The market can be surprisingly efficient. Proof of this is Estée Lauder, the world's second-largest cosmetics company behind France, and still considered a few years ago to be the defensive investment par excellence.
In the past, investors were quite happy with sales and profit growth. But they had felt the wind shift in recent years, as evidenced by the group's market capitalization being divided by four since the peak of the pandemic.
The share price is now back exactly where it was ten years ago. And rightly so: for fiscal year 2024, cash profit - or free cash flow - per share stands at $4, exactly where it was at the end of fiscal year 2015.
A whole cycle for nothing, then, despite $9 billion spent on share buy-backs - at much higher valuations than today - and $4 billion invested in acquisitions. No growth in earnings per share, but $6 billion more net debt to bear: the destruction of value is phenomenal.
Estée Lauder, which published its annual results last night, is seeing its sales and profits fall once again. All segments are down, with the exception of fragrances, which are stagnant, accounting for just one-sixth of consolidated sales.
The lack of interest from Chinese customers is, as you'd expect, the elephant in the china store. Estée Lauder's sales in Asia-Pacific will fall by 6% in 2024, a trend that has worsened since last year, when sales there fell by 4.5%.
Having arrived in 2008 when the economy was on the brink of collapse, the all-powerful CEO Fabrizio Freda is retiring three years too late. The man who had been responsible for the group's turnaround has seen his legend severely dented.
