Estee Lauder (EL) the well-known company in the beauty and fashion industry is in trouble. Its stock plunged to $100 on Wednesday, the lowest point since October 2017. At its peak during the pandemic, the stock was trading at $366. As a result, its total market cap has fizzled to $37 billion from its record high of over $133 billion.Pexels The rise of Estee LauderStarted in 1946, Estee Lauder is an American company that is well-known in the beauty industry. It was started by Estee Lauder who was formerly known as Josephine Esther Mentzer. Together with her husband, Joseph Lauter, they founded the company in 1946 and received the first big order – of $800 – in the following year.Estee Lauder’s business has grown rapidly over the years. While this growth was mostly organic, the company also spent big in acquisitions. For example, it acquired Make-Up Art Cosmetics (M.A.C) in 1994 followed by Bobbi Brown Cosmetics.Other notable acquisitions were companies like Jo Malone London, La Mer, Aveda, Too Faced, and Kilian Paris. Most recently, it acquired Tom Ford in a $2.3 billion deal. As Estee Lauder grew, its revenues exploded as the middle class in the US and international markets grew. Its annual revenue stood at over $7.32 billion in 2009 and $17.74 billion in 2022. Its net income also jumped, peaking at over $2.8 billion in 2021 as it benefited from the Covid-19 lockdowns and stimulus packages.As Estee Lauder’s business grew, rumors emerged that some companies – especially LVMH and L’Oreal – were considering a bid. Executing such a deal would require the go-ahead of the Lauder family, which owns 38% of the company and 86% of the voting power.EL stock chart by TradingView The fall of Estee LauderEstee Lauder’s business is going through a major slowdown. For one, competition in the beauty industry is increasing, which has seen it lose market share in the past few years. It has lost its market share from big giants like L’Oreal and Shiseido and smaller companies like E.L.F.Indeed, the most recent data by Euromonitor shows that Estee Lauder’s market share in the US has dropped by nearly a fifth to 6.2%. In the same period, L’oreal gained market share to 13.7%. Another report by Yogi showed that L’Oreal sold 40 of the most popular skincare brands.As a result, Estee Lauder’s sales have been slowing. The first quarter’s results showed that the company’s sales dropped by 10.4% YoY to $3.52 billion. It cited the slow recovery of the Chinese economy, high-interest rates, and rising inflation.Estee Lauder’s net income crashed by 84% to $108 million. Most importantly, the company lowered its forward guidance for the second quarter and the full year.  It expects that its adjusted EPS will drop to between $0.48 and $0.58, representing a 62% to 69% drop. The CFO said: 

“We are lowering our fiscal ’24 outlook for the balance of the year to reflect the slower-than-expected pace of recovery due to incremental external headwinds that continue to evolve during the second quarter.”

 The future of Estee LauderEstee Lauder is without a doubt going through a rough patch as its business slows. This is shown by the fact that its stock price has plunged hard in the past few months. Also, the company lowered its guidance once again.History shows that major recoveries takes time after such freefall. For one, the company is still facing major headwinds as interest rates are set to remain high for longer. Competition is still rising in its key markets.Fortunately, for Estee Lauder, it still owns some of the best brands in the industry. This means that the management can still engineer a strong turnaround. Most importantly, the collapse means that the company can now become a good takeover target by the likes of L’Oreal and LVMH.Such an acquisition would help these companies solidify their presence in the United States and other Asian markets. In the medium term, I suspect that the Estee Lauder stock price will remain under pressure as investors wait for the next catalyst.More By This Author:Bitcoin Forms Bullish Pennant As Raydium, Celestia, EOS Prices Rise BTC Chart Pattern Bodes Well For Arweave, Avalanche, Chainlink, Solana Transocean Stock Price: RIG Is At Risk Of Diving As Earnings Miss