Estée Lauder Cos. cut its forecast for the third time in six months as travel recovers more slowly than expected in China, hindering growth in a market that accounts for about one-third of the luxury company’s revenue.
(Bloomberg) — Estée Lauder Cos. cut its forecast for the third time in six months as travel recovers more slowly than expected in China, hindering growth in a market that accounts for about one-third of the luxury company’s revenue.
The retailer now expects annual sales to be down about 10% to 12% for the fiscal year ending in June, worse than its previous guidance for a 5% to 7% decline. The gradual and inconsistent return to travel shopping in Asia is causing “significantly greater headwinds” than were expected just a few months ago, Chief Executive Officer Fabrizio Freda said in a statement on Wednesday.
The company’s shares tumbled 16% in early trading before US markets opened in New York. If that decline holds, the stock would be set for its biggest drop since January 2009.
Executives had said in February that they were expecting a rebound in the current quarter that ends in June, as more Chinese shoppers travel to domestic hot spots including Hainan. The popular island province generates around 14% of Estée Lauder’s sales, according to estimates from analysts at TD Cowen. Estée Lauder also cited weakness in travel retail sales in South Korea.
Excluding some items, profit is now expected to be between $3.29 and $3.39 per share for the fiscal year, far short of the $4.97 that analysts had estimated. The company had already lowered its forecast twice because of continued weakness in China.
The downbeat outlook from Estée Lauder is a contrast from many of its competitors. Coty Inc., LVMH, L’Oréal SA and Kering SA have all said that sales in China have begun to accelerate in the current quarter after a slow start to the year.
(Updates shares in third paragraph.)
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