Estée Lauder Cos Inc has forecast a bigger drop in full-year profit as slow recovery in major market China and higher costs pose risks.
Shares of the New York-based company were down about 3% in premarket trading after the company forecast third-quarter sales and profit below analysts' expectations, as the company also faces higher freight and labor expenses.
Sales of many US companies such as Estée had been impacted by China's strict zero-COVID policy, but analysts expect the country's recent move to relax its toughest curbs and lift travel restrictions to boost sales for luxury and beauty companies.
The company also expects the return to growth in Asia travel retail and mainland China to benefit sales in the second half of the year.
Fabrizio Freda, president and chief executive officer said, “We delivered on our expectations for the second quarter of fiscal 2023, despite the incremental pressure of COVID-19 in China in December.
"Many developed and emerging markets around the world outperformed to realise our organic sales growth outlook and, given disciplined expense management and moderation of the stronger US dollar, we exceeded our adjusted diluted EPS outlook."
Slowdown In Demand
The MAC lipstick maker's sales in the reported quarter were also impacted by Asia travel retailers cutting inventories, and lower replenishment orders in the United States on worries of a slowdown in demand.
Estee expects annual adjusted profit per share to fall between 27% and 29%, compared with its prior forecast of a decrease between 19% and 21%.
However, the MAC lipstick maker expects 2023 net sales to fall between 5% and 7%, compared with its prior forecast of a decrease between 6% and 8%.
News by Reuters, additional reporting by ESM. For more A-Brands news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.