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Estée Lauder sales down 12 percent on Asia travel retail

The Estée Lauder Companies Inc. reported on Tuesday net sales of USD 3.75 billion for its third quarter ended March 31, a decline of 12 percent, as the cosmetic giant took a hit in its Asia travel retail business.

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The New York-based company also recorded an 8 percent dip in organic net sales, primarily driven by Asia travel retail in Hainan and Korea.

In Asia Pacific, net sales grew 7 percent, driven by the ongoing recovery from eased Covid-related restrictions, led by Hong Kong, Australia, Japan and mainland China. This was somewhat offset by the slower than anticipated recovery of Dr.Jart+ travel retail in Korea from the Covid-19 pandemic, said the U.S. group.

By market, net sales in Hong Kong doubled, benefiting from the reopening of borders, the resumption of travel and the return of brick-and-mortar traffic and net sales in Australia rose strong double digits, reflecting the return of brick-and-mortar traffic and benefiting from double-digit growth in each of the major product categories.

Japan also clocked double-digit net sales growth, with the ongoing recovery from eased Covid related restrictions compared to the prior-year period.

Meanwhile, mainland China returned to growth, reflecting double-digit increases in February and March, partially offset by the decline in January, due to the impact from the increase in the number of Covid cases, including slower brick-and-mortar traffic.

The company added that nearly all emerging markets in Asia Pacific grew by double digits.

Operating income in the region increased, driven by the prior-year period other intangible asset impairment of USD 205 million related to Dr.Jart+, partially offset by an increase in cost of sales, including promotional items, and the decrease in net sales, it added.

“In the context of a quarter which we anticipated to be challenging, we are pleased to have delivered the high-end of our outlook for the third quarter of fiscal 2023,” said ‘Fabrizio Freda, president and chief executive officer.

“Our developed and emerging markets grew strongly and exceeded our expectations to offset an even slower-than-expected recovery in Asia travel retail. Each of The Americas and Asia-Pacific returned to organic sales growth, bolstered by increases in the United States and China, while the markets of EMEA continued to prosper. Moreover, we continued to grow our prestige beauty share in many markets, including a sequential acceleration in gains in China and Western Europe.”

Looking ahead, the owner of Estée Lauder and Tom Ford brands said its expects organic net sales to return to growth in the fourth quarter, reflecting continued momentum of post-Covid recovery growth in nearly all markets globally.

Earlier this week, Estée Lauder said it has completed its acquisition of U.S. fashion label Tom Ford, a deal it first announced late last year to be worth USD 2.8 billion.