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May 1, 2020
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Estee Lauder warns of weak sales as most stores remain shut under lockdown

Reuters API
May 1, 2020

Estee Lauder on Friday warned of weak quarterly sales due to COVID-19-led lockdowns in several markets, after it beat Wall Street’s lowered estimates for third-quarter profit and sales on growth in China and higher online demand.

The M.A.C owner said it expects a majority of its retail stores across the world to remain closed for most of the current quarter and warned that global prestige beauty products would be “adversely impacted”.

“We are very much focused on the fact that demand remains strong. And it’s really the access to our products that has become challenging in markets like in Europe as well as in the Americas,” said Estee Lauder Chief Financial Officer Tracey Travis.

The company, like other cosmetic makers, has been ramping up its online business to offset the fallout from the closure of department stores, airport duty free shops and beauty parlours due to lockdowns.

The efforts helped Estee Lauder bring in a double-digit rise in global online sales in the third quarter.

Estee Lauder and its French rival L’Oreal SA have seen sales of skin-care products recover in China in recent weeks as some lockdown measures in the country were eased and online sales surged.

Estee Lauder on Friday said it expected sales in mainland China to return to double digit growth in the current quarter.

Overall net sales in the third quarter fell for the first time in over three years, hit by a 23% decline in sales in North America, due to closed stores and salons.

Confinement measures pressured make-up sales, as about 90% of women shun their cosmetic routines while working from home, according to a survey by Jefferies.

Net sales fell 10.7% to $3.35 billion in the third quarter ended March 31, but was ahead of market expectations of $3.05 billion. At least five analysts lowered their sales estimates last month.

Estee Lauder posted a loss of $6 million or 2 cents per share, compared with a profit of $555 million, or $1.51 per share, a year earlier, primarily due to virus-related $346 million writedowns on some brands.

Excluding one-time items, the company earned 85 cents per share, beating the estimate of 73 cents, according to IBES data from Refinitiv.

Estee Lauder also estimated its cost-cutting measures, including furloughs and salary reductions, to cut operating expenses by about $500 million to $600 million in the fourth quarter.

Shares of the New York-based company, which fell about 15% this year, were down marginally at $175.38.

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