In a significant move, UK fund manager Terry Smith has divested his stake in Estée Lauder Cos., citing concerns over the company’s handling of China’s reopening. Smith, managing one of the UK’s largest equity funds, outlined in his annual letter to investors that Estée Lauder’s supply chain inadequacies resulted in missed opportunities for post-lockdown growth in China and global travel retail.
While the size of the Estée Lauder stake remains undisclosed, Smith has chosen to maintain a holding in beauty rival L’Oréal SA. This decision underscores L’Oréal’s resilience in overcoming challenges, including a downturn in travel retail in Asia. Despite industry headwinds, L’Oréal’s performance, driven by budget brands like Maybelline and strategic acquisitions, stands in contrast to Estée Lauder’s recent struggles.
Estée Lauder, boasting brands such as Clinique and Aveda, has faced setbacks, including three consecutive cuts to its annual outlook and a loss of market share in the US. The company is now focused on a business revitalization strategy, expanding its luxury skincare and fragrance offerings and relaunching the Clinique brand.
Over the past year, Estée Lauder shares declined nearly 50%, while L’Oréal shareholders witnessed gains of over 20%. L’Oréal’s robust performance in the cosmetics market, marked by 11% like-for-like revenue growth in the quarter ending September, positions it favorably in the industry.
Terry Smith identifies L’Oréal as a «long-term favorite,» highlighting strategic moves such as the acquisition of the Australian soap brand Aesop for $2.53 billion last year, strengthening its position in the luxury division.
