Retail in Asia

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Estée Lauder sales hit by Mainland China woes

Cosmetics giant Estée Lauder Companies recorded a 17 percent decline in total sales to USD 4.62 billion for the second quarter ending December 31, on the back of a steep sales decrease in its Asia region, impacted by Covid-19 restrictions in Mainland China.

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The owner of Estée Lauder, Tom Ford Beauty and M.A.C. Cosmetics said organic net sales fell 11 percent in the fiscal 2023 second quarter, in which it also acquired the Tom Ford fashion brand.

The New York company said the evolution of the Covid-19 environment, including restrictions in mainland China and the rising number of Covid cases, led to stronger headwinds as the quarter progressed.

As a result, tourism and product shipments to China’s Hainan remained largely curtailed and traffic in brick-and-mortar in the rest of China was limited.

Net sales in Asia declined 7 percent, due to the ongoing Covid-related impacts affecting brick-and-mortar in Greater China and Dr.Jart+ travel retail in Korea.

In other markets in Asia-Pacific, Covid recovery drove strong net sales growth in most countries, led by Japan, Australia, Malaysia and the Philippines. In Korea, double-digit growth from most brands was more than offset by the decline from Dr.Jart+’s travel retail business. Likewise, fragrance and hair care net sales grew double digits in the region.

Operating income in the region decreased, driven by the decline in net sales and an other intangible asset impairment of USD 100 million related to Dr.Jart+, partially offset by disciplined expense management.

“We delivered on our expectations for the second quarter of fiscal 2023, despite the incremental pressure of Covid-19 in China in December,” said Fabrizio Freda, president and chief executive officer.

“Many developed and emerging markets around the world outperformed to realize our organic sales growth outlook and, given disciplined expense management and moderation of the stronger U.S. dollar, we exceeded our adjusted diluted EPS outlook. Fragrance excelled globally, while makeup prospered in a great number of markets, as our brands are realizing the promise of the category’s renaissance as usage occasions resume.”

Looking ahead, the company said it is “encouraged by both our strong momentum in numerous markets globally and improving macro trends,” adding it has made “progress on several strategic initiatives to drive growth and resiliency in our business, with the opening of our China Innovation Labs as well as our first-ever manufacturing facility in Asia-Pacific.”

“We have great confidence that we will emerge from this year even better positioned to realise the long-term growth opportunities of global prestige beauty,” added Freda.