The Estée Lauder Cos. withdrew its annual forecast as it reported a slump in first quarter 2025 sales on the back of struggles in Asia. This sent the stock down 25 percent to $63.98 in early-morning trading.
The group reported net sales of $3.36 billion for its first quarter ended Sept. 30, a decrease of 4 percent from $3.52 billion in the prior year. Analysts had penciled in $3.37 billion.
Organic net sales fell 5 percent primarily due to worsened consumer sentiment in China that drove further softening in overall prestige beauty in mainland China and low conversion rates in Asia travel retail and Hong Kong. In addition, lower replenishment orders in Asia travel retail, including inventory pressure, impacted organic net sales.
The company reported a net loss of $156 million, compared with net earnings of $31 million in the prior year, primarily due to charges associated with talcum litigation settlement agreements of $159 million in the aggregate, which includes charges for current and potential future claims with certain plaintiff law firms.
The change also reflects charges associated with the Restructuring Program component of the company’s Profit Recovery and Growth Plan.
Adjusted diluted net earnings per common share increased to 14 cents, above Wall Street estimations of 10 cents.
“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 chief executive officer Fabrizio Freda. “With this complex industry landscape, including the particular difficulty in forecasting the timing of market stabilization and recovery in China and Asia travel retail, and in the context of leadership changes, we are solely issuing an outlook for the second quarter and withdrawing our fiscal 2025 outlook.”
The company is also reducing its dividend to a “more appropriate payout ratio” to create more financial flexibility for its incoming leadership team.
As reported Wednesday, Stéphane de La Faverie has been named the new president and chief executive officer of the Estée Lauder Cos. He will take the reins on Jan. 1, while William Lauder will step down from his current role as executive chairman of the company and will remain chair of the board of directors, following the company’s upcoming annual meeting of stockholders.
On this, Freda said: “In an industry as dynamic as prestige beauty, Stéphane’s deep knowledge, exceptional strength as a leader, and unique ability to combine inspiration, authenticity and strategic insights to drive profitable growth will enable him to move us forward with speed and agility.”
