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Key Takeaways
- Shares of beauty products maker Estée Lauder climbed 10% on Thursday, posting one of the day’s top performances in the S&P 500.
- The gains for the stock followed the announcement of an economic stimulus in China, which could boost consumer sentiment and help drive a sales recovery.
- Concerns about sales in China, where Estée Lauder generates close to a third of its sales, have been a source of pressure on the stock in 2024.
Shares of beauty products manufacturer Estée Lauder (EL) surged Thursday, lifted by continued optimism about China’s efforts to shore up its slumping economy with an economic stimulus package.
China’s moves, which so far include lowering interest rates and reducing reserve requirements for banks—and may go even further—has helped provide a boost to U.S.-listed Chinese stocks, as well as shares of companies with a significant consumer-facing business presence in the world’s second-largest economy.
China is a critical market for Estée Lauder. In its most recent quarterly earnings data, released in August, the cosmetics firm reported that roughly a third of its net sales came from the Asia/Pacific region. The company said weakness in mainland China was the primary driver of a 3% year-over-year drop in Asia/Pacific net sales during the quarter.
In particular, the makeup maker pointed to softness in China’s prestige beauty market. Weak consumer sentiment in China has dragged on sales in the prestige category, and the company expects declines in the segment to persist throughout the current fiscal year.
Concerns about sales in China have been a primary source of pressure on Estée Lauder shares in 2024. Even after the solid gains on Thursday, the stock remains down roughly 30% this year.