The Estée Lauder Companies (ELC) has seen a disappointing start to its 2024 financial year, after reporting a double digit sales decline for Q1.
Net sales amounted to US$3.52bn for the three month period ended 30 September 2023, a 10% decrease from the $3.93bn it recorded one year prior.
The Clinique and Mac owner’s earnings also sank to $31m during the quarter, compared with the $489m it reported in Q1 2023.
The financial results were largely impacted by increased pressures on the company’s Asia travel retail business.
This was exacerbated by a slower-than-expected recovery of prestige beauty sales across mainland China in the wake of the Covid-19 pandemic.
Sales for the beauty brand owner’s skin care arm also experienced a significant decline during the quarter, with sales down 21%.
ELC has now lowered its financial outlook for 2024, as it works to re-establish its balance sheet and profitability.
“We are accelerating and expanding our profit recovery plan, to benefit fiscal years 2025 and 2026, to realise our ambitions to rebuild profitability despite the external headwinds’ increased pressure on the business in fiscal 2024,” said ELC President and CEO Fabrizio Freda.
The poor performance across skin care was attributed to the ELC’s lagging Asia travel retail business and its decision to reset retailer inventory levels.
Double digit sales growth from both Mac and The Ordinary helped to alleviate the category's decline, however.
ELC said The Ordinary reported a boost in income from hero products sales and new launches, including its Soothing & Barrier Support Serum.
Mac, meanwhile, saw net sales increase across all of its operating regions, and has continued to benefit from the launch of its Hyper Real product franchise in Q3 2023.
The business’ make-up and fragrance divisions reported a slightly better performance in Q1.
Net sales for make-up were up 1%, which reflected increased consumer demand in the US.
Mac, Too Faced, Tom Ford and Clinique were all highlighted as key performers, and helped to offset a decrease from the Estée Lauder brand.
Fragrance sales also increased by 5%, bolstered by strong growth from Le Labo and Tom Ford in the US and Asia.
“In the context of a quarter which we anticipated to be challenging, we delivered our organic sales outlook and exceeded expectations for profitability,” added Freda.
“Momentum continued in many developed and emerging markets around the world, where our organic sales grew strongly and we realised prestige beauty share gains.”