Beauty company reports a surprise Q1 profit but Q2 profit will be less than half what is forecast
Shares of Estée Lauder Companies Inc. plunged toward a six-year low Wednesday after the beauty-products company reported a surprise fiscal first-quarter profit but provided a second-quarter outlook that was well below expectations and slashed its full-year forecast.
“While we had a better-than-expected first quarter, we are lowering our fiscal 2024 outlook given incremental external headwinds, namely from the slower growth in overall prestige beauty in Asia travel retail and in mainland China, which is currently confirmed in the pre-sale phase of the 11.11 Shopping Festival, and the risks of business disruption in Israel and other parts of the Middle East,” said Chief Executive Fabrizio Freda.
The stock EL, -17.37% sank 17.6% in premarket trading, putting it on track to open at the lowest price seen during regular-session hours since Sept. 28, 2017. It was also headed for the biggest one-day selloff since going public in November 1995, compared with the current record drop of 17.3% on May 3, 2023.
The company reported net income for the quarter to Sept. 30 that fell to $31 million, or 9 cents a share, from $489 million, or $1.35 a share, in the same period a year ago.
Excluding nonrecurring items, adjusted earnings per share came to 11 cents, compared with the FactSet consensus for a per-share loss of 21 cents.
Sales fell 10.5% to $3.52 billion, below the FactSet consensus of $3.53 billion.
Skin care sales sank 22% to $1.64 billion, missing the FactSet consensus of $1.71 billion, while makeup sales grew 1% to $1.06 billion, beating expectations of $1.02 billion.
Elsewhere, fragrance sales rose 5% to $637 million, above expectations of $609 million, and hair-care sales fell 6% to $148 million to miss estimates of $160 million.
The outlook, however, is disappointing investors.
For the second quarter, the company expects adjusted EPS of 48 cents to 58 cents, well below the FactSet consensus of $1.21. Sales are expected to fall between 11% and 9%, while the FactSet consensus of $4.72 billion implies an increase of 2.2%.
For fiscal 2024, the adjusted EPS outlook was cut to between $2.17 and $2.42 from between $3.50 and $3.75. And sales are now expected to be between down 2% and up 1%, compared with previous guidance of an increase of between 5% and 7%.
The stock has already tumbled 26.4% over the past three months through Tuesday, while the S&P 500 SPX, 0.73% has lost 8.4%.