Estee Lauder has recently taken significant measures by withdrawing its fiscal 2025 guidance and reducing its dividend, as the company's first-quarter sales were lower than anticipated, especially due to challenges in the China and Asia travel retail markets. The decision stems from 'incremental uncertainty' about when the China market and Asia travel retail will stabilize, coupled with imminent leadership changes within the company. The beauty giant announced Wednesday that Stephane de La Faverie is set to step in as chief executive at the beginning of next year, taking over from Fabrizio Freda, who will retire.
In light of recent financial results, Estee Lauder has slashed its quarterly dividend to $0.35 per share, down from $0.66. This revised dividend will be payable on December 16 to shareholders who hold their shares at the close of business on November 29. In the quarter ending September 30, Estee Lauder's net sales fell 4% year-over-year, totaling $3.36 billion, slightly below the consensus estimate of $3.37 billion gathered by Capital IQ.
The Asia-Pacific region experienced an alarming sales decline of 11%, primarily driven by reduced sales in mainland China and Hong Kong. Meanwhile, the Americas, as well as Europe, the Middle East, and Africa, also reported decreases in sales figures. Adjusted earnings for the first quarter did see some growth, rising to $0.14 per share from $0.11 in the prior year, outperforming Wall Street's expectation of $0.10. As the quarter progressed into October, it became evident that the company was confronting more severe macroeconomic obstacles for fiscal year 2025 than previously anticipated.
Estee Lauder shares reacted negatively to the news, plummeting nearly 21% during Thursday's trading session, resulting in a significant loss of 52% in their market value year-to-date. Consumer sentiment in China has deteriorated, with prestige beauty industry retail sales experiencing a drop from a 10% decrease in the previous quarter to a mid-teens percentage decline in the recently concluded quarter.
While there is hope for medium- to long-term recovery driven by China’s new economic stimulus measures, the company expects further short-term declines in the prestige beauty sector. Looking forward to its second quarter, Estee Lauder anticipates a drastic reduction in adjusted EPS, projecting a plunge of 60% to 77%, resulting in a range between $0.20 and $0.35, starkly contrasted with the expected $1.06.
Furthermore, net sales for that quarter are estimated to decline between 6% and 8% from the prior year. The company has communicated its belief that China’s stimulus measures will not provide a boost to its performance in the upcoming quarter, while it still expects some normalization of growth within the prestigious beauty market, particularly in North America..