E Lauder Companies Faces Lawsuit Over China Sales Slowdown

Est⁘e Lauder Companies (ELC) is facing a legal challenge over its sales practices in China during the Covid-19 pandemic.

A lawsuit filed in the US claims the beauty giant defrauded shareholders by concealing its overdependence on grey market sales in the country, Reuters reports .

Judge Subramanian said shareholders identified "several misleading omissions" and "half truths" in ELC's disclosures about the negative impact of the clampdown.

Shareholders in the case claim that ELC became dependent on daigou during the pandemic, in particular in the Hainan province.

They allege that the owner of MAC Cosmetics and Jo Malone concealed how this impacted sales until November 2023, causing shares in the company to plunge 19% and wiping US$8.7bn from its market value.

"Defendants attributed the decline to everything but the crackdown and reassured investors that an upswing was coming soon," Subramanian wrote in the filing, according to Reuters.

"What matters is that Est⁘e Lauder [Companies] touted the reasons for its success while leaving out the parts of the truth it found inconvenient," he continued.

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