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| Expectations of a rebound in luxury purchases by customers in the world's largest market have failed to materialize. (Source: Jing Daily) |
Estée Lauder, one of the world's most expensive cosmetics brands, has just announced a cut in its full-year 2023 earnings forecast, after demand for high-end beauty products in China showed a slow recovery.
Previously, the owners of cosmetics brands Estée Lauder, MAC and Clinique have repeatedly expressed optimism that their businesses will flourish, thanks to the return of Chinese customers after the Covid-19 pandemic.
However, after initial growth in the first quarter of 2023, Chinese consumer demand has continued to shrink, leading to a decline in sales, especially in the luxury retail sector. This is one reason why Estée Lauder's stock has fallen 55% in value in the first 10 months of this year.
Similarly, Canada Goose, the maker of premium goose-down down jackets, has also cut its full-year 2023 sales forecast. In its latest earnings outlook, the company said China, its largest market outside Canada, remains challenging. Since January 2023, the company’s stock price has fallen a total of 43%.
Another notable example is Apple’s sales in China. The US tech giant reported that sales in mainland China, the company’s third-largest market, fell 2% in the 12 months to September 30, largely due to falling consumer demand.
Since early 2023, China’s economy has been struggling to recover from the pandemic. Youth unemployment is rising, while the real estate crisis has not been completely resolved, causing a “negative wealth effect” that has led to falling home prices. That has prompted consumers to spend less and hoard more cash.
Moreover, some observers say that the rising trade tensions between China and the United States have had a significant impact on American businesses operating in the Chinese market, with the Chinese government and consumers now favoring domestically produced products over imported ones.
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