Estee Lauder sales hit by lackluster demand for makeup, shares drop

FILE PHOTO: An Estee Lauder cosmetics counter is seen in Los Angeles
FILE PHOTO: An Estee Lauder cosmetics counter is seen in Los Angeles, California, U.S., August 19, 2019. REUTERS/Lucy Nicholson/File Photo

May 3, 2021

By Aditi Sebastian

(Reuters) -Estee Lauder Cos Inc missed analysts’ estimates for quarterly sales on Monday, as weak demand for its luxury foundations and lipsticks offset growth at the cosmetics maker’s skincare brands, with people continuing to work from home.

The company’s shares, which touched a record high last week, fell nearly 7%.

Sales of cosmetics and makeup products have taken a hit during the COVID-19 pandemic as shoppers stay at home, pressuring Estee Lauder’s M.A.C and Bobbi Brown brands.

Lockdowns in certain parts of Western Europe also hampered demand for luxury makeup products, with Estee Lauder’s net sales declining across much of the region, notably in the United Kingdom and Spain.

Sales at Estee Lauder’s skin care segment jumped 31%, while sales at its makeup segment fell 11%.

Total net sales rose 16% to $3.86 billion for the third quarter ended March 31, but missed Refinitiv IBES estimates.

“The sales miss was surprising, given the momentum in the business exiting the December quarter,” Jefferies analyst Stephanie Wissink said.

Estee Lauder has been doubling down on its investments in skincare fueled by a pandemic-led shift from makeup to self-care and the company remains optimistic about a rebound in makeup demand.

Chief Executive Officer Fabrizio Freda told analysts the company was preparing for “a renaissance in (global) makeup”, having seen the division show higher sales in Australia, China and Israel, countries which have returned to relative normalcy.

Rival L’Oreal said last month it was seeing signs of a comeback in makeup sales.

Estee Lauder forecast fourth-quarter sales to grow between 44% and 50% on constant currency terms. Analysts had expected sales to rise 48.16%.

The company said it expects a fourth-quarter profit of between 38 cents and 48 cents per share, below estimates of 62 cents.

(Reporting by Aditi Sebastian and Praveen Paramasivam in Bengaluru; Editing by Shounak Dasgupta)