Estée Lauder has reported better-than-expected profitability results for its first quarter ending September 30, 2023. However, the American cosmetics group revised its annual forecasts downwards, due to a slowdown in demand in China. This announcement led to an impressive fall in Estée Lauder’s share price, reaching its lowest level in over six years.
Estée Lauder Companies on Wednesday, November 1, reported sales down 10% to $3.52 billion for its first quarter ended September 30, 2023. The organic decline in sales was 11%, mainly due to expected pressures in the company’s travel retail business in Asia, as well as a slower-than-expected recovery in mainland China.
These challenges were partially offset by organic sales growth in the USA, in many Asia/Pacific markets, and in almost all Europe, Middle East and Africa (EMEA) markets, notably the UK and Germany. Perfumery and Make-up sales also increased, partially offsetting the decline in Skin Care.
But the company reported a net profit of $31 million, compared with $489 million the previous year.
“Against the backdrop of what we had anticipated would be a challenging quarter, we achieved our organic sales guidance and exceeded profitability expectations. Encouragingly, we returned to growth in the United States, thanks to the contribution of fragrance, make-up and skincare. This performance partially offset the pressure exerted by travel retail in Asia and the slowdown in the recovery of prestige beauty products in mainland China”, said Fabrizio Freda, President and CEO.
Revised forecasts
Estée Lauder also revised its annual forecasts downwards on Wednesday. The cosmetics group thus joins other luxury companies such as L’Oréal and LVMH, which are facing a slowdown in the fast-growing Chinese market.
“Although the first quarter was better than expected, we are lowering our outlook for fiscal 2024 due to additional external headwinds, namely the slowdown in overall prestige beauty growth in Asia and mainland China,” added Fabrizio Freda. “We are accelerating and expanding our earnings recovery plan, which will benefit fiscal 2025 and 2026, to achieve our ambitions of restoring profitability despite the increased pressure of external headwinds on the business in fiscal 2024.”
For fiscal 2024, Estée Lauder anticipates at best a 1% increase in sales and at worst a 2% decline, compared with a previous growth forecast of between 5% and 7%. In terms of organic sales, the Group expects at worst a 1% decline and at best a 2% increase. Previously, Estée Lauder had forecast organic growth of between 6% and 8%.
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Read also>LAGGING BEHIND ITS COMPETITORS, ESTÉE LAUDER REVISES ITS FORECASTS DOWNWARDS
Featured photo : ©Estée Lauder
