imagine your favorite toy is on sale for a month. every time your friends talk about that toy, they say that it's going to be expensive again after the sale. but then after the sale, nobody buys that toy and it stays cheap. you might start to think that your friends were not very good at predicting prices. same thing is happening with the estee lauder companies stock. people thought it was going to be expensive again after the sale, but the stock is still cheap. that means the company is facing some problems that are making it hard for the stock to go back up. Read from source...

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The Estee Lauder Companies Inc. (EL) has been facing a turbulent stock trajectory, mainly driven by weak consumer sentiment, high inflation, and increasing interest rates. The company is grappling with issues such as market instability in mainland China and Asia travel retail, lower conversion rates, and negative foreign currency impacts. Consequently, the stock has plunged 42.4% year to date compared to a 37.7% drop in the broader industry. In contrast, the Consumer Staple sector and the S&P 500 have posted increases of 9.4% and 16.3%, respectively, during the same period. Closing the trading session at $84.20 on Thursday, shares of EL stand close to its recently reached 52-week low of $82.39.

EL is trading below its 50 and 200-day moving averages, indicating a bearish outlook and challenges in sustaining recent performance levels. In the fiscal 2024, the company faced significant challenges in the Asia-Pacific region, particularly in mainland China, due to a broader slowdown in the prestige beauty sector. Sales in the Asia-Pacific region fell 7% to $1,205 million during the fiscal fourth quarter. The contraction in adjusted operating margins is another concerning point, which contracted 120 basis points to 10.2% in the fiscal 2024. While there was a modest recovery in the later part of the fiscal 2024, the outlook for fiscal year 2025 indicates a slower- than-expected pace of margin expansion.

The company is losing market share in channels that are growing more slowly, such as traditional retail, despite some gains in high- growth platforms like Amazon. However, these gains are not enough to offset losses in brick- and-mortar stores, particularly in North America, where competition is fierce. The Estee Lauder Companies also face significant financial pressure due to unfavorable currency rates. Currency fluctuations, particularly in regions like Israel and the Middle East, compounded by business disruptions, further impacted the company's profitability in the fiscal 2024. These currency headwinds are expected to continue affecting earnings, potentially reducing earnings per share by approximately 3 cents in the fiscal 2025.

The company continues to face a challenging macroeconomic environment, with ongoing volatility in the global prestige beauty market, especially in mainland China and Asia travel retail. For fiscal year 2025, management expects a more modest performance compared to industry averages, primarily due to its strong presence in these regions. Weak consumer sentiment and changing traveler behavior, with more spending on experiences over products, are impacting Asia travel retail. Additionally, risks such as retailer destocking and intense competition, particularly in North America, are further complicating the company

while the profit recovery and growth plan aim to simplify processes and cut expenses, analysts' downgrades suggest that the road to recovery might be longer than anticipated. The stock is trading at a premium relative to industry peers, which seems increasingly difficult to justify, and the company is facing significant challenges. Despite these challenges, the company is making strides, leveraging its strengths in high-growth areas and focusing on digital transformation.