The share price fell 10% in pre-market trading! The recovery of high-end cosmetics is blocked. EL.US's fiscal guidance is disappointing.

On Monday, Estee Lauder (EL.US) reported its fiscal fourth-quarter earnings for the year 2024. The data showed that the company's Q4 revenue was $3.77 billion, up 7.2% YoY, beating the market's expectations; and its EPS was $0.64, also beating the market's expectations.

However, Estee Lauder's revenue guidance for the year 2025 was below analysts' expectations, indicating that the long-awaited recovery of the cosmetic company has faced another obstacle.

Estee Lauder expects its revenue to decline 1% to grow 2% in the current fiscal year. Analysts had previously expected a 5.6% growth in revenue to $16.5 billion. The cosmetics giant said that the sales of high-end cosmetics in China continued to decline, reflecting "the continued negative sentiment of Chinese consumers".

Fabrizio Freda, CEO of Estee Lauder, said in a statement: "While our outlook for sales and profits in 2025 is disappointing, we will make significant progress this year as we implement our strategic reset."

Earlier on Monday, Estee Lauder announced that Freda, who has served as CEO for a long time, will retire in June 2025. Freda has been implementing a restructuring plan to get Estee Lauder back on track financially and to regain some of the market share that has been lost to competitors such as L'Oréal. He has promised to cut costs, seize on beauty trends on social media more quickly, and shift to selling some of its brands, including Clinique, on Amazon's website. Estee Lauder has long avoided selling products on Amazon's website, fearing that it would damage consumers' perception of its brand's premium image.

Estee Lauder is struggling to recover from the financial difficulties caused by the sharp decline in sales at its duty-free stores (mainly located in China and other parts of Asia), which have been hit hard by the slow pace of the post-pandemic travel recovery. The so-called travel retail business, which had started to recover in the quarter that ended March 31, has been sluggish in China and the United States, where consumers have been in a slump. Both countries had powered Estee Lauder's strong growth in the years before the pandemic.

According to a report by Olivia Tong, an analyst at Raymond James, the Chinese market accounted for nearly 30% of Estee Lauder's sales at its peak.

Over the past year, Estee Lauder's executives have repeatedly lowered their guidance, and now they are trying to restore the confidence of investors and analysts.

After the earnings report, Estee Lauder's shares fell as much as 10% before recovering to close down 3%. The stock has fallen more than 30% in the year to date.