Estée Lauder’s inventory tanks as company cuts sales outlook

Estee Lauder’s (EL) shares plunged Wednesday as the company lowered its 2023 sales forecast.

adjusted earnings per share of Accounting third of the company The quarter was down 75% from the year-ago quarter, but net sales lagged 12%. A slower-than-expected recovery in Asian travel weighed on growth, according to Estée Lauder management.

Estée Lauder CFO Tracey Travis said on the company’s earnings call: travel retail It refers to duty-free sales at locations such as airports, airlines, and cruises, to name a few.

Retailers now expect sales to fall in the range of 10% to 12% in fiscal 2023. The company had previously shown a 5% to 7% decline.

Estée Lauder shares fell a record 21% when markets opened Wednesday, down 17% with a narrow loss.

Global travel retail organic sales fell 45% in the quarter, according to Estée Lauder. Retailers attribute the decline in net sales to Asian travel retail, particularly in Hainan and South Korea.

Broadly divided into skin care categories Estée Lauder also cited prolonged COVID-19-related shutdowns as a factor.

China’s COVID-19-related policies are much stricter than Western countries such as the United States. As recently as March, Chinese cities used lockdowns to limit the spread of the disease, According to Bloomberg. On April 29, China removed the PCR testing requirement for inbound travelers.

Fabizio Freda, CEO of Estée Lauder, said in a call Wednesday that travel retail was clearly difficult to predict in the moment of the pandemic. He pointed out that the channel had long-term positives, such as construction.

Estée Lauder cosmetics counter in Los Angeles, California, USA on August 19, 2019.  REUTERS/Lucy Nicholson

Estée Lauder cosmetics counter in Los Angeles, California, USA on August 19, 2019. REUTERS/Lucy Nicholson

The decline in sales contrasts with results for other companies operating in Asia and for the makeup industry as a whole. On April 12, LVMH (MC PA) boasted Sales increased 17% year-on-year amid a “significant recovery” in China. March, Ulta Beauty (Ultra) reported by Existing store sales up 15.6% beauty products mainly considered resilientIn the current macroeconomic uncertainty.

Against that backdrop, Estee Lauder’s slowdown in the third quarter was more severe than some analysts feared.

But Wall Street analysts remain bullish on stocks. At Estee Lauder, he has 24 buys, 9 holds and 1 sell, with an average target price of $289, according to Bloomberg Consensus data.

“It was difficult to predict the timing of all this recovery,” said Freda. “But we know there’s a recovery going on. So we don’t see anything wrong with prestige beauty.”

Josh is a reporter at Yahoo Finance.

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