December 3, 2023

  • Estee Lauder Companies Inc (NYSE: EL) shares are plunging Wednesday morning after its mixed third quarter performance, hit by pressures affecting its Asia travel retail business. The company also foresees significantly greater headwinds in its fourth quarter than expected in February.
  • EL reported a third-quarter FY23 sales decline of 12% year-on-year to $3.75 billion, beating the analyst consensus estimate of $3.71 billion.
  • Organic net sales fell 8%, primarily driven by Asia travel retail in Hainan and Korea. 
  • Sales in the Americas increased 3% Y/Y, Europe, Middle East & Africa dropped 26%, and Asia/Pacific fell 1%.
  • Net sales from Skin Care fell 20%, Makeup dropped 2%, Fragrance rose 1%, and Hair Care grew 1%.
  • Gross profit declined 20% Y/Y to $2.59 billion, with the margin contracting 750 basis points to 69.1%.
  • Operating expenses decreased 9% Y/Y to $2.3 billion, while the operating expense margin was 61.2% versus 59.2% last year.
  • Operating margin contracted 950 basis points to 7.9%, and operating income for the quarter fell 60% Y/Y to $297 million.
  • The company held $5.53 billion in cash and equivalents as of March 31, 2023.
  • Adjusted EPS of $0.47 missed the analyst consensus of $0.51.
  • “As the shape of recovery from the pandemic for Asia travel retail comes into better focus, it is proving to be both far more volatile than we expected and more gradual relative to what we experienced in other regions. We are, therefore, lowering our organic sales and EPS outlook for fiscal 2023 to reflect significantly greater headwinds in our fourth quarter than we expected in February,” said President and CEO Fabrizio Freda.
  • On May 2, 2023, the company declared a quarterly dividend of $0.66 per share on Class A and Class B Common Stock. The dividend is payable in cash on June 15, 2023, to stockholders of record at the close of business on May 31, 2023.
  • Outlook: Estee Lauder cut FY23 adjusted EPS guidance from $4.87-$5.02 to $3.29-$3.39, against the consensus of $4.96.
  • EL sees FY23 sales decline of 12% – 10% (prior view 7%-5% Decline), reflecting slower than expected return to growth in Asia travel retail.
  • Price Action: EL shares traded lower by 16% at $205.94 premarket Wednesday.


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