By Ananya Mariam Rajesh
(Reuters) -Estee Lauder Cos Inc cut full-year profit forecast on Tuesday as fresh COVID-19 curbs in China and the suspension of operations in Russia following the invasion of Ukraine dent sales, sending the luxury cosmetics maker’s shares down 8%.
The restrictions in China, a major growth market for global luxury goods makers, put the brakes on a recovery in demand for cosmetics from a pandemic-induced slump, leading the Clinique skincare maker to also miss third-quarter sales estimates.
Estee Lauder’s Asia-Pacific sales fell for the first time in nearly two years as the restraints in China also limited its capacity to ship orders from distribution facilities.
In contrast, French rival L’Oreal posted better-than-expected quarterly sales last month as strong demand in Europe and North America helped counter some of the impact of lockdowns in China.
China generates about 36% of Estee Lauder’s sales, compared to about 20% for L’Oreal, according to analysts at Jefferies.
The brokerage added Estee’s forecast for China sales to continue to be pressured in the fourth quarter did not bode well for L’Oreal even with its smaller exposure to the market.
Estee estimates adjusted annual profit of between $7.05 and $7.15 per share, compared with its prior outlook of between $7.43 and $7.58.
Full-year net sales are projected to rise 7% to 9%, down from its prior forecast of an increase of 13% to 16%.
Still, some analysts were optimistic of a fast rebound.
“We have seen COVID-19 concerns negatively impact demand in the past only to see sales subsequently rebound once social restrictions end,” Edward Jones analyst John Boylan said.
Estee’s sales rose 10% to $4.25 billion in the third quarter, but fell short of expectations of $4.31 billion, according to Refinitiv data.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shinjini Ganguli and Sriraj Kalluvila)
