Estée Lauder Forecasts Weak Annual Profit on Slow Recovery in Asia Travel Retail

Estée Lauder projected annual sales and profit below estimates on Friday, signalling a slower-than-expected recovery in its travel retail business, mainly in Asia, and easing demand in the United States.

Shares of the company were down 6 percent in premarket trade.

Major global companies have taken a cautious stance on their China recovery, as the world’s second-largest economy struggles to revive demand and battles rising youth unemployment rates and a high cost of living.

Analysts have said the drop in consumer demand in China and a slow recovery in Asia travel retail — sales made at airports or travel destinations like Korea and China’s Hainan — could impact luxury companies like Estée Lauder, which makes about 30 percent of its annual revenue from the Asia Pacific region.

“Asia travel retail pressured results, particularly in skin care, and we continued to experience softness in North America,” chief executive officer Fabrizio Freda said.

Estée Lauder’s Americas region reported flat net sales, while Asia Pacific reported a 29 percent increase in sales in the quarter.

European luxury rival LVMH last month also flagged cooling demand in the US

French cosmetics maker L’Oréal, which beat estimates on a China rebound, however, said the Chinese market was not picking up at the speed everyone had hoped for.

Estée Lauder’s expectations of a dour first quarter also led analysts to raise questions about the continuing uncertainty in Hainan and Mainland China.

“De-stocking and inventory levels in Asian travel retail … likely to remain the biggest headwind to growth over the next few quarters,” said Bernstein analyst Callum Elliott.

Estée Lauder expects full-year sales to rise between 5 percent and 7 percent, compared with analysts’ estimate of an 8.8 percent increase, according to Refinitiv data.

It sees annual adjusted profit to be between $3.50 and $3.75 per share, compared with an expectation of $4.83.

By Ananya Mariam Rajesh and Granth Vanaik

Learn more:

Estée Lauder Is Falling Behind Rivals Like L’Oréal, Even on Its Home Turf

The company’s sluggish sales in Asia and supply-chain missteps have left it trailing behind the French beauty giant.

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