Estee Lauder cuts profit forecast on China COVID curbs, Ukraine crisis

An Estee Lauder cosmetics counter is seen in Los Angeles, California, U.S., August 19, 2019. REUTERS/Lucy Nicholson

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Might 3 (Reuters) – Estee Lauder Cos Inc (EL.N) reduce full-year revenue forecast on Tuesday as recent COVID-19 curbs in China and the suspension of operations in Russia following the invasion of Ukraine dent gross sales, sending the luxurious cosmetics maker’s shares down 8%.

The restrictions in China, a serious progress marketplace for world luxurious items makers, put the brakes on a restoration in demand for cosmetics from a pandemic-induced hunch, main the Clinique skincare maker to additionally miss third-quarter gross sales estimates.

Estee Lauder’s Asia-Pacific gross sales fell for the primary time in almost two years because the restraints in China additionally restricted its capability to ship orders from distribution services.

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In distinction, French rival L’Oreal (OREP.PA) posted better-than-expected quarterly gross sales final month as robust demand in Europe and North America helped counter a few of the affect of lockdowns in China. learn extra

China generates about 36% of Estee Lauder’s gross sales, in comparison with about 20% for L’Oreal, in keeping with analysts at Jefferies.

The brokerage added Estee’s forecast for China gross sales to proceed to be pressured within the fourth quarter didn’t bode properly for L’Oreal even with its smaller publicity to the market.

Estee estimates adjusted annual revenue of between $7.05 and $7.15 per share, in contrast with its prior outlook of between $7.43 and $7.58.

Full-year web gross sales are projected to rise 7% to 9%, down from its prior forecast of a rise of 13% to 16%.

Nonetheless, some analysts had been optimistic of a quick rebound.

“We have now seen COVID-19 considerations negatively affect demand up to now solely to see gross sales subsequently rebound as soon as social restrictions finish,” Edward Jones analyst John Boylan mentioned.

Estee’s gross sales rose 10% to $4.25 billion within the third quarter, however fell in need of expectations of $4.31 billion, in keeping with Refinitiv knowledge.

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Reporting by Ananya Mariam Rajesh in Bengaluru; Modifying by Shinjini Ganguli and Sriraj Kalluvila

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