Important points
Shares of beauty products maker Estée Lauder rose 10% on Thursday, making it the best performer of the day among the S&P 500 index. The stock’s rise follows the announcement of an economic stimulus package in China, which could boost consumer sentiment and boost sales. Concerns over sales in China, where Estée Lauder generates nearly a third of its sales, are weighing on the stock in 2024.
Shares of beauty products maker Estée Lauder (EL) rose on Thursday on continued optimism about China’s efforts to revive its struggling economy with stimulus packages.
So far, Chinese moves such as lower interest rates and lower bank reserve requirements have helped boost U.S.-listed Chinese stocks and those of companies with a significant presence in consumer-facing businesses. Yes, but there is also the possibility of going further. The world’s second largest economy.
China is an important market for Estée Lauder. In its latest quarterly earnings data released in August, the cosmetics company reported that about one-third of its net sales came from the Asia-Pacific region. The company said the weakness in mainland China was the main factor behind the 3% year-over-year decline in Asia-Pacific net sales for the quarter.
In particular, the cosmetics maker pointed to the softness of China’s luxury beauty market. Sales in the prestige category are sluggish due to weak consumer sentiment in China, and the company expects the decline in this segment to continue throughout the current fiscal year.
Concerns about sales in China are the main pressure on Estée Lauder stock in 2024. Even after Thursday’s solid rally, the stock remains down about 30% this year.
