The Estée Lauder Companies (ELC) has reported a 4% decline in net sales for the first quarter of fiscal 2025.
Net sales for the three months ended 30 September 2024 were US$3.36bn, down from $3.52bn in Q1 2024.
Organic net sales decreased 5%, which the New York-based beauty giant attributed to worsened consumer sentiment in China, and low conversion rates in Asia travel retail and Hong Kong.
Lower replenishment orders in Asia travel retail, including inventory pressure given the further retail market deceleration, further impacted organic net sales.
However, these declines were offset by growth in several markets, including Japan and the company’s priority emerging markets.
These include Brazil, Mexico, India, the Middle East, Turkey, South Africa, Thailand, Malaysia, Vietnam, Indonesia and the Philippines.
However, the Bobbi Brown and Clinique owner’s Q1 earnings were severely hit by talc litigation settlement agreements charges.
Totalling $159m, these charges meant the company reported a net loss of $156m, compared with net earnings of $31m in the prior year.
By category, skin care net sales decreased 8%, with La Mer and Estée Lauder sales in particular negatively impacted by sluggish China and Asia travel retail demand.
The company’s fragrance net sales dipped 1% for the same reason.
However, ELC’s skin care sales in Europe, EMEA and (to a lesser extent) the Americas, grew thanks to new product innovation in the nighttime skin care category within its Advanced Night Repair and Revitalizing Supreme+ franchises.
Make-up net sales decreased 2%, with double-digit growth from Clinique failing to claw back declines at MAC Cosmetics, which struggled with softness in North America and disruption in the Middle East.
Finally, the quarter saw ELC hair care net sales drop 6%.
This was primarily driven by Aveda and reflected continued softness in the company’s North America salon channel.
Fabrizio Freda, ELC’s outgoing President and CEO, whose successor Stéphane de La Faverie, was officially announced yesterday (30 October), said: “While we believe the new economic stimulus measures in China present medium-to-long-term potential for stabilisation and ultimately growth in prestige beauty, we anticipate still strong declines near-term for the industry in China and Asia travel retail.
“In the rest of our business, we continue to expect the ongoing normalisation of growth in prestige beauty, most notably in North America.”
He added that ELC would not be issuing a fiscal 2025 outlook at this juncture.
“With this complex industry landscape, including the particular difficulty in forecasting the timing of market stabilisation and recovery in China and Asia travel retail, and in the context of leadership changes, we are solely issuing an outlook for the second quarter and withdrawing our fiscal 2025 outlook,” said Freda.
Additionally, he revealed ELC would reduce its dividend to “a more appropriate payout ratio”.
This, Freda said, is expected to create more financial flexibility for the company’s incoming leadership team to help return the company to profitable growth.
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