Estee Lauder (EL-N)

This has come down so much that it's an opportunity now. Their numbers will only go up in beauty, driven by influencers. EL is long-established, but has missed the boat on a few things. They are due for a turnaroud.

There is still lots of risk here but we think the potential is also looking good from current levels. The company is still quite levered, but it generates good cash flow. EPS will fall this year but better things are expected in 2026. With its slowdown, the company has some serious cost-cutting efforts ongoing, and if these work there is good leverage to earnings. We would not want a lot, and it is for recovery-style patient investors only, but we think it will ultimately recover well enough.
Unlock Premium - Try 5i Free

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.

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.

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.

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.

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.

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. 

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. 

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

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.

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. 
Unlock Premium - Try 5i Free

It used to be top of the world, offering the best luxury cosmetics like skin care. They made a big bet on Chinese travellers returning to duty-free shops, but they lost the bet. Meanwhile, competitors came on hard. IS down 44% this year, though popped 5% today.

It's been a loser for him, but it does a lot of business in China. Shares moved up before and after today's Biden-Xi summit. It's one of the biggest market laggards, and now the market is looking for those.

A disaster. Used to be great. The CEO is not doing a good job.