Estée Lauder faces less rosy outlook without China

Estée Lauder is lowering the bar, now that serious restrictions have returned to China and the Russian market is gone. The cosmetics group also announces its third price increase in a year.

Growth everywhere except Asia

Estée Lauder will have to settle for less this year, as new lockdowns in China weigh down sales. For the full financial year, the cosmetics group is now expecting net sales growth of 7 to 9 %, well below the 13 to 16 % it had originally assumed. The expected earnings per share are being lowered from 7.28-7.47 dollars to just 6.54 – 6.70.

In the past quarter, sales increased by 10 % to 4.25 billion dollars (4 billion euros), although analysts had expected a little more. However, quarterly profit exceeded forecasts and amounted to 2.97 dollars per share. There was growth in all regions except Asia, which partly compensated for the decline in China. The group’s net sales in the Asia-Pacific region fell by 4 %.

Biting the bullet

“There is no doubt that these current limitations in China will prove to be transitory, although there will be a far greater impact on our results in the fourth quarter than they were in the third quarter”, CEO Fabrizio Freda told Financial Times. The war in Ukraine is also affecting the company, as Estée Lauder, like most brands, has suspended its Russian operations since March.

The skincare segment in particular was the growth engine this quarter and accounted for a 6 % increase in sales. Premium brand La Mer is the star of the range, although the setback in China partially offset the double-digit growth in other regions. The company will raise prices in July for the third time this fiscal year.