Estée Lauder's latest financial report painted a grim picture, primarily due to its travel retail business, causing its stock price to experience a historic drop.
On Wednesday, Estée Lauder's stock closed down 18.9%, with intraday losses exceeding 20%, hitting a six-year low. This marked the company's most significant single-day decline since its IPO in 1995.
The sharp drop came in the wake of Estée Lauder's financial report for the quarter ending September 30, which was less than stellar. The report revealed that since the start of the 2024 fiscal year, Estée Lauder's revenue stood at $98 million, a staggering decline of over 85% year-over-year. Net sales amounted to $3.5 billion, down 10% compared to the previous year, while net profits plummeted over 90% to $36 million.
For context, the financial report released in August for the 2023 fiscal year showed that Estée Lauder's total revenue had decreased by 10% year-over-year, with net profits dropping by 58%. Revenue declined across the Americas, Europe, the Middle East, Africa, and the Asia-Pacific regions.
The latest report highlighted that despite net sales declines in markets outside the Americas, the company achieved "organic growth" in nearly all markets, including Asia-Pacific and Europe. However, the weak performance in the travel retail sector, particularly in the Asia-Pacific region, weighed down the overall results.
Travel retail primarily refers to duty-free shopping at airports, accounting for up to 40% of Estée Lauder's sales in some regions.
The slow recovery of the travel retail business in the post-pandemic era, attributed to the slower-than-expected reopening of international flights and visa issuance in the Asia-Pacific region, has been a significant drag. L'Oréal's recent financial report also reflected a sluggish trend in its travel retail business.
Estée Lauder had anticipated this downturn. During the earnings call, the company's President and CEO, Fabrizio Freda, mentioned that they did not expect the travel retail sector to return to its previous levels.
Additionally, Estée Lauder anticipates that the Israel-Palestine conflict will impact this fiscal year's performance. Specifically, it could affect earnings per share by approximately 22 cents, equivalent to about $78.7 million, potentially leading to a 1% decline in revenue. In the report, Estée Lauder revised its adjusted earnings per share for the 2024 fiscal year downward by more than 35%.
Year-to-date, Estée Lauder's stock has declined by 48%, underperforming the S&P 500 index, which has grown by 9.23% over the same period.
