Estee Lauder Companies Inc (NYSE:EL) shares traded lower in premarket on Tuesday after the company reported second-quarter results.
The company reported a second-quarter sales decline of 6% year-on-year to $4 billion, beating the analyst consensus estimate of $3.97 billion. Organic net sales decreased 6%.
Net sales in the Americas dropped 2%. Sales in Europe, Middle East & Africa declined 6%, and Asia/Pacific plunged 11%. Net sales from Skin Care plunged 12%, Makeup decreased 1%, Fragrance grew 1%, and Hair Care declined 8%.
Gross profit decreased 2% to $3.04 billion, with the margin expanding 310 basis points to 76.1%. Adjusted EPS of $0.62 beat the consensus estimate of $0.32.
Estee Lauder’s operating loss for the quarter was $580 million, compared to an income of $574 million last year. Operating margin declined to (14.5)% from 13.4% in the prior-year period, primarily reflecting $861 million from goodwill and other intangible asset impairments and $181 million from charges associated with restructuring and other activities. Adjusted operating margin contracted 200 basis points to 11.5%.
The company held $2.6 billion in cash and equivalents as of December end. The company will pay a quarterly dividend of $0.35 per share on the company’s Class A and Class B Common Stock, payable in cash on March 17, 2025 to stockholders of record at the close of business on February 28, 2025.
“Today, we are excited to launch Beauty Reimagined, a bold strategic vision to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years as we aim to become the best consumer-centric prestige beauty company,” said President and CEO Stéphane de La Faverie.
The company is expanding its Profit Recovery and Growth Plan (PRGP), including the restructuring program. Actions under the plan are expected to be substantially executed in fiscal 2025 and 2026 and completed in fiscal 2027, with nearly all of the full run-rate benefits expected to be realized during fiscal 2027.
Once fully implemented, Estee Lauder expects to take restructuring and other charges of between $1.2 billion – $1.6 billion. The company now expects a total job reduction of 5,800 to 7,000 positions, including those already approved.
“While we are not satisfied with our third quarter outlook, it primarily reflects weak retail sales trends in our Asia travel retail business, which deteriorated in our second quarter driven by Korea… For the third quarter, we expect overall soft retail trends to persist in Asia travel retail, significantly pressuring our organic net sales despite the improvement we made with in-trade inventory levels in the first half of fiscal 2025, which we intend to maintain around current levels,” de La Faverie added.
Outlook: Estee Lauder sees third-quarter sales to decline 12% – 10%. EL expects third-quarter adjusted EPS of $0.20 – $0.30 versus an estimate of $0.63.
Price Action: EL shares traded lower by 4.83% at $78.77 in premarket at the last check Tuesday.
Photo via Shutterstock.
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