Estée Lauder 2024 sales, profit forecasts miss estimates

Investing.com -- Estée Lauder (NYSE:EL) has delivered annual profit and net sales forecasts that were under market expectations, in a sign that the beauty giant is facing a slower-than-anticipated recovery in its travel retail business in China.

The owner of the MAC brand said it now sees full-year 2024 sales increasing by between 5% to 7%, missing Refinitiv IBES estimates of 8.8% that were cited by Reuters.

Adjusted earnings per share were also projected to come in at $3.50 to $3.75 during the period. Analysts had called for a forecast of $4.83.

Shares in the company declined in premarket U.S. trading on Friday. The stock has shed about a third of its value this year and touched a more than three-year low at one point.

Despite rolling out price cuts to entice more customers in the duty-free island of Hainan, the New York-based group's returns in China have been hit by a sluggish post-pandemic rebound in the country. Shoppers in the world's second largest economy have become more selective in their spending on beauty products, particularly as youth unemployment touches record levels. Inventories in China have been more difficult to clear out as a result.

Compounding the issue has been intensifying competition in the U.S. from smaller brands, which has eaten away at Estée Lauder's share of its home market.

During the 12 months ended June 30, net sales in the Asia Pacific region slipped by 4% on a reported basis to $5.19 billion, while its Americas operations dropped by 2% to $4.52B. Group-wide, net sales were $15.94B, a decline of 10%.

In a statement, the firm said it aims to return to net sales growth in its 2024 fiscal year and progressively rebuild margins over the "next few years."

"The rebalancing of inventory in Asia travel retail is expected to partially offset the anticipated growth in many other markets globally, as the industry focuses on the gradual transition of selling to individual travelers," Estée Lauder said.

But it warned of headwinds to China's economy, as well as potential impacts from high inflation, a stronger U.S. dollar, and recession concerns across the world.