Pre-market down over 20%! Estee Lauder withdraws fiscal year 2025 outlook and lowers dividend | Earnings report insights

In the face of the complex situation in the global luxury beauty industry, Estée Lauder has withdrawn its full-year outlook for fiscal year 2025 and lowered its performance guidance for this year, expecting net sales in the second quarter to continue to decline, citing uncertainty under the new CEO and weak global demand.

The company has also reduced its dividend to a "more appropriate" payout ratio. In pre-market trading, Estée Lauder's shares fell over 20%. So far this year, the stock has dropped 40%.

On the 31st, The Estée Lauder Companies Inc. announced its financial report for the first quarter of fiscal year 2025, ending September 30, 2024:

• Revenue: In the first quarter, net sales decreased by 4%. Although there was growth in Japan and priority emerging markets, it was not enough to offset the overall decline in performance.
• Net Profit: In the first quarter, there was a net loss of $156 million, compared to a net profit of $31 million in the same period last year. The adjusted net profit, excluding restructuring and other expenses, was $52 million.
• Earnings Per Share: The adjusted diluted earnings per share rose to $0.14, an increase of 7% year-on-year.

This quarter, the decline in net sales was mainly concentrated in skincare and makeup products, which fell by 8% and 2% year-on-year, respectively. Sales of fragrances and hair care products also saw a slight decline. Sales performance varied by region, with the Asia-Pacific region experiencing an 11% drop.

Total operating expenses amounted to $2.554 billion, a year-on-year increase of 9%. Among these, the settlement costs related to talcum powder lawsuits were $159 million, and restructuring and other expenses were $97 million. The increase in these costs led to an operating loss of $121 million, compared to an operating income of $98 million in the same period last year.

Stéphane de La Faverie will take over as CEO in January next year. The company has been dealing with declining market share in the U.S. and weak sales in the Asia-Pacific region, particularly in duty-free stores, i.e., travel retail business.

The outgoing Fabrizio Freda has served as CEO since 2009, and he stated:

“We expect the Asian travel retail industry to continue to see significant declines in the near term.

I hope my successor can help the company move forward quickly and flexibly.”