Estée Lauder net sales drop 9% in Q2 FY24 amid Asia travel retail struggles

By Benedict Evans |

Fabrizio Freda, CEO of Estée Lauder

Despite recent challenges, CEO Fabrizio Freda noted positive growth in key emerging markets.

The Q2 FY24 report for The Estée Lauder Companies, which outlines its fiscal performance through Q2 FY24 (six months ended 31 Dec 2023), reveals a 10% decline in skincare net sales, an 8% decline for makeup, and fragrance net sales saw no change, when compared with the same quarterly reporting for 31 December 2022.

The American multination cosmetics company faced significant, yet not unexpected challenges in the Asia travel retail market. For the six months period ended 31 December 2023, Estée Lauder reported overall net sales of $7.8bn, a 9% decrease compared with $8.55bn in the prior-year period.

In the report, Estée Lauder attributes 8% of the fall in net sales (six months edned  to “expected challenges in Asia travel retail as well as ongoing softness in overall prestige beauty in mainland China.”

These challenges included changes in government and retailer policies in H2 FY23 in response to crackdowns on the use of Informal Value Transfer Systems (IVTS) also referred to as ‘daigou’, lower traveller to consumer conversion rates, and lower than anticipated sales during the 11.11 Global Shopping Festival (11.11), a 24hr online shopping event hosted annually on 11 November by Alibaba.

The final 1% reduction year-on-year was attributed to ongoing geo-political disputes in Israel and the Middle East, though Estée Lauder says this has been largely offset by positive growth in other markets.

Estée Lauder financial report for FY24 Q2

Skincare and makeup were the most affected product categories, though Estée Lauder remains optimistic about its long-term prospects and future growth opportunities in global prestige beauty.

Estée Lauder has continued to reduce its retailer inventory in Asia travel retail in order to achieve retailer target levels through Q3 FY24 – one of several ongoing strategic priorities which include improving working capital, higher levels of net pricing, and a disciplined approach to managing expenses.

This inventory reduction aligns with the expansion of its ‘Profit Recovery Plan’ for FY25 and F526, which will see an estimated 3-5% net reduction in jobs, and annual gross benefits of $350m to $500m before tax.

Fabrizio Freda, President and Chief Executive Officer for Estée Lauder, commented: “For the second quarter of fiscal 2024, we delivered our organic sales outlook and exceeded expectations for profitability.

Many developed and emerging markets around the world continued to grow organically and at retail. While mainland China and Asia travel retail declined, our retail sales trended ahead of organic sales, and these businesses are poised to return to organic sales growth in the second half.”

Estée Lauder financial report for FY24 Q2

The full (unaudited) consolidated statement of earnings shows similar operating expense margins, but larger disparities in operating income, as well as a 52% drop in earnings before income taxes over a six month period.


Regionally there were also notable variations. The Americas saw a negligible dip in net sales of 1%, but double-digit growth was seen especially in Latin American markets like Brazil and Mexico, fueling growth in skincare and fragrance.

EMEA net sales fell 14%, with mixed performance leading to flat growth, with a decrease in operating income partially offset by $85m of lower inter-company royalty expense, due to the decline in income from Estée Lauder’s travel retail business and lower cost of sales.

Estée Lauder financial report for FY24 Q2

Results per geographic region were varied, with declining net sales offset somewhat by double-digit growth in certain emerging markets.

Finally, although net sales in the Asia Pacific market dipped 7%, net sales in Hong Kong SAR increased double-digits following the reopening of borders and resumption of travel.

“We made progress in the first half across several strategic priorities, including reducing inventory in the trade of Asia travel retail, improving working capital, realising higher levels of net pricing, and managing expenses with discipline,” noted Freda, adding: “In the second half of fiscal 2024, we are positioned to return to strong organic sales growth and expand our profitability from the first half.”


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