What happened
Estée Lauder (EL 0.33%) shareholders lost ground to the market this week. The makeup giant's stock fell 19% through 1:15 p.m. ET Thursday trading, compared to a 1.2% drop in the S&P 500, according to data provided by S&P Global Market Intelligence. Estée Lauder shares are down 19% so far in 2023.
The price drop this week came in response to management's fiscal Q3 earnings report, which contained a more conservative outlook for the 2023 fiscal year.
So what
Estée Lauder's Wednesday report showed decent sales trends through late March. Net sales were down 12%, meeting the high end of the guidance range that management issued back in February. Earnings declined to $156 million from $558 million a year ago.
NYSE: EL
Key Data Points
Executives said in a press release that most of Estée Lauder's geographic markets performed better than expected, but that challenges in parts of Asia offset these gains. "We are encouraged by the strong momentum in the rest of our business," CEO Fabrizio Freda said.
Now what
Executives said they believe these challenges, mainly tied to a slower recovery in the travel industry in parts of Asia, will be temporary. Yet the rebound won't occur quickly enough for Estée Lauder to avoid a hit to the wider business.
To that end, management lowered their guidance for the full 2023 year. While organic sales were forecast to land between flat and a 2% decrease back in February, executives are now targeting declines of between 7% and 5%. Estée Lauder is also projecting a roughly 50% drop in adjusted earnings, compared to prior expectations for a decline of between 27% and 29%.
The worsening sales and earnings trends understandably shook investors, who had been looking for better results in both areas in 2023. Estée Lauder is still mending its business. But the stock will remain pressured as long as growth and profitability levels keep moving lower.
