Estee Lauder Cos Inc forecast a bigger drop in full-year sales and profit on Wednesday on a slower-than-expected recovery in Asia travel retail and major market China, sending its shares down about 10% in premarket trade.
Even though China has relaxed pandemic-related restrictions, Estee flagged that January 2023 was pressured by low retail traffic and retailers destocking due to an increase in COVID-19 cases as people step out of the safety of their homes after long periods of lockdowns.
Traffic to popular travel destinations such as Hainan still remains under pressure.
The MAC lipstick maker's sales also witnessed an impact from US retailers tightening inventories of its products on worries of a slowdown in demand as consumers turn increasingly cautious on the back of rising interest rates and living costs.
The company's profit also took a hit from a stronger dollar like other major US companies such as PepsiCo and Nike that have sprawling global operations and convert foreign currencies into the greenback.
Estee expects full-year 2023 net sales to fall between 10% and 12%, compared with its prior forecast of a 5% and 7% decrease.
It also forecast adjusted profit per share to fall between 50% and 51%, compared with a decrease between 27% and 29% it expected earlier.
However, the company beat third-quarter sales expectations helped by a recovery in travel retail globally, excluding Asia.
