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Estee Lauder Eyes Weak Annual Results on Slow Recovery in Asia Travel Retail 

An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, Aug. 19, 2019. (Reuters)
An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, Aug. 19, 2019. (Reuters)
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Estee Lauder Eyes Weak Annual Results on Slow Recovery in Asia Travel Retail 

An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, Aug. 19, 2019. (Reuters)
An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, Aug. 19, 2019. (Reuters)

Estee Lauder on Wednesday cut its annual profit forecast and said it expects a drop in annual sales, as the MAC lipstick maker struggles with a slower-than-anticipated recovery in its Asia travel retail business. Shares of the New York-based company were down about 15% in premarket trading.

Major global companies including European peer L’Oreal have flagged ongoing challenges to their travel retail businesses in Asia, particularly China, as the world's second-largest economy struggles to revive domestic demand post-pandemic.

Last quarter, Estee had said the recovery in Asia travel retail - sales made at airports or travel destinations like Korea and China's Hainan - has been under pressure with retail sales trends turning negative in May and June.

Estee makes about 36% of its annual revenue from the Asia Pacific region.

The company now expects full-year 2024 adjusted profit per share between $2.17 and $2.42, compared with its prior forecast of $3.50 to $3.75.

Estee now expects full-year 2024 sales to decrease 2% to an increase of 1%, compared with the previous forecast of an increase between 5% and 7%.

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Fashion

Kering Posts 11% Drop in Q2 Sales, Sees Weak Second Half

The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)
The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)
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Kering Posts 11% Drop in Q2 Sales, Sees Weak Second Half

The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)
The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)

Kering reported a bigger-than-expected drop in second-quarter sales and forecast a weak second half, as the French luxury group struggles to revive its key label Gucci and worries grow about a prolonged downturn in high-end spending.

Sales at the French luxury group which owns labels Gucci, Boucheron and Balenciaga, fell to 4.5 billion euros ($4.9 billion), an 11% drop on an organic basis, which strips out currency effects and acquisitions.

The figure was below analyst expectations for a 9% drop, according to a Visible Alpha consensus.

It also said second-half operating income could fall by around 30%, following a 42% drop in the first half.

Sales at Gucci fell 19%, showing no improvement from the first quarter, and below analyst expectations for a 16% decline, according to a Visible Alpha consensus.

Kering has been revamping Gucci, the century-old Italian fashion house which accounts for half of group sales and two-thirds of profit.

Minimalist designs from new creative director Sabato de Sarno, which began trickling into stores earlier this year, are key to the design reset and push upmarket, in a bid to cater to wealthier clients who are more immune to economic headwinds.

Kering chief financial officer Armelle Poulou told reporters that the designs had been well received and the rollout was on track.

But the efforts have been complicated by a downturn in the global luxury market, while China's rebound - traditionally Gucci's most coveted market - was clouded by a property crisis and high youth unemployment as Western markets came down from a post-pandemic splurge.

Earnings from sector bellwether LVMH on Tuesday missed expectations as sales rose 1%, offering few signs that a pickup is around the corner, sending shares in luxury goods companies down on Wednesday. Kering traded at its lowest level since 2017.