Jim Cramer - Mad Money Estee Lauder EL-N BUY Nov 15, 2023

EL is a high-quality consumer staple name, which has always traded at a premium valuation. However, EL’s revenue has declined for two years in a row now, which has investors concerned. We think EL is in a bit of turnaround situation now, which we try to stay away from (most turnarounds rarely turn or take longer than expected), we would like to see revenue growth recover before getting interested in EL. Growth out of China is not helping but competition does look like it is increasing across the board as well and we wonder a bit if EL is having trouble adjusting to newer marketing channels that are being used. 
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Is down 16% in May. She expected things to imnrpove when she bought it; that hasn't happened yet, but weakness in the Chinese consumer may be bottoming while more marketing should help.

He sold some of his holdings. A disaster. A loser he held onto when sales in China failed to triumph.

It reported a beat this morning, but they always set a really low bar in earnings, and the long-time CEO announced his retirement. The CEO guided it to great heights, but recent disastrous declines in earnings. The pandemic hurt their Chinese sales and that has never recovered; also, airport sales haven't recovered. Since the start of 2022, Estee Lauder has sank 75% while ELF has soared 382%. Lauder maintained high prices to protect their margins, but that may be working anymore. 

Fundamental driver of business very strong - vanity products. Long history of well established brands. China growth has slowed, but overall is optimistic on company. Not founder run, but founder still owns large chunk of business. Is ~1% position in portfolio. Will keep buying on share price weakness. 

If the Chinese consumer continues to recover, EL will do well. But even with the stimulus announced in China this week, China won't come roaring back.

He'd own it for the next couple of months, but questions the next couple of years. Clinique is strong, but has lost some of its brand "heat". Weaker topline. Revenue coming down at the same time as costs are inflating. Tactically bullish if you believe the spurt in China is real, but tends to get more competitive over the long term, and that will come home to roost for EL over a 5-year horizon.

See his Top Picks for a more durable idea.

Enjoys their products and notes they are sector leaders. They score 9/10 overall. The current pullback makes her cautious though. It could be a while before this turns around. They did beat their last quarter.

Strong brand. Liked the growth in Asia. Moved online very well during Covid. China slowing has hurt a lot of luxury brands. New CEO. Cut outlook for next year. Opportunity for stock to go up from here, but you need Asia to come back. Needs to exit lagging brands.

Estee overplayed its hand in terms of how much it costs to shop, not realizing that the consumer around the world has changed and wants more value than they used to. The stock has performed so poorly for so long.