Estee Lauder Falls After Profit Forecast Trails Estimatesby
Currency effects reduce third-quarter international revenue
Hong Kong market some time away from stabilizing, CEO says
Estee Lauder Cos. fell the most in almost four months after its annual profit forecast trailed analysts’ estimates, hurt by the dollar’s strength.
Earnings will be $3.09 to $3.14, excluding some items, in the year through June, the New York-based company said Tuesday in a statement. Analysts projected $3.17, on average.
The dollar’s gains over the past two years have hampered international sales for Estee Lauder, which generates almost 60 percent of its revenue outside of the Americas. Revenue rose 2.9 percent to $2.66 billion in the company’s fiscal third quarter, which ended March 31. Excluding the effects of currencies, that would have been a roughly 6 percent gain, said the company, which produces Bobbi Brown makeup and Clinique skin-care products.
Sales were little changed in the Americas and gained 7.7 percent in Europe, the Middle East and Africa. Revenue from Estee Lauder’s Asia Pacific region, which accounts for about 20 percent of the company’s total, was flat. However, on a constant-currency basis, sales increased in every country in the region except Hong Kong, where revenue fell as fewer Chinese traveled there.
“We are some time away from stabilizing,” Chief Executive Officer Fabrizio Freda said in an interview. “I could not say if it would be a year or less, but it’s not forever. I don’t think there will be a gain or growth in Hong Kong unless the political situation changed.”
The shares fell 4 percent to $93.29 at the close in New York, the biggest decline since August. The drop pared Estee Lauder’s gain this year to 5.9 percent.
Some of its cosmetics competitors also declined on Tuesday. Coty Inc., which reported third-quarter earnings that missed analysts’ estimates, dropped 8.7 percent to $28.35, the most since its initial public offering in June 2013. Avon Products Inc., which has a partnership with Coty in Brazil, also slid 8.7 percent to $4.32.
Estee Lauder also said it’s eliminating 900 to 1,200 jobs, or 2.5 percent of its workforce. That will help the company boost productivity and free up resources to invest in areas such as research and development as well as new technology. The job cuts and other restructuring initiatives will result in charges of $600 million to $700 million.