The Estée Lauder Cos. has sharply lowered guidance, citing coronavirus.
Now, the beauty business says net sales are forecast to increase between 0 percent and 1 percent in the second half of its fiscal year. "The third quarter is anticipated to be the most negatively impacted by the coronavirus with sales declining versus the prior-year period," Lauder said in a statement.
"In the wake of the recent coronavirus outbreak, we are first and foremost concerned about the health and safety of our employees, consumers and everyone affected in China and around the world. Our hearts and support go out to the many people working hard to mitigate the health risks of the coronavirus," said Lauder president and chief executive officer Fabrizio Freda in a statement.
"The global situation will also affect our financial results in the near term, so we are updating our fiscal year outlook. With our results to date and our agility in allocating resources, we will strive to deliver full-year growth at least in line with our long-term goals, even in this challenging moment. We will be ready to return to our growth momentum as the global coronavirus outbreak is resolved," he said.
Lauder's guidance shift came as the company released its financial results for the quarter ended Dec. 31. Sales for that period were up 15 percent, to $4.62 billion in the quarter. Net earnings dipped slightly, to $557 million compared to $573 million in the prior-year period.
Lauder also said that it took a $777 million impairment charge for Too Faced, Becca and Smashbox due to declines in the makeup category.
“Our multiple engines of growth generated broad-based gains across all our regions and major categories, as our prestige brand portfolio was well received by global consumers during the Singles Day event and holiday season," Freda said.
“Our sales growth came from all facets of our business, including the Asia/Pacific region, the skin care and fragrance categories, the online and travel retail channels, and the Estée Lauder, La Mer and luxury fragrance brands. Our emerging markets continued to be vibrant and we made progress towards the stabilization of our North American business despite continued softness in the makeup category. Additionally, we completed the acquisition of the Korean-based Dr. Jart+ brand at the end of the quarter, which strengthens our position in global skin care.”
For the quarter, skin care became the largest category, with 27 percent growth and $2.2 billion in sales. Estée Lauder and La Mer led the category, but Origins and Clinique also grew globally. At Lauder, hero franchises like Advanced Night Repair, Perfectionist, Re-Nutriv, Revitalizing Supreme+ and Micro Essence, continued to do well. La Mer's growth was broad based, and Origins benefitted from growth in moisturizers and Dr. Weil Mega Mushroom Treatment Lotion and Serum. Clinique's growth was driven by its Smart and Moisture Surge franchises.
Makeup generated 6 percent growth, with $1.7 billion in sales, driven by Estée Lauder, Tom Ford, Bobbi Brown and La Mer. Higher sales from those brands were offset by declines at Becca and Smashbox, and strategic investments in MAC. Lauder's Double Wear continues to do well. Tom Ford sales were driven by eyeshadow and cushion compact products in Asia Pacific. Bobbi Brown also grew in the Asia/Pacific region and travel retail, driven by Intensive Skin Serum Foundaiton and Luxe Shine Intense Lipsticks.
Fragrance brought in $581 million in net sales, an 8 percent year-over-year gain, driven by Jo Malone London and Tom Ford Beauty.
Hair care posted $162 million in net sales, up 5 percent from the prior-year period. Both Aveda and Bumble and bumble grew.
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