Weak China Sales Hit Estee Lauder's Q4, CEO To Retire

Estee Lauder Companies Inc EL shares are trading slightly lower after the company reported its fourth-quarter results. 

The company reported sales growth of 7% Y/Y to $3.87 billion, beating the analyst consensus estimate of $3.83 billion.

Organic net sales grew 8% Y/Y, fueled by broad-based gains across all product categories, with Skin Care leading the way, driven by the company’s global travel retail segment.

Organic net sales in the Americas declined 5%, with sales in Europe, Middle East & Africa climbed 32% and Asia/Pacific fell 4%.

Organic net sales from Skin Care grew 15%, Makeup grew 1%, Fragrance rose 1%, and Hair Care increased 2% in the quarter.

Gross profit increased 14% Y/Y to $2.78 billion, with the margin expanding to 71.8% from 67.8% in the quarter. Operating expenses rose 23% Y/Y to $3.01 billion, while the operating expense margin was 77.8% vs. 67.9% last year.

Estee Lauder’s operating loss was $233 million, compared to a $5 million loss last year. Adjusted EPS of $0.64 beat the analyst consensus estimate of $0.27.

The company held $3.4 billion in cash and cash equivalents as of June 30, 2024.

Dividend: The company will pay a quarterly dividend of $0.66 per share, payable on September 16 to stockholders of record on August 30.

CEO Retirement: Estée Lauder announced that President and CEO Fabrizio Freda will retire at the end of FY25.

The company said its Board is well advanced in its CEO succession planning process, considering internal and external candidates. 

Outlook: Estee Lauder expects an FY25 adjusted EPS outlook of $2.75-$2.95 (vs. consensus of $4.02) and organic & reported revenue growth (1)% to 2%.

For the first quarter, Estee Lauder expects adjusted EPS of $0.02-$0.10 (vs. the consensus of $0.66) and organic and reported net sales growth of (5)% – (3)%.

Fabrizio Freda, President and CEO, said, “For fiscal 2025, we anticipate continued declines in the prestige beauty segment in China, mainly reflecting persistent weak sentiment among Chinese consumers.”

“In the rest of our business, we are planning to deliver improved performance across both developed and emerging markets. To fuel this, our priorities are reigniting Skin Care, capitalizing on the multiple growth drivers of high-end Fragrance, moving faster in leveraging winning channels, launching accretive innovation inclusive of new, big opportunities, and enhancing our precision marketing capabilities.”

“For fiscal 2025, the Profit Recovery and Growth Plan enables us to offset the pressure to profitability driven by the prestige beauty segment’s ongoing softness in China, yielding a more moderate pace of operating margin expansion than we’d previously expected.”

“While our sales and profit outlook for fiscal 2025 is disappointing, this year we will make important strides, as we implement our strategy reset to continue rebalancing regional growth, deliver improved annual profitability, and strengthen go-to-market and innovation capabilities to elevate our execution in response to a more competitive market.”

“These efforts, coupled with the strengths of our brands, product portfolio, and talented teams around the world, will position us to both outperform prestige beauty in fiscal 2026 and accelerate profitability expansion.”

Investors can gain exposure to the stock via KraneShares Trust KraneShares Global Luxury Index ETF KLXY and VanEck ETF Trust VanEck Morningstar Wide Moat Growth ETF MGRO.

Price Action: EL shares are down 0.47% at $94.52 premarket at the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image via Estee Lauder

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