The world’s number one cosmetics company is suffering from the lowered outlook of its competitor, Estée Lauder. The latter now expects revenues to decline by 6 to 8% for the year, against a previous growth forecast of 3 to 5%. After the announcement of this warning, the L’Oreal share recorded the largest drop in the CAC 40 by mid-day on Wednesday.
The American cosmetics group Estée Lauder expects its first half results to be negatively impacted by the Covid-related restrictions affecting the travel sector in Asia, particularly in mainland China. Also at issue is a negative dollar effect and the end of certain licensing agreements. As a result, its sales are expected to decline by 17 to 19% for its current quarter compared to the same period last year. For its part, the adjusted earnings per share is expected to be between 5.25 and 5.40 dollars, compared to a previous range of 7.39 dollars to 7.54 dollars.
Chinese confinements affect Estée Lauder, which drags L’Oréal down
After the announcement of this disappointing outlook, L’Oreal suddenly stalled in the middle of the day and lost nearly 2%, to 312.20 euros, the biggest drop in the Cac 40.
The cosmetics group’s share price was weighed down by the more than 8% plunge of Estée Lauder on Wall Street, after the announcement of disappointing forecasts for the second quarter and for the whole year. The group is also dragging down Coty, listed in New York.
The drop in Estée Lauder’s second quarter sales reflects the negative impact of stricter inventory management in travel retail due to the drop in traffic caused by health restrictions (30% of sales are made in China), a 7% decline due to the unfavorable currency effect of the dollar, and finally after the termination of the company’s licensing agreements with Donna Karan New York (DKNY), Michael Kors, Tommy Hilfiger and the Ermenegildo Zegna product lines since June 30 of this year
Estée Lauder down 6 to 8% for the year
For the whole year, the group is now seeing its net sales fall by 6 to 8% and those, on a like-for-like basis, are up by only 2%. Earnings per share are now only expected to be in the range of 5.01 to 5.21 dollars, compared to a previous estimate of 7.11 to 7.33 dollars. The recovery that was expected in traffic with Hainan, China’s tourist island province, is expected to be weaker than hoped, Estee Lauder said.
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