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Estée Lauder Fears Bigger Drop In Profit On Uncertain China Recovery

By Donna Ahern
Estée Lauder Fears Bigger Drop In Profit On Uncertain China Recovery

Estée Lauder Cos forecast a bigger drop in full-year profit than it had initially estimated, citing uncertainty around recovery in major market China.

Analysts, meanwhile, expect China's recent move to relax its toughest COVID-related curbs and lift travel restrictions to improve sales for US luxury and beauty companies, such as Estée, that took a beating from the country's strict zero-COVID policy.

Shares Fall 

Shares of the New York-based company were down about 1% in early trading on Thursday after the company also forecast third-quarter sales and profit below analysts' expectations.

Estée noted that it expects a return to sales growth in Mainland China and Asia travel retail in the second half of the year.

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"Outside of China, the travel retail looks strong" said Evercore ISI analyst Robert Ottenstein, adding that segment recovery in the country, however, remained an important question.

Lower Sales 

Lower sales at Asia travel retailers and fewer inventory orders from the United States on worries of a slowdown in demand, hurt the MAC lipstick maker's sales in the second quarter.

"A concern on the quarter was apparent weakness in the US and it looks like they may be losing market share on the skin care side," Ottenstein added, highlighting a 5% decline in sales in the Americas.

Esteé expects annual adjusted profit per share to fall between 27% and 29%, compared with its prior forecast of a decrease between 19% and 21%, and net sales to fall about 5% to 7%, compared with a 6% and 8% drop it forecast earlier.

News by Reuters, edited by Donna Ahern, Checkout. For more A-brand news, click here. Click subscribe to sign up for the Checkout print edition.

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