The Estée Lauder Companies reported net sales of USD 3.52 billion for the first quarter ending September 30, down 10 percent, on the back of a slow recovery in Asia travel retail and mainland China.
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The New York-based beauty giant said organic net sales declined 11 percent, driven by expected pressures in the company’s Asia travel retail business, as well as headwinds from a slower-than-expected recovery of overall prestige beauty in mainland China.
By region, Asia Pacific net sales declined 3 percent, with the slower China recovery partially offset by increases in many other markets in the region, led by Hong Kong, Japan and Australia.
In mainland China, the net sales declined due to skin care, partially offset by growth in fragrance, primarily driven by the launch of Le Labo in the fourth quarter of fiscal 2023, and in hair care, due to Aveda. Makeup net sales were flat, reflecting decreases from M·A·C and Estée Lauder, offset by double-digit growth from Tom Ford.
Net sales in Hong Kong SAR more than doubled in nearly all product categories, benefiting from the reopening of borders and the corresponding resumption of travel as well as the return of brick-and-mortar traffic compared to the prior year, while in Japan, strong double-digit growth in fragrance, led by Le Labo, drove an increase in net sales.
Elsewhere, net sales in Australia rose double digits, benefiting from growth in each of the major product categories, led by skin care and fragrance, due to The Ordinary and Estée Lauder, respectively.
As a result of the tough sales quarter, total net earnings for the company were slashed to USD 31 million, compared with USD 489 million in the prior year.
“In the context of a quarter which we anticipated to be challenging, we delivered our organic sales outlook and exceeded expectations for profitability,” said Fabrizio Freda, president and chief executive officer, Estée Lauder Companies.
“Momentum continued in many developed and emerging markets around the world, where our organic sales grew strongly and we realized prestige beauty share gains. Encouragingly, we returned to growth in the U.S., with fragrance, makeup and skin care all contributing. This performance partially offset the pressures of Asia travel retail and a slower recovery of overall prestige beauty in mainland China.”
Looking ahead, the company said it is lowering its fiscal 2024 outlook given the slower growth in overall prestige beauty in Asia travel retail and in mainland China, which it said 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.