Why Did Estée Lauder Stock Fall 25%?

Core Viewpoint - Estée Lauder has faced significant challenges in 2024, with a stock decline of over 50% while the S&P 500 has risen by 20%, attributed to falling sales and profits [1][5]. Financial Performance - In Q1'25, Estée Lauder reported revenue of $3.4 billion, matching consensus estimates, but this represented a 5% year-over-year decline on an organic basis [2][3]. - The company experienced declines across various product categories: Skin Care sales fell by 8%, Hair Care by 6%, Makeup by 2%, and Fragrance by 1% [3]. - Geographically, sales in EMEA decreased by 4%, Americas by 1%, and Asia Pacific by 11%, with the decline in Asia Pacific largely due to weak demand in mainland China [3]. Profitability Metrics - The adjusted operating margin for Q1'25 was reported at 4.3%, reflecting a 120 basis points increase year-over-year [4]. - Adjusted earnings per share (EPS) stood at $0.14, up from $0.11 in the prior-year quarter [4]. Future Outlook - Estée Lauder has withdrawn its 2025 outlook, which previously anticipated a sales decline of 1% to 2% compared to 2024 and adjusted EPS in the range of $2.75 to $2.95 [4]. - Current forecasts suggest a top line of approximately $15 billion, indicating a 4% year-over-year decline, with adjusted EPS expected to drop to $1.86 in fiscal 2025 [4]. Stock Performance and Valuation - Following the Q1 results, Estée Lauder's stock declined by 25%, primarily due to concerns over the situation in China and its impact on earnings [5]. - The stock's valuation is estimated at $80 per share, suggesting a 20% upside from its current level of $66, based on a projected P/E ratio of 43x [5][6]. - The stock has seen a dramatic decline of 75% from $255 in early January 2021 to around $65 now, contrasting with a 55% increase in the S&P 500 during the same period [7].