The Estee Lauder Companies Inc. is being targeted in a new proposed class action investor lawsuit that claims the company "made false and/or misleading statements and/or failed to disclose that Estee Lauder was unable to effectively manage its supply chain and product manufacturing, resulting in reduced revenues and margins, and increased inventory levels," per one report.
The result was an inflated growth potential outlook, per another report.
In November 2023, The Estée Lauder Companies Inc. reported Q1 fiscal 2024 net sales of $3.52 billion, a decline of 10% from $3.93 billion in the prior year. Organic net sales declined 11% due to weakness in the Asia travel and mainland China markets.
While sales challenges are generally not actionable, the proposed suit claims that top executives and the company misled investors regarding the challenges of inventory in the U.S. and Asia markets, as well as "supply chain issues."
At the same time, the complaint claims that executives advanced excessively upbeat projections for sales and revenue.
As detailed in an official press release:
The filed complaint alleges that defendants misled investors with unrealistic and materially false statements about market demand Estee’s products and its inventory levels. These statements concealed the truth about Estee’s weakness in the market until, on May 3, 2023, Estee announced weaker sales and profit for the year than estimated and accordingly cut its fiscal year outlook for a third consecutive time.
As a result, the price of Estee stock declined from $245.22 per share on May 2, 2023 to $202.70 per share on May 3, 2023.
This is an ongoing story that will be updated as news breaks.
