By Anuja Bharat Mistry, Anshi Sancheti and Samantha Marshak
(Reuters) -Estee Lauder said on Wednesday it would cut inventory and promotions to help mitigate rising costs, after the luxury cosmetic maker warned that a $100 million hit from tariffs would weigh on its annual profit forecast. The company’s shares fell about 4% in afternoon trading after Estee Lauder also forecast annual profit below estimates.
Higher costs related to the Trump administration’s unpredictable trade policies have dampened consumer spending, hurting businesses, especially higher-end brands like Estee Lauder and Tapestry as the luxury sector struggles with sagging demand.
“This highlights broader pressures on the beauty industry since even those companies that don’t rely on imports of finished goods still have to source the bulk of their ingredients, packaging, and other materials from overseas suppliers,” said Sky Canaves, analyst with eMarketer.
To reduce the impact of US-China tit-for-tat tariffs on its margins, the company said in May it would sell fewer cosmetics in China that were sourced from its U.S. factories. For China sales, Estee would rely more on cosmetics made in its factories in Japan and Europe.
The company sources roughly 25% of its products sold in China and the EMEA regions from U.S. manufacturing plants.
Estee Lauder’s organic net sales for the fourth quarter fell 13%, after rising 8% a year ago, hurt by softness in the skincare and makeup segments. Estee is also grappling with weakness in the U.S. and China markets as well as in the large European markets of France and Germany.
Travel retail sales continue to be muted, accounting for two-thirds of the 8% sales decline in the fourth quarter, though plans are in place to expand the company’s duty-free presence in the Americas, according to chief financial officer Akhil Shrivastava.
To boost earnings, Estee Lauder has also accelerated new launches in categories including skincare, introduced new luxury price tiers, increased investment, and cut costs under new CEO Stephane de La Faverie, who took up the role earlier this year.
The company reported a wider quarterly loss of $546 million, up from $284 million a year ago, partly due to impairment charges tied to brand performance at Too Faced and skincare brand Dr.Jart+.
On an adjusted basis, it earned 9 cents per share, in line with estimates.
It sees full-year adjusted earnings per share to be in the range of $1.90 to $2.10, compared with analysts’ estimates of $2.21, according to data compiled by LSEG.
Estee Lauder, which laid out restructuring plans in February, said on Wednesday it expects to take restructuring charges between $1.2 billion and $1.6 billion before taxes, in 2026.
(Reporting by Anuja Bharat Mistry and Anshi Sancheti in Bengaluru; Samantha Marshak in New York; Editing by Shinjini Ganguli)
