Estée Lauder results underlines weakness in key Asian businesses

Estee Lauder results underlines weakness in key Asian businesses

The results reflected how the company is struggling in the all-important Chinese market, where it has seen a continued deterioration in its market share. Concern over this has led to a succession of stock market rating agencies downgrading their outlooks for the company.

Berenberg chose to downgrade its rating for Estée Lauder from a buy to hold, citing concerns over general headwinds and that consumers in China are starting to slow their spending on a range of CPG categories.

“Most concerning to us, however, is the deterioration in market share trends for Estée Lauder (EL​​) in China in Q1 FY 2024, which suggests the company may be struggling to capture its fair share of repatriated sales that were previously channeled through Daigou shoppers,”​ analyst Fulvio Cazzol said.

The company reported that sales were down from $3.93 billion in the corresponding quarter last year to $3.52 billion, stating that the decline was primarily down to expected pressures in the Asia travel retail business, on top of the headwinds in China.

The US and most of Asia Pacific were still strong

However, the results were not all gloomy, partially offset by stronger performances reflecting net organic sales growth in the U.S., many other markets in the Asia Pacific region, and most markets in the EMEA region.

“In the context of a quarter which we anticipated to be challenging, we delivered our organic sales outlook and exceeded expectations for profitability,”​ said Fabrizio Freda, President and Chief Executive Officer.  

Momentum continued in many developed and emerging markets around the world, where our organic sales grew strongly and we realized prestige beauty share gains. Encouragingly, we returned to growth in the U.S., with Fragrance, Makeup and Skin Care all contributing. This performance partially offset the pressures of Asia travel retail and a slower recovery of overall prestige beauty in mainland China.”

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