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How Estée Lauder’s Big Bet on China Led it to Lose $100B in Value Over Three Years
By: Hadassa Kalatizadeh
On Tuesday, Estée Lauder will report its latest quarterly earnings to Wall Street. As reported by Fortune.com, executives at the beauty giant, are almost getting used to giving bad news. The 79-year-old company’s last report released in October featured a particularly disappointing earnings statement. Estée Lauder, whose global luxury brands include MAC, Aveda, Le Labo, and Clinique, dismayed shareholders by cutting its dividend by nearly half, in a bid to preserve cash. Rather than offer any upbeat predictions with the dividend cut, it also withdrew its financial forecasts, leaving shares of the stock to plunge 21% in a single day of November. It wasn’t just a one-time disappointment.
By this time, the company had already repeatedly lowered its forecasts over the past two years, leaving an unshakable impression that executives didn’t any longer have a strong handle on the business. “Estée Lauder was an incredible company…but given the collapse in profits, I’m not sure it still is,” wrote famed investor Whitney Tilson in a Stansberry Research article.
Per Fortune, revenue and profits are down, and the share price for the stock has followed—dropping a whopping 78% from its all-time high of $374.20 in January 2022. In market capitalization terms, the decreased stock price over the past three years has lowered the company’s value by roughly $100 billion. This has been particularly painful for the founding Lauder family, which still holds close to 35% of the company’s outstanding shares (and 84% of the voting power).
The crux of the problems seems to be the slide in China sales. The company made a huge bet on China’s luxury market, under its former-CEO Fabrizio Freda. Retail experts had predicted that China would rival the U.S. as the top luxury market in the world. Freda dived in establishing the company’s presence early on, not only in China’s major cities, but also the smaller cities. It also opened stores in the country’s new airports and duty-free shops for locals.
For a while, in the 2010s, this helped the company, but since COVID the Asian market continuously been a major bummer for the company, as it has for other Fortune 500 companies including Apple and Starbucks. Estée Lauder’s Asia Pacific business has fallen for three years in a row, with fiscal 2024 sales at $4.89 billion, or 16% below their 2021 peak.
Also, Estée Lauder skin care and cosmetics brands which had been a hit with boomers and Gen X, never succeeded in winning over consumers under 40— who represent a giant share of the makeup market. In its fiscal 2024, which ended on June 30, Estée Lauder reported total revenue of $15.6 billion, down 12 percent compared to its 2022 peak. Not only were the sales slipping, but profits were declining rapidly. Net earnings of $409 million were down 60% from the previous year. The bad news continued in the first quarter of 2025, with the company reported a net loss of $156 million.
Per Fortune, on Tuesday’s earnings call, investors will look to new CEO and President Stéphane de la Faverie, who was appointed to take over company helms in late October. He will need to renew hope in the company’s future. He will need to present a clear plan on how it will improve the dismal sales in China, and make the company’s global supply chain more effective.
He will also need to show the company’s progress in appealing to a younger audience, rebranding a core group of its brands previously targeting older shoppers– possibly by tapping into sites like TikTok. Social media has been driving demand for novelty, younger brands, with low operating costs. Estée Lauder will need to tap into these new tools.
“We need brand builders, but we need also people that will act with urgency, speed, courage to make the needed changes,” former CEO Freda said of the new appointee, who has also been his apprentice.
