Estée Lauder shares plunge 20% as company yanks forecast on weak sales
Estée Lauder shares plunged more than 20% on Thursday after the cosmetics giant withdrew its full-year earnings forecast and revealed weak demand for its luxury fragrance and cosmetic products.
Shares of the 78-year-old company, founded and controlled by New York’s Lauder family, on Thursday were recently off 22% at $68.03 — their lowest level in a decade.
Estée Lauder said it expects second-quarter profit per share between 20 cents and 35 cents — sorely short of analysts’ estimates of $1.06, according to LSEG data.
The company expects net sales to plunge between 6% and 8%, compared with Wall Street’s estimate of 0.2% growth to $4.3 billion.
On Wednesday, the company said it had appointed a longtime employee, Stephane de la Faverie, as its new chief executive.
He will take the helm on Jan. 1.
The leadership change is an attempt to give the company a major makeover as it suffers from a consumer spending slowdown in major markets, particularly China.
“We anticipate still-strong declines near-term for the industry in China and Asia,” outgoing CEO Fabrizio Freda said.
The beauty and luxury goods sectors have struggled in recent quarters as Chinese consumers – hit hard by a hiring slump, lower wages and a weak housing market – have cut back on non-necessity spending.
China’s government earlier this month pledged stimulus to help the economy recover, but analysts and investors have warned it will likely take time for that money to work its way from consumers to businesses.
Estée Lauder said it was “cautiously optimistic” about medium- to long-term growth opportunities due to the stimulus in China, though it clarified it does not expect that to help its second quarter performance.
Estée’s first-quarter sales in the period ended Sep. 30 fell 11% in the Asia Pacific region, compared to a 3% decline in the previous quarter.
“There really is no end to the softening of demand in China as well as in the US. They have been facing a great deal of competition,” said eMarketer analyst Sky Canaves.
Last week, European rival L’Oreal missed quarterly sales expectations and flagged low spending on beauty products in the region, as well as disappointing travel retail results.
Earlier this month, Bernard Arnault’s luxury fashion group LVMH – which owns Louis Vuitton – reported a 5% decline in sales in its fashion and leather goods unit. The results missed expectations of 4% growth.
The region including China was LVMH’s worst performer. LVMH’s US division did not fare much better.
Estée Lauder said it was pulling its annual forecasts to provide wiggle room for several leadership changes. Along with the new CEO, Estée is also bringing on a new chief financial officer after longtime CFO Tracey Travis announced her impending retirement over the summer.
Estée announced a quarterly dividend of 35 cents per share. Its shares have already plummeted 40% this year.
The luxury makeup group is not the only major company to yank its yearly guidance on leadership changes amid shaky earnings results.
In the last two months, Nike and Starbucks have each pulled back their annual forecasts and announced new chief executives.
With Post wires
