The Estée Lauder Companies announced financial results for the first quarter ending September 30, 2024, reporting net sales of $3.36 billion, a 4% decrease from $3.52 billion in the same period last year. Organic net sales dropped 5%, primarily due to weakened consumer sentiment in China, impacting the overall prestige beauty market in mainland China and leading to lower conversion rates in Asian travel retail and the Hong Kong SAR. Lower replenishment orders in Asian travel retail, coupled with inventory pressure from a retail market slowdown, further contributed to the sales decline. However, growth in regions such as Japan and Priority Emerging Markets partially offset these declines.
CEO Fabrizio Freda emphasized that while first-quarter results aligned with adjusted projections, the impact of the Chinese and Asian markets exceeded expectations. He highlighted the success of the company’s Profit Recovery and Growth Plan, which led to improved gross margins, though operational challenges offset this to some extent.
Looking ahead, Freda acknowledged that while new economic stimulus policies in China provide hope for the prestige beauty industry, near-term challenges remain, particularly in China and Asia’s travel retail market. As a result, Estée Lauder is focusing on second-quarter guidance and withdrawing its fiscal 2025 outlook. To support future growth, the company announced a dividend reduction to increase financial flexibility. Additionally, Estée Lauder is undergoing leadership changes, with Stéphane set to take over as CEO from January 2025, bringing extensive industry expertise and a growth-focused strategic vision.
In specific segments, skin care sales were $1.529 billion, down 7% year-over-year, largely due to deteriorating consumer sentiment in China, which further weakened the prestige beauty market in mainland China and led to low conversion rates in Asian travel retail and the Hong Kong SAR. Lower replenishment orders in Asian travel retail, combined with inventory pressures, also affected organic net sales. Double-digit declines in La Mer and Estée Lauder were the primary drivers of this category’s underperformance.
Net sales grew in Europe, the Middle East & Africa (EMEA), followed by the Americas, offsetting declines in mainland China and Hong Kong SAR. This growth was driven by innovations in nighttime skin care products, specifically the Advanced Night Repair and Revitalizing Supreme+ lines. In the Americas, net sales grew as a result of shipments for the October 2024 launch of Estée Lauder products in Amazon’s U.S. Premium Beauty store.
Makeup sales totaled $1.038 billion, a 2% decrease year-over-year, with declines in M·A·C and Too Faced offset by strong growth in Clinique, driven by its lip products. M·A·C’s net sales fell in the high-single-digit range, reflecting weak retail sales in North America, which led to fewer replenishment orders. Ongoing business disruptions in the Middle East also contributed to M·A·C’s sales decline. Too Faced experienced a decrease in net sales, primarily in North America.
Clinique saw double-digit global sales growth across all regions, fueled by the strength of its lip products, led by the Clinique Pop and Almost Lipstick lines, new product innovation, and the launch in Amazon’s U.S. Premium Beauty store in the third quarter of fiscal 2024. Makeup’s operating loss increased due to $159 million in charges related to talcum litigation settlements.
Fragrance sales were $630 million, down 1% year-over-year. Estée Lauder reported mid-single-digit growth in net and organic sales for its luxury brands, excluding global travel retail, reflecting strategic investments to support direct-to-consumer expansion, particularly in standalone stores.
Net sales for the TOM FORD brand declined in the high-single-digit range due to North American retail softness, leading to fewer replenishment orders and challenges in global travel retail. Jo Malone London’s net sales remained flat, with challenges in global travel retail offset by growth from new product innovations like Orange Marmalade and Hinoki & Cedarwood and existing products such as Cypress & Grapevine, largely due to a strategic focus on men’s products.
Le Labo’s net sales grew by double digits, driven by continued success of the Classic Collection, the annual City Exclusive event, new product innovations, and expanded direct-to-consumer reach worldwide.
Hair care sales dropped 22%, recording $250 million, mainly due to Aveda, reflecting shipment timing and continued softness in North America’s salon channel.
Hair care operating loss decreased, with lower sales costs and strict expense management partially offset by the net sales decline.
Regionally, sales in the Americas declined by 2% to $1.187 billion, though Latin America achieved growth, driven by strong makeup sales in Brazil.
Sales in Europe, the Middle East, and Africa (EMEA) totaled $1.230 billion, a 2% decrease, with travel retail impacted by Chinese consumer trends and shifts in spending preferences.
In the Asia-Pacific region, net sales fell by 11% to $944 million, led by growth in Japan. Mainland China’s net sales dropped by double digits due to weakened consumer sentiment impacting overall prestige beauty. However, Estée Lauder gained prestige beauty share in China, led by skin care, for the second consecutive quarter.
In the Hong Kong SAR, net sales fell by double digits, mainly due to worsened consumer sentiment and low conversion rates among travelers, leading to fewer replenishment orders.
In Japan, net sales increased across all major product categories, with fragrances seeing the highest growth driven by both local and tourist consumers, contributing to nearly all distribution channels experiencing sustained growth. The company achieved double-digit retail sales growth in the first quarter of fiscal 2025, driving prestige beauty share gains compared to the prior year.
