Estee Lauder To Encounter Asia Travel Retail Pressure Through 1HFY24, Says Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Estee Lauder Companies Inc EL with a price target of $250.

Estee Lauder will report 4Q23 earnings on Friday, August 18, before the market opens.

The analyst forecasts EPS of $0.00, compared to $0.42 last year and the consensus estimate of $(0.04). On the topline, revenue is expected to increase 4.3% Y/Y to $3.714 billion versus the consensus of a 1.5% decline to $3.507 billion.

The analyst estimates 500 basis points of operating margin contraction to 0.8%, as compared to the consensus of down nearly 500 basis points to 0.9% and the 5.8% operating margin recorded last year.

The analyst said the company expects Asia travel retail pressure due to headwinds in Korea and retailer inventory tightening in Hainan to continue through 1H24.

The analyst believes the channel can see a full recovery over time, given historical spending patterns and incentives for Chinese to shop abroad along with the apparent underlying demand in the market for EL’s products as evidenced by Mainland China growth.

In mid-July, EL reported that it had been a victim of a cybersecurity incident and has been working with law enforcement and third-party cybersecurity experts to understand the scope of the data taken.

The incident disrupted parts of the business operations during the quarter, and the analyst expects to hear about the resolution of the incident.

While the lag in Asian travel retail can represent lost business and profitability, the analyst is upbeat about the recovery prospects and the strength in demand across the rest of the business.

Price Action: EL shares are trading lower by 0.57% at $166.67 on the last check Monday.