Estée Lauder’s (EL) latest earnings report for Q4 Fiscal 2024 is a mixed bag, with some bright spots in an otherwise challenging landscape. The beauty giant saw its net sales increase by 7% to $3.87 billion for the quarter, exceeding analysts’ forecast of $3.80 billion. However, the broader picture isn’t as rosy. For the full Fiscal year, the company’s net sales dipped by 2% to $15.61 billion. This decline, coupled with a whopping 61% drop in diluted EPS to $1.08, paints a picture of a company grappling with significant headwinds.
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EL’s Diluted EPS Falls Sharply
One of the most striking figures in Estée Lauder’s earnings report is the sharp decline in diluted earnings per share (EPS) for the Fiscal year, which tumbled by 61% to $1.08. This decline was influenced by goodwill impairment charges related to the Dr.Jart+ brand and the impact of a stronger U.S. dollar. Adjusted diluted EPS also fell, by 25%, to $2.59.
For the fourth quarter alone, the company reported a diluted net loss per common share of $0.79. However, excluding restructuring and other charges, the adjusted diluted EPS for this quarter was $0.64, which notably beat analysts’ consensus expectation of $0.26. Despite these challenges, the company managed to exceed expectations for the quarter’s adjusted EPS.
CEO Fabrizio Freda acknowledged the challenging environment, particularly in China, stating, “In Fiscal 2024’s fourth quarter, we achieved our organic sales outlook and exceeded expectations for profitability, closing a difficult year.” Freda’s focus is on driving share gains in China and improving performance across other markets in Fiscal 2025.
Estée Lauder’s Net Sales Show Regional Disparities
Estée Lauder’s net sales performance varied significantly across regions. While overall sales were down 2%, the company experienced growth in certain areas like Japan and Hong Kong SAR, where net sales increased by double digits. However, this was overshadowed by persistent challenges in mainland China and the Asia travel retail market, both of which saw declines due to weak consumer sentiment and lower conversion rates.
Interestingly, while sales in mainland China were sluggish, Estée Lauder reported strong growth in Latin America and steady performance in North America, highlighting the geographic disparities within the company’s sales.
Estée Lauder’s Share Repurchases Take a Back Seat
In light of the earnings decline, Estée Lauder’s share repurchase activities have been relatively muted. The company has not highlighted any major share buyback initiatives, likely choosing to conserve cash amid the ongoing uncertainty in key markets. With a cash reserve of $3.4 billion at the end of the Fiscal year, the company appears to be prioritizing financial flexibility over aggressive share repurchases .
EL’s Outlook Is Cautiously Optimistic
Looking ahead, Estée Lauder is cautiously optimistic. The company expects global prestige beauty to grow by 2-3% in Fiscal 2025, with hopes of re-accelerating to mid-single-digit growth by Fiscal 2026. However, continued weakness in China and the Asia travel retail market remains a concern. Estée Lauder’s Profit Recovery and Growth Plan (PRGP) is expected to drive savings and operational efficiencies, but the road ahead will require navigating significant headwinds.
Is Estée Lauder a Buy Stock?
Analysts remain cautiously bullish about EL stock, with a consensus Moderate Buy rating based on six Buys and 10 Holds. Over the past year, EL has decreased by more than 35%, and the average EL price target of $128.93 implies a upside potential of 36.15% from current levels. These analyst ratings are likely to change following EL’s results today.
