Estée Lauder recently announced an annual sales forecast that falls short of analysts’ expectations, indicating an ongoing struggle in the recovering beauty market. The cosmetics giant projects revenue for the current fiscal year to decline by 1% to 2%, contrasting sharply with analysts’ predicted increase of 5.6% to about $16.5 billion. This downturn is primarily attributed to diminishing sales in prestige beauty products in China, where consumer confidence remains fragile.

Fabrizio Freda, the CEO, expressed disappointment but assured that the company is committed to making significant advancements as part of a strategic reset. This news precipitated an 8.4% decline in the company’s stock during premarket trading, highlighting investor concerns.

The financial struggles stem from a contraction in sales at tax-free stores in tourist regions, particularly in Asia. Although there was a glimmer of recovery in travel retail earlier this year, overall consumer demand in critical markets like China and the United States remains tepid. Once a major revenue source, China now poses challenges, having constituted nearly 30% of Estée Lauder’s sales before the pandemic and reversing to become a liability since then.

Freda’s turnaround strategy includes cost reductions and enhanced responsiveness to social media beauty trends. Plans are also underway to list some brands, such as Clinique, on Amazon—representing a significant shift for Estée Lauder, which has traditionally distanced itself from mass retail platforms to maintain its luxury branding image.

As Estée Lauder navigates these challenges, the beauty industry continues to adapt, reflecting shifting consumer behaviors and competitive pressures.