Estee Lauder Cos Inc, well-known for its Clinique skincare products, recently announced that it expects a decline in its profit forecast for fiscal 2020 due to the ongoing coronavirus epidemic in China. However, despite this setback, the company’s quarterly results exceed expectations, boosting investor confidence and leading to a 4% increase in its stock.

The success of cosmetics companies, including Estee Lauder, in China can be attributed to the growing number of affluent consumers who are willing to invest in premium makeup and fragrance products. In the second quarter, Estee Lauder’s Asia Pacific region, fueled by strong sales on China’s Singles Day, experienced a significant 29.3% increase in sales. Furthermore, the company’s overall sales for the quarter ended December 31 surpassed Wall Street’s estimate, reaching $4.62 billion compared to the projected $4.35 billion.

CEO Fabrizio Freda expressed his satisfaction with Estee Lauder’s performance, noting that the growth was observed in various aspects of the business. He also highlighted the progress made in stabilizing the North American market, despite a slight decline in the makeup category. Additionally, the company’s quarterly profit of $2.11 per share exceeded analysts’ expectations of $1.90.

Barclays analysts, including Lauren Lieberman, were particularly pleased with the sales growth seen in the Americas, as sales rose by 1% for the first time in over a year. However, the ongoing coronavirus outbreak has had a significant impact on Estee Lauder’s operations. With over 500 reported deaths and temporary store closures in China, the company had to revise its fiscal 2020 per-share earnings forecast to a range of $5.60 to $5.70, down from the previous estimate of $5.85 to $5.93. The decline in air travel and consumer traffic in key shopping and tourist areas due to the outbreak has been particularly concerning, and markets heavily reliant on tourist activity are expected to be the most affected.

In fiscal 2019, China accounted for approximately 17% of Estee Lauder’s sales, reflecting significant growth from a 9% contribution in fiscal 2017. In response to the outbreak, the company has adjusted its sales growth forecast range for fiscal 2020, lowering the low end to 6% from 7%, while maintaining the top end at 8%. Despite the challenges posed by the coronavirus, Estee Lauder remains determined to navigate through this difficult period while ensuring it continues to meet the needs and demands of its loyal customers.

Useful links:
1. [Estee Lauder’s Quarterly Results](https://www.esteelauder.com/investor-relations/investor-news/press-release)
2. [Impact of Coronavirus on Global Economy](https://www.cnbc.com/2020/02/05/coronavirus-nearly-double-the-economic-hit-to-global-growth-virus-containment-the-greatest-uncertainty.html)