Actions of Estee Lauder (NYSE:EL) plunged today as the cosmetics giant continues to battle weakness in China, with the company also cutting its dividend and withdrawing its guidance for the fiscal year, reflecting a lack of visibility on the situation in China and the need to reinvest in the business.

The stock was down 19.3% on the news as of 12:38 p.m. ET.

Image source: Getty Images.

Estée Lauder’s challenges continue

Estée Lauder, which owns brands like Aveda, Clinique, La Mer and Mac, reported a decline in organic sales of 5% and revenue of 4%, to $3.36 billion, matching essentially at the consensus of $3.37 billion.

The company blamed deteriorating consumer confidence in China, which hit the prestige beauty segment, as well as weakness in travel retail or duty-free. He reported growth in Japan and emerging markets.

According to generally accepted accounting principles (GAAP), the company reported a loss of $156 million due to charges related to a talc litigation settlement, while adjusted EPS was $0.14, up from 0 $.13 in the year-ago quarter, and ahead of the consensus by $0.09.

However, the biggest news was that Estée Lauder cut its dividend from $0.66 to $0.35 per quarter, a move that management said was intended to give the company more financial flexibility, ‘especially as a new management team is about to take over.

Management also discussed the difficulty of predicting the recovery of the travel retail sector in China and Asia.

What’s next for Estée Lauder?

Management gave guidance for the current quarter, but withdrew it for the full year due to uncertainty in China.

For the current quarter, it expects an organic decline in net sales of 6% to 8% and adjusted earnings per share of $0.20 to $0.35, a decline of 60% to 77% from last year. quarter of last year.

Clearly, Estée Lauder faces a number of challenges, and China’s weakness has affected most consumer companies doing business there. It is unclear when the Chinese economy will rebound. Until there are clear signs of this, it is best to avoid Estée Lauder’s actions.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Motley Fool has a disclosure policy.