Updated as of 5:30 p.m. on Thursday.
The Estée Lauder Cos. has finally delivered a new full-year outlook to the market.
After scrapping its previous forecast in October, Estée Lauder said it expects sales to drop by as much as 9 percent in 2025 on the back of continued weakness in Asia and travel retail, but sees a return to growth next year if “there is meaningful resolution of the recently enacted tariffs.”
Related Articles
The bigger-than-expected annual drop comes on the back of a forecasted stronger double-digit net sales decline in the company’s global travel retail business in the fourth quarter compared to the third quarter when travel retail declined 28 percent organically. It continues to shrink as a percentage of the business toward the low teens.
Lauder also expects a high-single-digit organic net sales decline in Asia-Pacific for fiscal 2025, primarily driven by ongoing subdued consumer sentiment from Chinese consumers and the impact of the company’s strategic exit of Dr.Jart+ from the travel retail channel in Korea.
Stéphane de La Faverie, president and chief executive officer, said: “With the strategic reset of our travel retail business well underway to better reflect recent industry trends and market conditions, and provided there is meaningful resolution of the recently enacted tariffs to mitigate potential related negative impacts, we are confident in our ability to return to sales growth in fiscal 2026.”
On the subject of tariffs, Akhil Shrivastava, executive vice president and chief financial officer at Lauder, added that it does not expect a material impact of fiscal 2025 profitability. But he stressed that “unless meaningful resolution of trade negotiations is achieved, we do anticipate the high rate of tariffs to have a material impact in fiscal 2026.” As a result, Lauder is exploring additional cost savings and strategic pricing to help further mitigate some of these impacts and plans to provide more details in its August earnings call.
At the beginning of April, President Donald Trump unveiled sweeping punitive tariffs on around 60 countries, sending the markets into a tailspin. He later stepped back, authorizing a 90-day pause — “and a substantially lowered reciprocal tariff during this period” of 10 percent. Still, he upped import duties on China-made goods to 145 percent. Currently, 75 percent of what Lauder sells in the U.S. is either sourced from its manufacturing plants in the U.S. and Canada or covered under existing trade agreements. Roughly 25 percent of what it sells in China is sourced from its manufacturing plants in the U.S.
“We have strategies to potentially reduce that to below 10 percent, including leveraging products made in our manufacturing plants in Japan,” said Shrivastava. This comes as the third-quarter numbers came in better than expected, although all categories and geographies saw declines.
Net sales for the third quarter decreased 10 percent to $3.6 billion, while organic net sales fell 9 percent. Analysts had forecast net sales of $3.52 billion.
Adjusted diluted net earnings per common share decreased to 65 cents, compared with 97 cents, but above Wall Street forecasts for 29 cents. Skin care net sales slid 11 percent, primarily due to the decrease in the company’s Asia travel retail business, which drove declines from Estée Lauder and La Mer. Makeup net sales decreased 7 percent, driven by declines from MAC, reflecting an unfavorable impact from the timing and lower level of shipments for new product launches compared to the prior-year period. Fragrance net sales fell 1 percent, dragged down by the Clinique Happy product franchise, and Estée Lauder retail softness at retail in Asia-Pacific. Hair care net sales decreased 10 percent.
On a geographical basis, net sales in the Americas dropped 5 percent, by 16 percent in Europe, Middle East and Africa and 1 percent in Asia-Pacific. In February, Lauder announced plans to ramp up its restructuring program, part of the so-called profit recovery plan, and will eliminate between 5,800 and 7,000 positions. This includes the 3,000 already announced and is expected to be executed in fiscal 2025 and 2026 and completed in fiscal 2027.
De La Faverie said that as of late April, it had approved initiatives to reduce more than 2,600 net positions.