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Estée Lauder has issued a gloomy outlook due to ongoing weakness in China, as the US beauty group announced its chief executive Fabrizio Freda plans to retire after nearly 15 years.
The group, whose brands include Clinique and MAC cosmetics, on Monday forecast lower than expected earnings and sales in the coming fiscal year due in large part to ongoing weakness in the key Chinese beauty market.
Shares in Estée Lauder, which have fallen about a third since the start of the year, dropped 2.2 per cent to $92.86 in early New York trading but were up slightly by early afternoon to $95.38.
While Estée Lauder believes the global “prestige beauty market” of upmarket brands will grow by 2-3 per cent, it “expects more tempered performance than the industry, mainly driven by its significant business in mainland China and Asia travel retail”.
The group reported a 2 per cent decline in net sales to $15.6bn in the year to June 30, 2024. It expects sales for the current year to range between a 1 per cent decline and a rise of 2 per cent, well short of expectations for a rise of at least 6.4 per cent according to consensus estimates from Reuters.
Adjusted earnings per share for 2025 are expected to be between $2.75 and $2.95, also well below estimates for $3.96.
Bigger French rival L’Oréal also flagged the lack of recovery in China in its most recent results as shoppers worried by the economic outlook cap spending on beauty products.
Estée Lauder said it was “well advanced” in its planning to appoint a successor for Freda as it announced his retirement, adding that the board had already “considered many highly qualified internal and external candidates”.
Freda, who will step down at the end of June next year, will continue to oversee the company’s strategic, financial and investment functions until a successor is appointed, the company said. This includes implementing a turnaround plan as Estée Lauder cuts back its workforce, invests in product innovation and works to shore up its margins.
The group has had success with skincare specialists La Mer and recently acquired cult brand The Ordinary, but the company has been under pressure due to a slow recovery in Asia.
“While our sales and profit outlook for fiscal 2025 is disappointing, this year we will make important strides as we implement our strategy reset to continue rebalancing regional growth, deliver improved annual profitability and strengthen go-to-market and innovation capabilities to elevate our execution in response to a more competitive market,” Freda said.
The management change comes shortly after the company announced in July its longtime chief financial officer would be replaced by Akhil Shrivastava, an internal candidate, later this year.
Freda, 66, joined Estée Lauder in 2008 as president and chief operating officer and was appointed chief executive a year later. The Italian executive spent two decades at consumer goods company Procter & Gamble before joining Estée Lauder. He is also on the board at BlackRock.
“We look forward to celebrating Fabrizio’s many amazing accomplishments as his formal retirement date nears. Until then the board, Fabrizio and the entire leadership team are laser-focused on navigating the current challenges faced by the company,” said Estée Lauder executive chair William P. Lauder.
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