After carefully evaluating our position in Estee Lauder, we have made the decision to exit our investment in the company by selling 330 shares at roughly $96.30. This move comes in light of the company’s disappointing fiscal 2025 guidance, which was announced recently. Despite Estee Lauder capping off its fiscal year 2024 on a better-than-expected note, with revenue and earnings per share surpassing estimates, the outlook for the new fiscal year poses challenges in the prestige beauty market.
One of the main concerns for Estee Lauder moving forward is the impact of the ongoing challenges in the Chinese and Asian travel retail business. The company expects another tough year in this region due to low consumer sentiment and conversion rates. Additionally, North America presents its own set of problems, with management revising its growth outlook for the region to reflect a softer environment. These factors have contributed to the company’s cautious guidance for fiscal 2025, with organic net sales expected to either decline by 1% or increase by just 2%.
The news of longtime CEO Fabrizio Freda’s retirement at the end of fiscal 2025 has also played a role in our decision to exit our position in Estee Lauder. While the market may view this transition positively, providing an opportunity for fresh leadership and a new strategic direction, the lack of a named successor and the lengthy timeline for the transition raise uncertainties about the company’s future. Unlike rapid CEO transitions seen in other companies, Estee Lauder’s succession plan may delay the realization of any potential positive impact from new leadership.
Lessons Learned and Moving Forward
Reflecting on our experience with Estee Lauder and the implications of our decision to sell our shares, it is important to acknowledge the challenges in accurately predicting and reacting to market dynamics. While it is possible that the company may surprise investors with better performance than expected, past experiences of the stock price falling despite positive results caution against holding on to investments based on hope rather than solid analysis.
The decision to exit our position in Estee Lauder represents a strategic move to reallocate our investment to stocks that are currently outperforming and have a more promising outlook. While the transition in leadership at Estee Lauder may present opportunities in the future, the current uncertainties surrounding the company’s performance and strategy justify our choice to move on to more favorable investment options. As market conditions continue to evolve, it is crucial to adapt our investment decisions accordingly to ensure the long-term growth and stability of our portfolio.