Shares of Estée Lauder fell more than 20% on Thursday after the cosmetics giant withdrew its full-year earnings forecast and revealed weak demand for its luxury fragrances and cosmetic products.
Shares of the 78-year-old company, founded and controlled by New York’s Lauder family, were down 22% as recently as Thursday at $68.03 – their lowest in a decade.
Estée Lauder said it expects second-quarter profit of between 20 cents and 35 cents per share — well below analysts’ estimates of $1.06, according to LSEG data.
The company expects net sales to decline between 6% and 8%, compared with Wall Street’s estimate of a 0.2% rise to $4.3 billion.
On Wednesday the company said it had appointed longtime employee Stéphane de la Fèvre as its new chief executive.
He will take command on January 1.
The leadership change is an effort to give the company a major turnaround as it suffers from a slowdown in consumer spending in key markets, particularly China.
“We still expect strong near-term decline for the industry in China and Asia,” said outgoing CEO Fabrizio Freda.
The beauty and luxury goods sectors have struggled in recent quarters as Chinese consumers – hit hard by a hiring slump, low wages and a weak housing market – have cut back on non-essential spending.
China’s government earlier this month promised stimulus to help the economy recover, but analysts and investors have warned that it will take time for that money to flow from consumers to businesses.
Estée Lauder said it is “cautiously optimistic” about medium to long-term growth opportunities due to stimulus in China, although it clarified it does not expect this to help its second-quarter performance.
Estée’s first-quarter sales in the Asia Pacific region fell 11% in the period ending Sept. 30, compared with a 3% decline in the previous quarter.
“There is really no end to the demand softening in China as well as the US. They face intense competition,” said eMarketer analyst Skye Canaves.
Last week, European rival L’Oréal missed quarterly sales expectations and flagged lower spending on beauty products in the region as well as disappointing travel retail results.
Earlier this month, Bernard Arnault’s luxury fashion group LVMH – which owns Louis Vuitton – A decline of 5% was recorded in sales in its fashion and leather goods unit. The results missed expectations for 4% growth.
The region including China was LVMH’s worst performer. LVMH’s US division didn’t fare much better.
Estée Lauder said it was removing its annual forecasts to provide room for several leadership changes. Along with the new CEO, Estee is also bringing in a new chief financial officer after longtime CFO Tracy Travis announced her impending retirement over the summer.
Asti declared a quarterly dividend of 35 cents per share. Its shares have already fallen 40% this year.
The luxury makeup group isn’t the only major company to lower its annual guidance over a leadership change amid shaky earnings results.
In the past two months, Nike and Starbucks have withdrawn their annual forecasts and announced new CEOs.
with post wires
