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“We expect incremental reinvestment will ultimately pressure medium-term margins & also are wary of a more muted recovery in China,” the analysts said in a downgrade note.
Several analysts warned that checks point toward a weaker-than-expected recovery in China. Moreover, Estee said yesterday that it suffered a cybersecurity incident.
“We can’t help but worry that these issues are broader & more systematic than we originally described,” the Barclays analysts added.
They are concerned that additional investments are needed to improve the company’s positioning.
“Of course, we’d see this as the right decision for the business over the longer term, but in the near to medium-term expect it would significantly curtail any investment narrative around margin recovery & resultant outsized earnings growth, and lead to more muted free cash flow,” the analysts concluded.
EL shares are down 2.5% in early Thursday trading.
