Why Estée Lauder Stock Collapsed This Week

Core Insights - Estée Lauder has reported weak quarterly earnings, leading to a significant decline in its stock price, which has dropped 23% following the announcement of disappointing results for Q1 of fiscal year 2025 [1] - The company is facing demand pressures, particularly in China, prompting a reduction in its quarterly dividend payment [1] Group 1: Financial Performance - The Asia Pacific region, crucial for Estée Lauder, has seen a decline in revenue, with Q1 revenue dropping 11% year over year to $944 million [2] - Over the past four years, Q1 revenue in Asia Pacific has decreased from $1.33 billion to $944 million, indicating a troubling trend for the company [3] - Estée Lauder's operating earnings have fallen 57% from all-time highs, contributing to an 82% decline in stock value over the last few years [4] Group 2: Dividend Changes - The management has decided to cut the dividend payout from $0.66 to $0.35, nearly halving the previous amount, which reflects the company's current struggles [5] - The new dividend yield is approximately 2% based on the reduced payout ratio, which is concerning for investors [5] Group 3: Investor Sentiment - Investors typically react negatively to dividend cuts, especially in the context of a struggling business, signaling a lack of confidence in a quick recovery [6] - Despite the challenges, Estée Lauder possesses strong brands like Tom Ford Beauty and Clinique, which could support a potential recovery if the Chinese market improves [7]