Estee Lauder stock plunges, withdraws full-year outlook on China uncertainty

Investing.comOct 31, 2024 11:24 AM

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Investing.com -- Shares of Estee Lauder (NYSE: NYSE:EL) tumbled 12.5% on Wednesday after the cosmetics giant reported a revenue miss and withdrew its fiscal 2025 outlook amid ongoing challenges in China and travel retail.

The company posted first-quarter adjusted earnings per share of $0.14, beating analyst estimates of $0.09. However, revenue fell 4% YoY to $3.36 billion, slightly below expectations of $3.37 billion.

Organic net sales declined 5%, primarily due to weakening consumer sentiment in China that drove further softening in prestige beauty demand in mainland China and low conversion rates in Asia travel retail and Hong Kong. Lower replenishment orders in Asia travel retail also impacted sales.

In a concerning move, Estee Lauder withdrew its fiscal 2025 outlook, citing "incremental uncertainty on timing of stabilization in Mainland China market and Asia travel retail as well as in the context of leadership changes." The company will now only provide quarterly guidance.

"While we believe the new economic stimulus measures in China present medium- to long-term potential for stabilization and ultimately growth in prestige beauty, we anticipate still-strong declines near-term for the industry in China and Asia travel retail," said CEO Fabrizio Freda.

For the second quarter, Estee Lauder expects reported and organic net sales to decrease between 8% and 6% YoY. Adjusted EPS is forecast to be $0.20-$0.35, down 60-77% from the prior year.

The company also announced it is reducing its dividend "to a more appropriate payout ratio," declaring a new quarterly dividend of $0.35 per share.

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