Estee Lauder, Canada Goose Adjust Forecasts Amid China's Slowing Luxury Demand

Luxury goods companies Estee Lauder and Canada Goose Holdings have revised their annual forecasts due to sluggish demand in the high-growth market of China. Estee Lauder's shares plummeted as much as 21% to reach a six-year low of $102.22, while Canada Goose's stock declined by 10%.

Market Response and Industry Impact

Global companies, including L'Oreal and LVMH, have also experienced a slowdown in sales as inflation and economic uncertainty hinder post-pandemic spending, particularly in China, the world's second-largest economy. Luxury brands have also cited challenges arising from Beijing's intensified regulations on "daigou" resellers - individuals who purchase items at lower prices overseas and sell them at a discount within China.

Canada Goose, known for its luxury parkas priced over $1,000, reported a slowdown in sales in China during the second quarter compared to the previous quarter, according to Reuters. Estee Lauder has faced difficulties with a slower-than-expected recovery in demand from Asian travelers, especially in popular destinations like Korea and China's Hainan province.

Cole Smead of Smead Capital Management commented on Canada Goose's Chinese business, expressing doubts about its immediate recovery and the selling pressure faced by the company's stock.

Estee Lauder indicated that inventory adjustments in Asia travel retail are expected to persist until the end of the third quarter of the 2024 financial year, as per Yahoo.

Estee Lauder and Canada Goose's Revised Forecasts

Estee Lauder expects adjusted profit per share to range between $2.17 and $2.42 for the full year, a significant decrease from the previous projection of $3.50 to $3.75. The conflict in the Middle East could impact profits by 8 cents per share.

Canada Goose anticipates revenues between C$1.20 billion ($864.49 million) and C$1.40 billion for 2024, compared to the earlier estimate of C$1.40 billion to C$1.50 billion. The adjusted profit per share is now projected to be between C$0.60 and C$1.40, down from the previous range of C$1.20 to C$1.48.

Canada Goose recorded an almost 11% decrease in revenue in the United States, with demand for high-end goods remaining weak. Conversely, Estee Lauder, perceived as an affordable luxury brand, saw an 8% increase in sales in the Americas region.

Photo: michela ampolo/Unsplash