Estée Lauder Cos Inc cut its full-year sales and profit forecasts on Wednesday, signalling a hit to sales from persistent COVID-19-related lockdowns and store closures in major market China.
The New York-based company's shares were down about 12% in premarket trade after the company also forecast second-quarter sales and profit below estimates.
The subsequent restrictions have resulted in reduced traffic in stores and temporarily curtailed distribution capacity in the region.
Estée Lauder generated about 31% of its sales from Asia-Pacific region in the fiscal 2022, according to a regulatory filing.
The company expects full-year 2023 net sales to decrease between 6% and 8%, compared with the prior forecast of a 3% to 5% growth.
The cosmetics giant expects full-year 2023 adjusted profit per share to decrease between 19% and 21%, compared with the previous forecast of a 5% to 7% growth.
Fabrizio Freda, president and chief executive officer, said, “For fiscal 2023, we are lowering our outlook primarily to reflect tighter inventory management in Asia travel retail, given reduced traffic as a result of COVID-19 restrictions, tightening of inventory by some retailers in the United States, and a greater negative impact from the far-stronger US dollar.
"We anticipate sequential acceleration to strong organic sales and adjusted EPS growth in the second half of our fiscal year as these pressures begin to abate, momentum continues to build in other areas of our business, and our ongoing investments in innovation and advertising drive growth. Our optimism in the long-term growth opportunities for our brands and for prestige beauty remains intact. Reflecting our confidence, today we raised our quarterly dividend.”