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Estée Lauder presents ugly outlook after COVID-19 demand disruption

Cons. Discr. - Retailing 414 Coronavirus 507 Earnings 667 Quote Watch 438 U.S. 5201

Estée Lauder reported calendar Q2 (fiscal Q4) revenues which dropped by 32.0% year over year as a result of widespread store closures linked to COVID-19. The beauty products manufacturer noted that at the end of June around 15% of retail stores in Europe and 20% in the Americas remain closed.

The firm expects calendar Q3 (fiscal Q1) revenues to decline by 12% to 13% year over year. That partly reflects the continued impact of COVID-19 as “some retail locations in certain markets may not reopen” as well as “restructurings and bankruptcies in the retail industry“. The latter has already been prevalent in the apparel and multi-line retailers as outlined in Panjiva’s research of Aug. 17.

Given the later-than-average reopening of stores in the Americas it is worth examining progress in Estée Lauder’s U.S.-bound trade. Panjiva’s data shows that U.S. seaborne imports linked to Estée Lauder support the potential downturn indicated with total shipments linked to the firm having fallen by 9.6% year over year in July. 

There was a 2.2% increase in shipments in Q2 which may reflect a degree of stock buildup. Indeed, the firm’s inventory days rose to 246 days from 210 days a year earlier, S&P Global Market Intelligence data shows.

RECOVERY FROM COVID-19 YET TO APPEAR

Chart segments change in U.S. seaborne imports linked to Estée Lauder by product.  Source: Panjiva

Most of Estée Lauder’s have seen a similar downturn in July with shipments linked to L’Oreal down by 10.2% while Shiseido’s fell by 18.2%. Smaller brands have done somewhat better though with shipments linked to Sephora down by just 2.9% while Benefit’s were unchanged. Yet, both Sephora and Benefit’s shipments had fallen significantly in Q2, by one third and nearly two thirds respectively, suggesting inventories were already under control.

ESTÉE LAUDER IN THE MIDDLE OF THE PACK AT START OF Q2

Chart segments change in U.S. seaborne imports of beauty products by shipper.  Source: Panjiva

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