Estée Lauder Cos Inc on Wednesday forecasted a bigger drop in full-year sales and profit, disappointing Wall Street; that was expecting better results on rebounding travel retail after Covid-19 restrictions eased globally and in China.

Shares of the company fell about 16 percent in premarket trade after Estée Lauder cited a slower-than-expected recovery in Asia travel retail and major market China for the latest round of cuts to its annual forecasts.

In contrast, European peers LVMH and L’Oréal saw a rise in first-quarter sales, boosted by a rebound in demand in the Chinese region.

Barclays analyst Lauren Lieberman said in a note that Estée Lauder’s profit forecast was the “last thing” expected even by the Street and that comments on Asia travel retail raises doubt on how much “control or visibility” the company has in its end-market sales through this channel.

Estée Lauder said while major shopping districts such as Hainan and Korea saw more traffic, the conversion of travellers to consumers in luxury beauty lagged.

Even though China relaxed pandemic-related restrictions, the company saw January 2023 pressured by low retail traffic and retailers destocking due to an increase in Covid-19 cases.

The MAC lipstick maker’s sales had also witnessed an impact in earlier quarters from US retailers tightening inventories of its products, but posted a 6 percent rise in organic net sales in the Americas, signalling steady demand for its Jo Malone fragrances and Bobbi Brown foundations.

The company’s profit remains pressured from a stronger dollar since it has sprawling global operations and converts foreign currencies into the greenback.

Estée Lauder expects full-year 2023 net sales to fall between 10 percent and 12 percent, compared to its prior forecast of a 5 percent and 7 percent decrease.

It also forecasted adjusted profit per share to fall between 50 percent and 51 percent, compared with a decrease between 27 percent and 29 percent it expected earlier.

However, the company beat third-quarter sales expectations but missed profit estimates.

By Ananya Mariam Rajesh; Editor Shinjini Ganguli

Learn more:

Estée Lauder Expects Smaller Fall In 2023 Sales on Resilient Demand

Analysts expect China’s move in early December to relax Covid-19 curbs and lift some travel restrictions to benefit luxury and beauty companies that had flagged a hit to sales in the country from its strict zero-Covid policy.