longtime CFO was also leaving the company with a successor set to take over on Nov. 1.

It expects second-quarter profit per share between 20 cents and 35 cents, compared with estimates of $1.06, according to LSEG data. It expects net sales to drop between 6% and 8%, compared with an estimate of 0.24% rise to $4.29 billion.



The company, whose shares have already dropped 40% this year, declared a quarterly dividend of 35 cents per share.

In the last two months, Estee is the third consumer-facing company after Nike (NYSE:NKE ) and Starbucks (NASDAQ:SBUX ) to pull back annual forecasts following a change at the helm.

Source: Investing.com