By Ananya Mariam Rajesh
(Reuters) -Estee Lauder Cos Inc’s shares plunged on Wednesday after the cosmetics maker forecast a bigger drop in full-year sales and profit than previously estimated, blaming a slow recovery in demand at duty-free and travel destinations, especially in Asia. Shares of the company fell as much as 22% to hit a six-month low of $190.30 after the MAC brand owner slashed the forecasts for a third time.
Meanwhile, European luxury companies LVMH and L’Oreal saw a rise in first-quarter sales, boosted by a rebound in Asia as China eased COVID restrictions last year.
Barclays analyst Lauren Lieberman said in a note Estee’s profit forecast was the “last thing” expected even by the Street.
Estee said while major shopping districts such as Hainan, an island in the southernmost province of China, and Korea saw more traffic, the conversion of travelers to consumers in luxury beauty lagged.
Even though China relaxed pandemic-related restrictions, the company saw January 2023 pressured by retailers destocking due to an increase in COVID-19 cases.
Estee CFO Tracey Travis said in a post-earnings call there has been progress in travel retail, which depends on duty-free sales at airports and travel destinations, through the third quarter and expects the sales to be up in double digits.
The company’s profit, however, also remains pressured from a stronger dollar since it has sprawling global operations and convert foreign currencies into the greenback.
Estee expects full-year 2023 net sales to fall between 10% and 12%, compared with its prior forecast of a 5% and 7% decrease.
It also forecast adjusted profit per share to fall between 50% and 51%, compared with a 27% to 29% decrease it expected earlier.
However, the company beat third-quarter sales expectations but missed profit estimates.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shinjini Ganguli)
