Estee Lauder Cuts Forecast On China Slowdown and Middle East Conflict

Estee Lauder, one of the world's biggest beauty products companies, said its annual results will be worse than initially forecast because of the weakness of the Chinese economy and potential impacts of the Israel-Hamas war.

The company expects sales in the fiscal year that ends in July of 2024 to be in a range of a 2% decrease to a 1% increase. The previous forecast was for a growth of 5% to 7%.

For the full-year adjusted profit per share, the forecast was reduced to $2.17 to $2.42 from $3.50 to $3.75.

Growth Estee Lauder's business in China was slower than expected. The company is also suffering the impacts of weak travel to and from Asia.

"This, combined with the potential risks of further business disruptions in Israel and other parts of the Middle East as well as currency headwinds, are increasing the pressure on the company's fiscal 2024 financial results," Estee Lauder said in the announcement of its results for the first quarter of the fiscal year, which ended in September.

Profit for the period sank 94% to $31 million from $489 million a year earlier. Net sales fell 10% to $3.5 billion.

"Momentum continued in many developed and emerging markets around the world, where our organic sales grew strongly and we realized prestige beauty share gains," Chief Executive Officer Fabrizio Freda said in the earnings statement. "Encouragingly, we returned to growth in the U.S., with Fragrance, Makeup and Skin Care all contributing. This performance partially offset the pressures of Asia travel retail and a slower recovery of overall prestige beauty in mainland China."

The IMF expects the Chinese economy to grow 4.2% in 2024, a slowdown from the 5% estimate for this year.

Canada Goose

Another luxury consumer products company lowered its forecast for annual results because of weaker Chinese growth.

Canada Goose, a producer of heavy winter coats and other apparel, said sales in the fiscal year of 2024 will be from C$1.20 billion (US$864.49 million) to C$1.40 billion, lower than its previous forecast of C$1.40 billion to C$1.50 billion.

"Our outlook for the second half of fiscal 2024 has come under pressure due to the increasingly challenging global macro-economic and geopolitical environments that have impacted consumer decision-making and prioritization of spend," the company said in a statement Wednesday.

Adjusted net profit in the quarter that ended on Oct. 1 fell to C$16.2 million, from C$20.3 million a year earlier.