Updated Aug. 18 at 1:37 p.m.

The Estée Lauder Cos.’ full-year forecasts fell in need of Wall Street estimates as the corporate’s struggles to regain footing within the Asia travel market proceed, despite a greater than expected set of fourth-quarter results.

Lauder, which has a much greater travel retail business than a few of its competitors, has seen Asia travel retail pressured by the slower-than-anticipated recovery from the COVID-19 pandemic, especially in the favored vacation resort area Hainan. This in turn led its overall global travel business’ organic sales to slip 34 percent in its 2023 fiscal yr.

At the identical time, U.S. sales have yet to climb back to pre-pandemic levels, while its California brands — Smashbox, Too Faced and Glamglow — have all initiated layoffs previously yr as those businesses face challenges.

Fabrizio Freda, president and chief executive officer of the Estée Lauder Cos., said, “For Asia travel retail, the pressure in Hainan intensified over the course of the fourth quarter. In May and June, retail sales trends deteriorated and turned steeply negative following the enforcement actions to regulate the activity. The implication of those are favorable for sustainable, long-term growth but actually create significant short-term headwinds through the transition.”

In consequence of all these aspects, the worldwide beauty giant, which last yr acquired Tom Ford, forecasted net sales to extend between 5 and seven percent in fiscal 2024 versus the prior yr, below analysts’ estimates for 8.8 percent.

Diluted net earnings per common share are projected to be between $3.50 and $3.75. Analysts had penciled in $4.83.

The news weighed on Lauder’s share price, which was down 3.3 percent to $156.69 on Friday. At first of the yr, it stood at around $253.

Mark Astrachan, an analyst at Stifel Financial Corp., said the guidance reflected “Lauder’s underperformance relative to many prestige beauty peers, reflecting the corporate’s over-reliance on China/Asia travel retail, U.S. weakness and blend to skincare.”

Within the fourth quarter ended June 30, net sales got here in at $3.61 billion, a 1 percent increase compared with $3.56 billion within the prior-year period and above Wall Street expectations for $3.48 billion.

Organic sales were down 15 percent in EMEA, a figure that features the worldwide travel retail numbers, while Asia Pacific was up 36 percent. Mainland China’s fourth-quarter organic sales were up by double-digit in comparison with each one and two years ago, the corporate said. The Americas were flat compared with the identical period a yr earlier. 

In an interview with WWD, chief financial officer Tracey T. Travis put the slower U.S. recovery partly right down to the delayed recovery in makeup, which is Lauder’s largest category within the country.

Net loss, meanwhile, was $33 million, and diluted net loss per share was 9 cents. On an adjusted basis, it was 7 cents per share, compared with Wall Street forecasts for a lack of 4 cents per share.

For the complete fiscal yr, net sales were $15.91 billion, a decrease of 10 percent from $17.74 billion within the prior yr. Net earnings were $1.01 billion, compared $2.39 billion within the prior yr. 

Skincare, which makes up 50 percent of the business, saw net sales fall 14 percent over the yr, primarily reflecting the challenges in Asia travel retail. Makeup net sales were virtually flat, but fragrance net sales rose 14 percent, reflecting double-digit growth across every region and led by Tom Ford, Estée Lauder and Le Labo. Hair care net sales rose 6 percent.

Diluted net earnings per common share was $2.79, compared with $6.55 reported within the prior yr.

Freda added: “For full-year fiscal 2023, we delivered organic sales growth and prestige beauty share gains in lots of developed and emerging markets, but Asia travel retail pressured results, particularly in skincare, and we continued to experience softness in North America. Fragrance excelled, up double digits in every region, and makeup improved sequentially to double-digit growth within the fourth quarter as more markets emerged into the post-pandemic era.”

The Estée Lauder Cos. also gave an update on the cybersecurity attack that caused it take take a few of its systems down in July. The corporate said it had identified a cybersecurity incident that involved an unauthorized third party having access to a few of its systems, and afterward, Lauder began an investigation with a third-party cybersecurity expert. The corporate said it was also coordinating with law enforcement.

Travis said she believes the incident has been contained. “After becoming aware of the incident, we proactively took down a few of our systems. We began bringing our systems back online inside days, which limited the incident’s impact on the corporate’s operations. Based on the knowledge available to-date we consider the incident is contained.”

As for its financial impact on the business, she stressed that the cybersecurity incident will not be expected to have a cloth impact to net sales, but it surely is predicted to be roughly 7 cents dilutive to earnings per share.

On the corporate’s M&A method amid these challenges, Travis said: “We’re at all times taking a look at where we have now whitespace opportunities inside a portfolio, but I’d say that’s a bit slower at once. We’ve got the Tom Ford acquisition that we’ve just done and the Deciem upcoming pending acquisition.”