Estée Lauder on November 3 lowered its profit outlook to an unexpected level, citing the effects of China’s ongoing Zero-COVID policy.

As the Associated Press reported, the popular beauty brand cut its annual adjusted per-share profit from $7.39 and $7.54 to $5.25 to $5.40. This is significantly lower than Wall Street’s expected earnings per share of $7.35. According to Reuters, this is a projected decline of between 19% and 21% for the entire 2023 fiscal year.

Rather than expecting a 3% to 5% gain in 2023 net sales, Estee Lauder anticipates a drop of between 6% and 8%.

The New York-based company attributed China’s COVID lockdowns to the downslide. It added that travel restrictions and tightening inventory in Asia and the U.S. might well hammer its first half of 2022.

The cosmetics group has warned that the world’s currency headwinds will affect its full-year outlook. A stronger dollar will lessen the profits of businesses with global operations. 

The gloomy prediction caused its stocks to decline by 9% that day. 

Beijing has retained its punishing pandemic measures after the 20th National Congress. According to CNBC, The Economist Intelligence Unit (EIU) believed this loyalty would further push companies to find factories away from the country.

Nick Marro, EIU global trade leader, says, “What we are hearing from companies [is] they are moving ahead with their supply chain diversification plans because this start-stop economy is here to stay.”

Sign up to receive our latest news!

By submitting this form, I agree to the terms.