(Added Estee Lauder stock milestone to paragraph 2 and investor commentary to paragraph 7) by Ananya Mariam Rajesh and Aatrayee Chatterjee
Estee Lauder EL.N and Canada Goose Holdings GOOS.TO GOOS.N cut their annual forecasts on Wednesday as luxury goods companies face weak demand in the fast-growing China market .
Shares of Estee fell 21% to their lowest level in more than six years of $102.22, while shares of Canada Goose fell 10%.
Global companies ranging from L’Oréal OREP.PA to LVMH
LVMH.PA said inflation and economic turmoil are dampening the post-pandemic spending spree, mainly in the world’s second-largest economy, China.
Luxury companies have also reported being hit by Beijing’s tighter controls on “daigou” resellers, or people who buy items at lower prices from abroad and resell at a discount in the country.
“Chinese authorities have clearly put a brake on these larger transactions and that may have fundamentally changed the trade,” said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.
Canada Goose, whose luxury parkas sell for more than $1,000, said sales in China slowed in the second quarter from the previous quarter, while Estee faced a weaker-than-expected rebound. of traveler demand in Asia, mainly in travel destinations such as Korea and China’s Hainan province.
“Their (Canada Goose’s) Chinese business is not revenue at what they had anticipated at this point…” said Cole Smead of Smead Capital Management. “The people who are selling the stock today are simply saying that, in the meantime, they don’t think things will turn around any time soon
Smead Capital holds shares of Canada Goose in its International Value portfolio.
Estee reported that an inventory reset in the Asia travel retail sector is expected to extend through the end of the third quarter of its 2024 fiscal year.
Duty-free retailer Dufry DUFN.S is expected to provide a clearer picture of travel retail growth when it reports quarterly results on Thursday.
Estee now expects adjusted earnings per share of between $2.17 and $2.42 for the full year, compared to an earlier forecast of $3.50 to $3.75. The company said disruption from the Middle East conflict could impact earnings by 8 cents per share.
Annual sales are expected to decrease by 2% or increase by 1%, compared to an increase of 5% to 7% previously.
Canada Goose expects 2024 revenue to be between C$1.20 billion (C$864.49 million) and C$1.40 billion, up from C$1.40 billion in 1 .50 billion Canadian dollars estimated earlier.
Adjusted annual earnings are expected to be between C$0.60 and C$1.40 per share, compared to a previous range of C$1.20 to C$1.48.
Canada Goose also saw a nearly 11% decline in revenue in the US region, due to lower demand for premium products, while Estee, considered a premium product, affordable luxury, recorded an 8% increase in sales in the Americas region.
($1 = 1.3881 Canadian dollars)