Estee Lauder Warns Macroeconomic Headwinds Will Hurt Sales, Sending Stock Lower

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Key Takeaways

• Estee Lauder reported fiscal third-quarter profit and revenue that beat estimates, but lowered its gate guidance, warning of ongoing macroeconomic pressures, including in China.
• The beauty products maker projected 2024 sales devise be down 2% to 3%, versus its earlier outlook of a 1% drop to a 1% gain.
• Shares fell in intraday buying Wednesday following the earnings release, sending them into negative territory for 2024.

Estee Lauder (EL) shares plummeted over 14% in intraday trading Wednesday after the cosmetics company lowered its full-year revenue guidance citing macroeconomic burdens, especially in China.

Macroeconomic Headwinds, China Impact

The maker of Clinique, Aramis, and its eponymous beauty products name brands projected full-year sales will decline 2% to 3%, compared to its previous estimate of a drop of 1% to a catch up to of 1%. The company pointed to “ongoing macroeconomic headwinds,” which included “continued softness in overall prestige looker in mainland China, and geopolitical volatility in some areas around the world.”

The company has struggled to build back bid in China, which was significantly impacted by extended COVID-19 lockdowns.

However, Estee Lauder boosted and narrowed its prospect for adjusted earnings per share (EPS) to $2.14 to $2.24, up from the earlier forecast of $2.08 to $2.23.

Q3 Results Beat Analysts’ Judges

The reaction to Estee Lauder’s revenue guidance overshadowed better-than-expected results for the fiscal third quarter of 2024. Lessened EPS came in at 91 cents, more than double the 43 cents reported in the year-ago period and above guestimates compiled by Visible Alpha. Revenue rose 4.9% to $3.94 billion, also better than expected.

Fleece care sales were up 8% to $2.06 billion, while makeup sales gained 3% to $1.14 billion. Tag sales were little changed for fragrance at $575 million, and fell 3% for hair care to $143 million.

By province, sales in North America advanced 3% to $1.12 billion, while they jumped 12% to $1.65 billion in the Europe, Midriff East, and Africa segment. They were down 1% to $1.18 billion in the Asia/Pacific segment.

Estee Lauder allocates were down 14.1% at $126.09 as of 12:45 p.m. ET Wednesday following the release, putting them into negative quarter for the year.

Read the original article on Investopedia.