Estée Lauder Q1 Earnings: China Uncertainty Hits Beauty Giant, Withdraws FY25 Outlook, Stock Tanks

Estée Lauder Companies, Inc. EL shares are trading lower on Thursday.

The company reported first-quarter adjusted earnings per share of 14 cents, beating the street view of 9 cents. Quarterly sales of $3.36 billion (down 4%), missed the analyst consensus estimate of $3.371 billion.

Segmentally, the Skin Care unit sales slumped by 7%, Makeup fell by 2%, Fragrance decreased by 1%, and Hair Care dropped by 6%.

Organic net sales dropped 5% mainly due to declining consumer sentiment in China, leading to weaker prestige beauty sales and low conversion rates in Asia travel retail and Hong Kong SAR. Additionally, lower replenishment orders and inventory pressures from a slowing retail market further affected sales.

In the quarter under review, Estée Lauder reported a net loss of $156 million, compared with net earnings of $31 million in the prior year, primarily due to charges associated with talcum litigation settlement agreements of $159 million in the aggregate.

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“With this complex industry landscape, including the particular difficulty in forecasting the timing of market stabilization and recovery in China and Asia travel retail, and in the context of leadership changes, we are solely issuing an outlook for the second quarter and withdrawing our fiscal 2025 outlook,” Fabrizio Freda, President and Chief Executive Officer said.

Yesterday, Estée Lauder announced the appointment of Stéphane de La Faverie as its new President and Chief Executive Officer, effective January 1, 2025. He will also join the Board of Directors, succeeding Fabrizio Freda, who has decided to retire after more than sixteen years with the company.

Estée Lauder exited the quarter with cash and equivalents worth $2.350 billion and inventory and promotional merchandise worth $2.255 billion. Long-term debt as of quarter end totaled $7.31 billion.

Dividend: The company is reducing its dividend which affords more financial flexibility for the incoming leadership team to reaccelerate the profitable growth trajectory.

Estée Lauder declared a quarterly dividend of 35 cents per share payable in cash on December 16.

Outlook: Estée Lauder expects adjusted net earnings per common share to decrease between 77% and 60% and range between 20 cents and 35 cents, significantly below the $1.06 consensus estimate.

For the second quarter, the company’s reported and organic net sales are forecasted to decrease between 8% and 6% versus the prior-year period.

Price Action: EL shares are trading lower by 22.9% to $67.24 premarket at last check Thursday.

Photo via Wikimedia Commons

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