Here's Why Estée Lauder Won't Reclaim a $100 Billion Market Cap Anytime Soon
Key PointsEstée Lauder’s turnaround is working, but it's a margin plan, not a growth plan.
Estée Lauder Companies (EL +0.88%) fell from its 2022 peak of approximately $134 billion to a current market cap of around $39 billion. While CEO Stéphane de La Faverie's turnaround strategy has been successful in making the company more profitable, a return to the $100 billion market cap is unlikely anytime soon. The previous peak was primarily fueled by Chinese travelers purchasing La Mer in duty-free shops, which have since collapsed.
The company continues to prioritize China as part of its global strategy, as evidenced by a capital markets event planned for Shanghai. De La Faverie's Beauty Reimagined approach focuses on procurement, supply chain optimization, outsourcing, and a return to double-digit operating margins. Growth is achieved through expanding consumer coverage, such as Clinique on Amazon and Bobbi Brown's shift to social media.
However, these moves are aimed at recapturing lost share rather than entering new markets. The recent breakup of merger talks with Puig further reinforces the company's commitment to its original plan. Despite trading at a higher forward earnings multiple than L'Oréal, investors are paying for the recovery before it's complete. Estée Lauder is a suitable holding for those seeking a cleaner, more profitable beauty company, but investors should not expect a return to its all-time highs.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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