(Reuters) -Cosmetics giant Estee Lauder forecast a bigger-than-expected drop in fiscal 2025 sales on Thursday, signaling a slowdown in demand for beauty products in the American market and a longer road to recovery in key China region.
The company had pulled its annual forecast in October and cut its dividend, citing an uncertain recovery in China.
Estee has been struggling to revive sales in China for the last couple of years as consumers navigated high unemployment and property downturn. It has also faced challenges in Asia travel retail or sales at airports or travel destinations like Korea and China’s Hainan.
Net sales in Asia-Pacific, which includes China and contributed 31.3% of Estee’s total sales in fiscal 2024, fell 3% in the third quarter.
In the U.S., companies from Estee to Coty are seeing middle-to-lower income consumers hesitant to buy premium brands, along with intense competition from smaller labels.
Estee’s woes are further aggravated by U.S. President Donald Trump’s chaotic implementation of tariffs, which are likely to push up costs for major American firms that import their products particularly from China and Europe.
The economic uncertainty is also likely to cast a shadow on Estee’s new CEO Stephane de La Faverie’s turnaround plans, which include speeding up of new launches, bringing in new luxury price tiers and increasing investments in marketing.
Organic net sales in the Americas fell 5%, with the company attributing it to retail softness and declines in consumer confidence and sentiment, which led to elevated inventory levels and destocking at certain retailers.
Estee expects fiscal 2025 net sales to be down 8% to 9%, compared with analysts’ estimate of a 7.07% fall, according to data compiled by LSEG.
It expects annual adjusted profit per share to be between $1.30 and $1.55, compared with the estimate of $1.40.
Shares of the Clinique skincare maker were up 5% in premarket trading, after it reported better-than-expected third-quarter results.
The MAC lipstick maker’s net sales fell 10% to $3.55 billion during the period. Analysts on an average estimated a fall of 10.72%.
Excluding items, it earned 65 cents, beating the estimate of 32 cents.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shilpi Majumdar)
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