Estée Lauder sees slowdown in Asia

On a global scale, the company suffered from softer-than-expected demand in some markets, according to chief executive Fabrizio Freda.

Net sales decreased by 6.5% in the Asia Pacific region, primarily reflecting lower local currency sales in China, Taiwan and Korea.

The lower sales in Korea reflected continuing difficult economic conditions and competitive pressures, and Estée Lauder expects to see continued weakness in prestige beauty in Korea, albeit at a more moderate pace.

However, there were higher operating results in Korea than in other countries, such as Japan, Thailand, China, Hong Kong, and Taiwan; with the latter trio all reporting double-digit decreases, primarily reflecting the impact from the accelerated retailer orders.

Estée Lauder’s strongest local currency growth was generated in Australia, Japan, Hong Kong and the Philippines.

Impact​

Overall, the company reported a profit of $432.5 million, down from $447.5 million a year earlier. Net sales increased 2.9% to $3.02 billion, or 4% excluding the impact of foreign currency.

As a result, Estée Lauder has lowered the high end of its revenue outlook by one percentage point, but has backed its earnings outlook for the year.

“Our fiscal second quarter sales growth was in line with our expectations, despite softer than expected markets in some geographies,”​ comments Fabrizio Freda.

“Underscoring our sustainable growth is our strong and diverse portfolio of brands that is balanced by geography, product category and channel.” ​

The cosmetics maker’s boss says that key drivers of its sales gains in the quarter were the United States and the United Kingdom, its luxury and make-up artist brands, and its online and travel retail channels.

“These factors and continued strength overall in emerging markets more than compensated for soft results in certain European countries and solid but slowing Chinese market growth,”​ he adds.

The North America-headquartered company had seen a recent rebound in spending by well-heeled customers in the U.S., its core market. Sales in the Americas segment rose 4.8% to $1.19 billion in the latest period.