Estée Lauder sales beat as China demand booms, shares rise 12 percent

(Reuters) - Estée Lauder Cos Inc EL.N joined rival L'Oreal SA OREP.PA in dismissing fears of a slowdown in China on Wednesday as its quarterly results beat Wall Street estimates on booming demand for cosmetics and high-end skincare products.

FILE PHOTO - Lipstick is displayed in the M.A.C flagship store in Paris, February 28, 2013. REUTERS/Philippe Wojazer

Chief Executive Officer Fabrizio Freda, like L’Oreal CEO Jean-Paul Agon earlier in the day, said he saw no signs of the slowdown expected by many investors due to pressure on Chinese growth from U.S. tariffs and easing global demand.

Those comments lifted shares across the consumer sector in both Europe and the United States, with Estée Lauder up as much as 12 percent.

“(In China) there is risk that the momentum slows going forward but it appears to be performing better than expected in the short term,” Morgan Stanley analyst Dara Mohsenian said.

Estée Lauder has launched several high-end skincare brands and collaborated with Chinese celebrities like Yang Mi, Hua Chenyu and Fei Fei Sun that is driving sales to affluent millennial consumers in China. Overall, sales in the Asia-Pacific region rose 24 percent, led by China and Japan.

L'Oreal reported stronger-than-expected results earlier on Wednesday. Fashion group Gucci's owner Kering PRTP.PA and Italian down jacket maker Moncler MONC.MI have also played down gloomy market views on China.

Estée Lauder said it expects to grow at a faster clip than the broader global prestige beauty industry’s market growth rate of 5 percent to 6 percent for fiscal 2019, and raised its full-year profit forecast.

The company now expects fiscal 2019 adjusted earnings per share of $4.73-$4.82, above its prior forecast of $4.62-$4.71. Analysts had estimated $4.75 per share.

Net sales are expected to grow between 4 percent and 5 percent or between $14.24 billion and $14.38 billion. Analysts on average expected $14.31 billion, according to Refinitiv data.

Estée Lauder said its outlook takes into account the impact of tariffs on future moderation of net sales growth in China and the travel retail market, which it has not experienced to date.

Excluding items, the company earned $1.41 per share, while net sales rose nearly 8 percent to $3.52 billion. Both topped Wall Street estimates.

Reporting by Siddharth Cavale and Jaslein Mahil in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty