Estée Lauder Is Paying the Price for Relying Too Much on China, Analysts Say

Halloween saved a nasty surprise for Estée Lauder Company shareholders. The global cosmetics giant lost more than 24 percent of its market value at the opening, in a sign analysts say reflects an over-reliance on the Chinese market, which accounts for nearly one-third of its total sales.
The company’s stock opened at $65.90 on Oct. 31, dropping 24.38 percent from its previous close, and recorded a weekly loss of 24.17 percent.
“Estée Lauder’s problems are a textbook case of market concentration risk,” Drayton D’Silva, founder and CIO of Tower Hills Capital, told The Epoch Times via email.
“Their over-reliance on Chinese consumers exposed to a macroeconomic downturn. Estée Lauder’s experience is a wake-up call for the entire luxury industry—adapt or face the consequences of putting too many eggs in one, formerly lucrative, basket.”
In a statement accompanying the release of the fourth quarter financial results, Fabrizio Freda, president and CEO of Estée Lauder, warned investors that things will worsen next year.
“For fiscal 2025, we anticipate continued declines in the prestige beauty segment in China, mainly reflecting persistent weak sentiment among Chinese consumers,” Freda said.
Estée Lauder is one of many multinational companies that rely heavily on China’s consumer market. French luxury giant LVMH has experienced a similar sales decline in recent quarters, while Apple has also seen a slowdown in iPhone sales.
That’s thanks to several factors that put pressure on Chinese consumers. First is a high-profile campaign by Chinese officials for “common prosperity” that discourages spending on luxury items.
Second is a decline in household wealth, as evidenced by a drop in home prices and equity prices.
Third is the slowdown in the Chinese economy and the rise in the youth unemployment rate.
In response, consumer spending has slowed, with retail sales growth dropping from 10 percent-plus in November 2023 to around 3 percent in September.
“The luxury market bubble in China is bursting,” Aaliyah Kissick, a Gen Z financial expert and CEO of a financial education company, told The Epoch Times. “Many took out consumer debt to keep up with the lifestyle and won’t be able to maintain the image—they’ll be cutting costs in non-essentials like makeup to make up for it.”
Still, Freda tried to give a positive spin to the company’s most recent results.
“Our first quarter results are largely aligned with our outlook on an adjusted basis, even though the expected headwinds in China and Asia travel retail were greater than anticipated,” he said in a press release accompanying the release of the first quarter results. “Our Profit Recovery and Growth Plan drove gross margin expansion, which was partially offset by operating deleverage.”
Nonetheless, he expects the decline in China’s sales to continue despite the stabilization measures the Chinese government took to stabilize economic growth.
“While we believe the new economic stimulus measures in China present medium- to long-term potential for stabilization and ultimately growth in prestige beauty, we anticipate still-strong declines near-term for the industry in China and Asia travel retail.”
Sid Sidharth, director of strategy and operations with Twilio, sees the downtrend in Estée Lauder’s China sales continuing.
“The data tells a clear story—double-digit sales declines in mainland China, coupled with pressures in Asia travel retail, signal that this isn’t just a temporary adjustment,” he told The Epoch Times. “We’re seeing a fundamental shift in consumer behavior and retail dynamics that requires a strategic response, not just tactical adjustments.”