Why Estee Lauder shares retreated today

Shares of Estee Lauder (EL -3.69%) were among the losers today, even as the broad market rose in response to former President Trump’s victory.

Estee Lauder has been hammered by weakness in China in recent quarters, and today’s sell-off appears to be a response to another potential trade war between the US and China. Trump also campaigned rateswhich could lower profits for a global company like Estee Lauder.

As a result, cosmetics stocks fell 3.9% as of 2:33 PM ET. That compared to a decline of 2.5% iShares MSCI China ETFshowing that investors are turning away from Chinese stocks.

Image source: Getty Images.

Estee Lauder’s problems persist

Estee Lauder shares have fallen sharply from their pandemic peak, largely due to the troubles in China. Stocks lagged today as investors shifted to cyclical stocks such as financials and energy, which are expected to do well under the Trump administration. , and away from consumer goods like Estee Lauder.

Tariffs did weigh on business during the first Trump administration, although CEO Fabrizio Freda tried to allay tariff concerns in 2018.

If Trump imposes tariffs this time, China could respond in kind, leading to higher costs for Estee Lauder in two of its key markets.

Can Estee Lauder bounce back?

The cosmetics giant is down more than 80% from its pandemic-era peak, and the company continues to implement its recovery and growth plan.

Organic sales fell 5% in the first fiscal quarter. It has cut its dividend and withdrawn its 2025 budget outlook, reflecting challenges in China.

It won’t be easy for the company to grow again without a recovery in China, and a new tariff regime would only make that harder.