Cosmetics Company Estee Lauder Is Sliding Friday Morning - Here's Why

Estee Lauder Companies Inc EL shares are down Friday morning following its fourth quarter results and lackluster outlook.

EL reported fourth-quarter FY23 sales growth of 1% year-on-year to $3.61 billion, beating the analyst consensus of $3.47 billion.

Organic net sales grew 4%, owing to strong growth in Asia/Pacific as markets continued to progress in recovery and benefit from double-digit growth in every product category.

Net sales in The Americas were virtually flat, reflecting the decline in North America primarily driven by the slower-than-anticipated pace of its improvement at retail.

Sales in Europe, Middle East & Africa dropped 15%, and Asia/Pacific jumped 29%.

Net sales from Skin Care fell 5%, Makeup increased 12%, Fragrance rose 5%, and Hair Care grew 5%.

Gross profit declined 3% Y/Y to $2.44 billion, with the margin contracting 320 basis points to 67.8%.

Operating expenses remained flat at $2.45 billion, while the operating expense margin was 67.9% versus 68.8% last year.

Estee Lauder incurred an operating loss of $(5) million for the quarter versus an income of $79 million last year.

The company held $4.03 billion in cash and equivalents as of June 30, 2023.

Adjusted EPS of $0.07 beat the analyst consensus of $(0.03).

"Momentum continued in the markets of EMEA and Latin America, and accelerated strongly in Asia/Pacific led by mainland China and Hong Kong SAR," said President and CEO Fabrizio Freda.

Outlook: Estee Lauder sees FY24 adjusted EPS of $3.50-$3.75, against the consensus of $4.83. EL sees FY24 sales growth of 5% - 7%.

Estee Lauder expects Q1 FY24 adjusted EPS of $(0.31) - $(0.21) against the consensus of $0.99. Q1 FY24 revenue to decline 12% - 10%.

Price Action: EL shares traded lower by 6.22% at $151.98 premarket Friday.