Can Estée Lauder Bounce Back?

Estée Lauder's stock has plunged 83% from its all-time high of $374 to $68.94, prompting many to wonder if it’s time to buy in.

But the key question is: How strong is consumer demand for Estée Lauder products, especially in its core market segments?

The fiscal Q1 2025 earnings report provides insight:

Revenue and Profit:

Revenue was $3.36 billion, down 10% year-over-year, impacted by currency effects and a slow recovery in Asia’s travel retail sector.
Net loss of $156 million contrasts sharply with last year’s profit. Adjusted EPS came in at $0.14, slightly above estimates, though revenue fell short of projections.

Product Category Performance:

Skin Care: Sales dropped 8%, largely due to low demand in China and Asian travel retail. La Mer and Estée Lauder brands struggled, though Europe and the Americas saw growth.
Makeup: Declined 2%, driven by weaker demand for M·A·C and Too Faced, though Clinique showed global strength.
Fragrance: Saw a slight 1% decline, with strong growth in Asia/Pacific partially offsetting travel retail challenges.
Hair Care: Fell 6%, affected by weak salon demand in North America.

Regional Performance:

The Americas: Sales dipped 1%, with North America facing slowdowns, though new launches on Amazon showed promise.
EMEA: Declined 4%, pressured by weak travel retail sales.
Asia/Pacific: Revenue fell 11%, with notable declines in China and Hong Kong, though Japan saw strong growth, especially in fragrances.

Key Challenges:

In Asia, the high-end beauty market continues to struggle, particularly in China, where consumer confidence remains low. As CEO Fabrizio Freda noted, demand in China has weakened from mid-single-digit to low double-digit declines. Asia/Pacific, which accounted for 31% of Estée Lauder’s revenue in FY 2024, remains a critical but challenging region.

To address overstock, Estée Lauder has implemented product discounts, pressuring margins. Shifts in consumer spending toward experiences over luxury goods further impact demand. The demand for their products remains well below 2020-2021 levels, and it’s uncertain if it will rebound.

In North America, leadership changes are underway. Stéphane de La Faverie will step in as CEO on January 1, 2025, bringing extensive industry experience and a focus on hero products, digital marketing, and high-growth channels. His track record includes impactful roles at Giorgio Armani Beauty and Lancôme.

Stéphane de La Faverie appointed President and Chief Executive Officer,

Brands:

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