The recent Estee Lauder stock price strong recovery hit a barrier as the beauty company published weak financial results again. EL dropped by 3.5% in the extended hours. This crash happened after it doubled from a low of $48 in April to $96 last week.
Estee Lauder published weak earnings
Estee Lauder is one of the top players in the beauty industry. It owns popular brands like Clinique, Aveda, Darphin Paris, Tom Ford, and Balmain Beauty, among others.
The company has come under intense pressure in the past few years as its Chinese business slowed. As a result, the annual revenue dropped from $17 billion in 2022 to $15.91 billion in 2023, and $15.6 billion in the last financial year.
Results released this week showed that the slowdown continued to slow down because of the Chinese market. Its net sales dropped by 8% in the fourth quarter to $14.32 billion in the fourth quarter.
Estee Lauder’s operating margin fell from 10.2% to 8%, bringing its profit to $1.14 billion.
All five divisions deteriorated in the last quarter. Skin care, the biggest part of its business, dropped by 12% to $6.9 billion, while makeup fell by 6% to $4.2 billion.
Sales of the other segment fell by 13% to $100 million, while haircare dropped by 10% to $565 million. Only the fragrance division had some growth as its revenue rose to $2.49 billion.
Estee Lauder’s sales dropped in all geographies. The Americas sales fell by 4%, while the EME and Asia Pacific dropped by 12% and 7%, respectively.
Betting on ‘Beauty Reimagined’
The management attributed most of the slowdown to weaker spending by Chinese shoppers. It is now betting on the Beauty Reimagined strategy to boost its sales growth.
Some of the approaches in this strategy is to make its service available in more places, including Amazon Premium and Alibaba’s T-Mall, to broaden it reach.
Read more: Estée Lauder shares fall on weak outlook and $100 mn tariff warning
EL’s strategy also involves boosting its spending on research and development (R&D) as it seeks to build new innovative products so that it can compete with the likes of ELF.
The company is also tweaking its advertising, mostly by focusing on new media like TikTok and Instagram. It is also leveraging AI more to boost its return on investment. In a statement, the CEO said:
“Having closed fiscal 2025 as expected, we remain wholly focused on continuing to execute our strategic vision of Beauty Reimagined with excellence. Despite continued volatility in the external environment, we embarked on fiscal 2026 with signs of momentum.”
Estee Lauder stock price analysis
The daily chart shows that the Estee Lauder stock price peaked at $95.14 this month, as we predicted.
It then formed the highly bearish double-top chart pattern, which explains why it pulled back after earnings.
The stock remains slightly above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that the bullish trend is intact. The two lines formed a bullish crossover in June this year.
Therefore, the stock will likely bounce back later this year and retest the important resistance level at $100. A drop below the 100-day moving average at $68 will invalidate the bullish outlook.
The bullish estimate is higher than what analysts are expecting, with their average target being at $86.5, in line with the current price. Telsey Advisory has a market-perfect rating, while JPMorgan was the recent one to upgrade its outlook from neutral to overweight.
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