Estée Lauder Companies (ELC) is facing a class action lawsuit on behalf of investors who acquired common stock between 18 August 2022 and 2 May this year.
The complaint, filed by US stockholder rights law firm Bragar Eagel & Squire, alleges that ELC misled investors with “unrealistic and materially false” statements about market demand for its products, as well as its inventory levels.
According to the litigator, these statements concealed the truth about ELC’s “weakness” in the market, which were eventually revealed on 3 May upon the publication of its Q3 fiscal 2023 results.
On this date, net sales for the quarter were revealed to have decreased 12% and the company said it would be slashing its full year guidance for a third consecutive time.
In response, the price of ELC stock declined from US$245 per share to $202 per share.
This was swiftly followed by speculation in the New York Post that billionaire activist investor Nelson Peltz was looking to engineer a shakeup at ELC – rumours which were swiftly quashed.
In August, ELC shared news of a slump for its full 2023 financial year, with net sales decreasing by 10% to $15.91bn for the period ended 30 June 2023.
This, it said, was the result of reduced travel retail sales in Hainan and Korea.
Bragar Eagel & Squire said its complaint is on behalf of all persons and entities who purchased (or otherwise acquired) ELC common stock between the stated timeframes, and who suffered losses.
Investors have until 5 February 2024 to apply to the United States District Court for the Southern District of New York to be appointed as lead plaintiff in the lawsuit.
Cosmetics Business has reached out to ELC for comment.