Estee Lauder forecasts weak annual profit on slow recovery in Asia travel retail

investing.com:

By Granth Vanaik and Ananya Mariam Rajesh

(Reuters) -Estee Lauder projected annual sales and profit below estimates on Friday, signaling a slower-than-expected recovery in its travel retail business, mainly in Asia, and easing demand in the United States.

Shares of the company were down 6% in premarket trade.

Major global companies have taken a cautious stance on their China recovery, as the world's second-largest economy struggles to revive demand and battles rising youth unemployment rates and a high cost of living.

Analysts have said the drop in consumer demand in China and a slow recovery in Asia travel retail — sales made at airports or travel destinations like Korea and China's Hainan — could impact luxury companies like Estee, which makes about 30% of its annual revenue from the Asia Pacific region.

«Asia travel retail pressured results, particularly in Skin Care, and we continued to experience softness in North America,» CEO Fabrizio Freda said.

Estee's Americas region reported flat net sales, while Asia Pacific reported a 29% increase in sales in the quarter.

European luxury rival LVMH last month also flagged cooling demand in the U.S.

French cosmetics maker L'Oreal, which beat estimates on a China rebound, however said the Chinese market was not picking up at the speed everyone had hoped for.

Estee's expectations of a dour first quarter also led analysts to raise questions about the continuing uncertainty in Hainan and Mainland China.

«De-stocking and inventory levels in Asian Travel Retail… likely to remain the biggest headwind to growth over the next few quarters,» said Bernstein analyst Callum Elliott.

Estee expects full-year sales to rise between 5% and 7%, compared with analysts' estimate of an 8.8%