Estee Lauder, Canada Goose slash targets

Estee Lauder and Canada Goose Holdings on Wednesday cut their annual forecasts as the US luxury goods companies struggle with weak demand in high-growth market China, sending their share prices plunging more than 10%.

Global companies ranging from L’Oreal to LVMH have indicated that inflation and economic turmoil are curbing a post-pandemic spending spree, mainly in the world’s second-largest economy, China.

Luxury companies have also flagged a hit from the Chinese government’s tighter controls of “daigou” resellers — people who buy items at lower prices abroad and resell them at a discount in the country.

“They are very exposed to the daigou trade and are also big beneficiaries ... the Chinese authorities have clearly clamped down on these bigger trade and it might have fundamentally changed the trade from here,” said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.

Canada Goose, whose luxury parkas retail for more than $1,000, said sales in China slowed in the second quarter from the first. Estee struggled with a weaker-than-expected rebound in demand from flyers in Asia, mainly in travel destinations such as Korea and China’s Hainan province.

The Asia-Pacific region accounts for more than 30% of the MAC lipstick maker’s revenue.

Estee also signalled that a resetting of inventory in Asia travel retail is expected to extend until the end of the third quarter of its financial year 2024.

The company now expects adjusted profit per share between $2.17 and $2.42 for its full year, compared to a prior forecast of $3.50 to $3.75. Estee said disruptions caused by the conflict in the Middle East could have an eight cents per share impact on profit.

Annual sales are estimated at anything from down 2% to up 1%, compared with a rise of 5%-7% earlier.

Canada Goose expects 2024 revenue to be between C$1.20bn ($864.49m) and C$1.40bn, compared with C$1.40bn to C$1.50bn estimated earlier.

Annual adjusted profit is expected to be between C$0.60 and C$1.40 a share, compared with the prior range of C$1.20 to C$1.48.

Canada Goose also posted a nearly 11% fall in revenue in the US region, as demand for high-end goods from affluent shoppers sags after staying strong since the pandemic.

However, Estee, seen as an affordable luxury, posted an 8% increase in sales in the Americas from newer launches like The Ordinary, MAC’s skincare brand Hyper Real and Tom Ford’s Cafe Rose fragrance.

Reuters