Estée Lauder, owner of Clinique, Aveda, and other major beauty brands, warned of a possible $80 million decline in 2024 earnings next year due to poor sales expected in China and possible disruptions from the Mideast war.

Earnings per share might tumble as much as 35 percent next year, the company said. Lauder had projected the figure would be between $2.50 to $3.75; it now expects per-share earnings to range from $2.17 to $2.42.

Earlier this year, Lauder had projected 2024 sales growth of 5 to 7 percent; now it has reversed that to a decline of as much as 2 percent after reporting a string of weak quarterly results this year. 

“Slower growth in overall prestige beauty in Asia travel retail and in mainland China” were the chief culprits sinking Lauder’s financials, CEO Fabrizio Freda said in an analysts call.

“Travel retail” refers to purchases at duty-free shops, mostly in airports. Those shops made up about 40 percent of Lauder’s pre-COVID sales in China. The country lifted its anti-COVID measures late last year but a brief recovery sputtered.

Now Lauder expects Chinese consumers will buy the company’s products on the mainland instead of in airports. “We’re not counting on travel retail to get back to its prior levels,” CFO Tracey Travis told analysts.

After the announcement, Lauder’s share price suffered its largest one-day plunge ever, falling more than 20 percent and closing down 18.9 percent to the lowest close since 2017. 

The stock price has shed 58 percent this year after China’s post-COVID recovery fizzled. China has accounted for about a third of Lauder’s past business.

The company also announced it is embarking on a two-year program to cut costs and boost profits.

TRENDPOST: Lauder’s tailspin is part of a trend we noted in “Sales of Luxury Brands Slows” (17 Oct  2023). In that article, we forecast that luxury spending has peaked and as Dragflation sets in, even those with money will be buying less. 

Also, luxury spending is a bellwether. When the wealthy cut their spending, it becomes a sign to the plantation workers of Slavelandia that hard times are ahead.