To The Moon

$Estee Lauder(EL)$ plummeted in pre-market trading, dropping 15% due to the just-released FY24Q1 financial report falling short of expectations. Specifically, the speed of revenue recovery slowed, causing the company to lower its full-year outlook. EPS was slightly better than expected, but revenue missed by $30 million. In terms of regions, the Asia-Pacific region had some currency losses due to Japan and China, resulting in an overall in-line performance. As for guidance, FY24Q2 is not too different, as it is the end-of-year shopping season. However, the company lowered its expectations for FY24H2, which is the first half of next year, with Europe being the most significant "below expectations" point. Why did the market estimate keep the growth? Because it was optimistic about the recovery of Asian travel and retail industries, but the fact is that consumer spending in the Greater China region may slow down, including Japan. Estée Lauder is overly dependent on the skincare business, and with increased competition in the cosmetics business, the company's gross margin has been declining year by year, reaching its lowest point in ten years. Advertising and marketing expenses have also increased significantly, and Chinese consumers naturally know what is going on. (Li Jiaqi) The EMEA (Europe, Middle East, and Africa) business has been declining by double digits for five consecutive quarters. The company originally expected a rebound in FY24H2, but now it has to reduce its expectations again due to Israel's war. Actually, I think Israel is just a cover-up. The real cause is that the European economy is not good, and consumption is declining. Moreover, there are so many local brands in Europe, and competition is fierce. $LVMH-Moet Hennessy Louis Vuitton(LVMUY)$ and $Hermes International SA(HESAY)$ in Europe are currently facing similar problems, but they are top luxury brands, while EL is only a cosmetics brand with less risk resistance. Therefore, in high-beta situations (market corrections), alpha may also be negative. No wonder hedge funds would rather miss out than try and fail.