Estee Lauder Falls 20% as China, Israel Weigh on Outlook

Beauty stocks experienced another wave of selling on Wednesday following Estee Lauder's (EL:US) downward revision of its fiscal-year projections for adjusted earnings per share and net sales. 

The company pointed to challenges in the Asia travel retail business and additional headwinds stemming from a slower-than-expected recovery in the overall prestige beauty market in mainland China. Moreover, EL highlighted the risks of business disruption in Israel and other parts of the Middle East as factors that are weighing on its outlook.

For its first fiscal quarter, Estee Lauder reported adjusted earnings per share of $0.11, down from $1.37 year-on-year, and falling short of the estimated loss of $0.20. Adjusted net sales for the first quarter were $3.52 billion, representing an 11% decrease compared to the previous year and missing the estimated $3.54 billion.

For this quarter, EL expects adjusted EPS to be in the range of $0.48 - $0.58, falling short of the average analyst estimate of $1.25. The company also foresees a decline in net sales for the second quarter, ranging from 9% to 11%.

“While we had a better-than-expected first quarter, we are lowering our fiscal 2024 outlook given incremental external headwinds, namely from the slower growth in overall prestige beauty in Asia travel retail and in mainland China,” said CEO Fabrizio Freda.

As a result, Estee Lauder's forecast for adjusted EPS for the full year 2024 is lowered to a range of $2.17 and $2.42, significantly lower than the consensus of $3.60. Net sales for the fiscal year of 2024 are projected to decrease by 2% to 1%.

Rep. Ro Khanna announced last month he purchased EL shares worth between $15,000 and $50,000 in early September. The transaction occurred on September 06, when the stock closed at $156.58.

The stock was seen exchanging hands at just above $100 on Wednesday.