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A-Brands

Estée Lauder Forecasts Dour 2023 Due To China COVID Lockdowns

Estée Lauder Cos Inc has forecast full-year sales and profit below estimates, due to a hit from COVID-19-related lockdowns in major market China.

A spike in cases and subsequent restrictions in China, which had recently eased its zero-COVID policy, have left companies with presence in the country stuck with piles of unsold stock as cautious consumers avoid visiting crowded shopping districts.

An extended lockdown imposed last week in China's tourism hub, Hainan, poses further challenges to Estée's brands such as Clinique and La Mer.

In May of this year, Estée Lauder cut its full-year profit forecast as fresh COVID-19 curbs in China and the suspension of operations in Russia following the invasion of Ukraine dent the cosmetics maker's sales.

Fourth-Quarter Performance

The company has been grappling with bleak China sales for sometime now. It generated $1.01 billion from the Asia-Pacific region in the fourth quarter, a 23% decline compared to a year earlier.

Shares of the New York-based company fell about 1% in premarket trading on Thursday after the MAC brand owner also forecast current-quarter results way below analysts' estimates.


But analysts expect China lockdowns to be a near-term impact and remain optimistic about demand for beauty products in the region over the long term.

Meanwhile, strong demand from higher-income consumers in the Americas helped the company beat fourth-quarter results as consumers in the region splurge on beauty products.

Outlook

The company expects full-year 2023 net sales to increase between 3% and 5%, compared with analysts' average estimate of a 7.6% rise, according to IBES data from Refinitiv. Estée also flagged a strong US dollar to impact its results for the year.

It also sees adjusted profit per share to increase between 5% and 7%, below estimates of a 10.5% gain.

Fabrizio Freda, president and chief executive officer, commented, “La Mer, M·A·C, and Jo Malone London led the contribution of double-digit organic sales growth by nine brands, impressive on its own and especially so given the significant pressure from COVID-19 in Asia/Pacific at the end of the year.

"Brick-and-mortar and online each grew globally, as we capitalised on reopening, extended our consumer reach in high-growth channels, and amplified our omni-channel capabilities.”

News by Reuters, additional reporting by ESM – your source for the latest A-Brands news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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