Estee Lauder sees no slowdown in China, forecasts robust fiscal 2020

By Aditi Sebastian and Soundarya J (Reuters) - Estee Lauder Cos Inc on Monday forecast full-year revenue and profit above Wall Street expectations, putting to bed concerns of slowing demand in China due to trade tensions and Hong Kong protests as sales of its luxury skin care products soared, propelling its shares to a record high.

Reuters August 20, 2019 00:06:44 IST
Estee Lauder sees no slowdown in China, forecasts robust fiscal 2020

Estee Lauder sees no slowdown in China forecasts robust fiscal 2020

By Aditi Sebastian and Soundarya J

(Reuters) - Estee Lauder Cos Inc on Monday forecast full-year revenue and profit above Wall Street expectations, putting to bed concerns of slowing demand in China due to trade tensions and Hong Kong protests as sales of its luxury skin care products soared, propelling its shares to a record high.

Cosmetic companies like Estee Lauder and L'Oreal are seeing a boom in their business in the Asia-Pacific region, mainly in China, as affluent millennials spend more at beauty retailers and duty-free stores at airports.

Shares of Estee Lauder, which reported better-than-expected fourth-quarter results, rose as much as 11% to $198.62.

The company has been selling 10 of its brands including M.A.C and Tom Ford on Alibaba's online marketplace Tmall, in a bid to boost its presence in the Asian market.

The efforts helped sales in the Asia-Pacific region grow 18% in the fourth quarter, while sales in the skincare business, its biggest and most profitable, rose 15% to $1.59 billion, boosted by demand for its premium skincare brands such as La Mer and Clinique.

Estee Lauder expects full-year sales to grow in the range of 7% to 8% and adjusted profit between $5.90 and $5.98 per share in fiscal 2020.

Analysts had expected sales growth of 6.87% and profit of $5.81 per share.

Estee Lauder, which also forecast first-quarter sales growth and profit above expectations, said the outlook took into account the potential impact of the Hong Kong protests and the protracted U.S.-China trade dispute, as well as costs related to Britain's impending exit from the European Union.

"We are not seeing any slowdown in China at this point in time" Chief Executive Officer Fabrizio Freda said.

Freda said Hong Kong, including travel retail, represented less than 4% of the company's business globally, and the company was working to recover some of the potential losses in Hong Kong from other markets.

"We are a little surprised by Estee's aggressive approach to guidance for the year," RBC analyst Nik Modi said.

Overall, quarterly net sales rose 9% to $3.59 billion, beating expectations of $3.53 billion, according to IBES data from Refinitiv.

Excluding items, it earned 64 cents per share, beating estimates by 11 cents.

(Reporting by Aditi Sebastian and Soundarya J in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)

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