Estee Lauder Shares Plunge Amid Revenue Declines and Woes

Shares of Estee Lauder dropped 23% as earnings beat expectations but showed declining revenue and profits. Management forecasts continued challenges in upcoming quarters, impacting investor confidence.

Date: 07-02-2025

AI Rating: 4

Declining Revenue
Estee Lauder's financial report revealed a significant decline in revenue, with a 6% drop to $4.0 billion for the fiscal second quarter. This decline is notably concerning as it indicates a persistent downward trend in the company's financial health.

Earnings Per Share (EPS)
The adjusted earnings per share fell a drastic 29% to $0.62, raising red flags about profitability. Furthermore, management's guidance suggests a dire forecast, predicting adjusted EPS could decline by another 70% to just $0.29 at the midpoint of guidance ranges.

Management Forecast and Challenges
Estee Lauder's management forecasts continued declines for the upcoming March quarter, projecting an additional 8% to 10% decrease in revenue. This outlook is troubling and likely to decrease investor confidence in the company's ability to regain stability.

Market Conditions
The company's struggles are primarily attributed to ongoing declines in China and weak consumer spending in that market. The Asia/Pacific revenue segment fell 11%, indicating that external economic factors are severely impacting performance.

Goodwill Write-Downs
The write-downs on the Tom Ford and Too Faced brands suggest that Estee Lauder faces challenges in reviving these acquisitions. This could signal problems with brand management or market relevance, further complicating its growth strategy.

New CEO's Strategy
The newly appointed CEO has initiated a restructuring plan called "Beauty Reimagined," but initial reactions suggest that the plan may not be transformative. Instead, it appears to focus on improving basic operational efficiencies rather than addressing the underlying issues affecting revenue and profits.

Stocks: EL