Estée Lauder’s Stock Tanks: Here’s Why Investors Are Bailing

Another blue-chip bites the dust as Estée Lauder's shares crater—proving once again that even legacy luxury brands aren't immune to market gravity.

Earnings Miss Sparks Panic

The cosmetics giant bled value after posting disappointing quarterly results. Revenue fell short of analyst projections while margins compressed—never a good look when you're trading at a premium multiple.

Consumer Spending Slowdown Hits Hard

High-end beauty products are getting squeezed as discretionary spending dries up. When wallets tighten, that La Mer cream becomes harder to justify—even for the 1%.

Guidance Cut Sends Shockwaves

Management slashed forward projections, citing 'challenging macroeconomic conditions'—corporate speak for 'we have no idea when this will end.'

Institutional Exodus Accelerates

Hedge funds dumped positions faster than expired foundation. Because nothing says 'confidence' like a coordinated retreat from a Dividend Aristocrat.

Retail Investors Left Holding the Bag—Again

The pros got out early while Main Street piled in at the peak. Some things never change on Wall Street—the suits win, the shirts lose.

A lackluster fourth quarter closes out a disappointing year

In the fourth quarter, Estée Lauder showed a revenue decline of 11.9% to $3.41 billion, with adjusted (non-GAAP) earnings per share plunging 86% to just $0.09. While those numbers seem dire, they were actually better than feared relative to analyst expectations.

The 12% revenue decline was led by a 24% decline in sales to the Europe, Middle East, and Africa region on a constant currency basis. However, management noted this was due to a weak travel-related business that mostly comes from Chinese citizens traveling abroad. There were also difficult comparisons in that segment, as the year-ago quarter had a big inventory replenishment.

Still, even outside of that region, sales fell 5% in the Americas and 4% in Asia/Pacific on a constant currency basis.

The company's new CEO, Stéphane de La Faverie, took over in January and expanded the PRGP cost-saving program in February, which has led to the cutting of 5,800 to 7,000 employees. That, combined with macroeconomic forces, could be weighing on revenue. On the other hand, management claims adjusted gross margins have structurally expanded over the past year, even as revenue declined.

Image source: Getty Images.

Management projects a return to growth in the year ahead

While the cost cuts may be pressuring Estée Lauder's top line today, management expects revenue to grow 0% to 3% in the year ahead on a constant currency basis.

Given that possibility, today's sell-off could be an opportunity. While the stock has recovered strongly off its April lows, Estée Lauder remains a whopping 76% below its all-time highs of early 2022.

Still, Estée Lauder trades at a lofty 40 times forward earnings, so investors will need to believe that more profit growth is at hand beyond next year in order for the stock to regain a meaningful portion of its multiyear decline.