Investing.com -- Shares of Estee Lauder (NYSE: NYSE:EL) plummeted 26% on Thursday after the cosmetics giant reported a revenue miss and withdrew its fiscal 2025 outlook amid ongoing challenges in China and travel retail.
The company posted first-quarter adjusted earnings per share of $0.14, beating analyst estimates of $0.09. However, revenue fell 4% YoY to $3.36 billion, slightly below expectations of $3.37 billion.
Organic net sales declined 5%, primarily due to weakening consumer sentiment in China that drove further softening in prestige beauty demand in mainland China and low conversion rates in Asia travel retail and Hong Kong. Lower replenishment orders in Asia travel retail also impacted sales.
In a concerning move, Estee Lauder withdrew its fiscal 2025 outlook, citing "incremental uncertainty on timing of stabilization in Mainland China market and Asia travel retail as well as in the context of leadership changes." The company will now only provide quarterly guidance.
"While we believe the new economic stimulus measures in China present medium- to long-term potential for stabilization and ultimately growth in prestige beauty, we anticipate still-strong declines near-term for the industry in China and Asia travel retail," said CEO Fabrizio Freda.
For the second quarter, Estee Lauder expects reported and organic net sales to decrease between 8% and 6% YoY. Adjusted EPS is forecast to be $0.20-$0.35, down 60-77% from the prior year.
The company also announced it is reducing its dividend "to a more appropriate payout ratio," declaring a new quarterly dividend of $0.35 per share.
Reacting to the report, analysts at B Riley said the mixed F1Q is "overshadowed by the withdrawal of FY guidance, a cut to the dividend, and a F2Q outlook below expectations." They added: "While the magnitude of the move (particularly in the context of the multi-year chart), prompts
a re-evaluation of the thesis - we remain on the sidelines in the context of significant model uncertainty, and we see the CEO appointment of an internal candidate as stymieing a thesis around a potential strategic 'shake-up'."
Meanwhile, Jefferies noted that yesterday, EL officially named Stéphane de La Faverie as the next CEO but stated: "Selecting internal hires for both CEO and CFO gives us concern that the new appointees may not make drastic enough strategic changes to improve the trajectory of the business."