Estée Lauder eyes a makeover as China’s beauty spend keeps sliding
Beauty blues… Estée Lauder may’ve topped earnings estimates yesterday, but the results were far from pretty. FYI: Estée houses big name brands like MAC, Bobbi Brown, and Tom Ford. The world’s second-largest beauty biz saw quarterly sales dip 7% and earnings slide 43%, citing the Israel-Hamas war and chilly China demand. Asia makes up a third of Estée’s sales, and the company lowered its yearly profit forecast. Still:
Beauty counterintuitive: Estée’s stock jumped 12% yesterday after the cosmetics powerhouse announced plans to let go of 3K+ workers. It hopes its restructuring program will eventually help it save up to $500M a year.
Meltdown on the mainland… China has the world’s second-largest cosmetics market (worth ~$52B), but sales have been sliding as millions of shoppers forgo pricey beauty hauls as their economy struggles to recover. LVMH's beauty biz (which includes brands like Benefit and Fenty) also saw sales slide in the first half of 2023. And luxe skincare brand Shiseido slashed its annual profit forecast in November on slow China demand.
Different shades: Drugstore biggies like L'Oréal and E.l.f. (which reports today) have fared better thanks to resilient demand in their key markets of Europe and North America.
It’s hard making up for a top customer… It isn’t just China's sluggish economy weighing down sales: global conglomerates aren’t as able to keep up with local trends. Smaller Chinese beauty brands are grabbing market share from corporate giants by advertising on Douyin (TikTok’s Chinese sister app) and quickly adapting to viral cosmetic trends like redness creams. China’s geopolitical beef with the West is also leading some patriotic consumers to shop domestic.