Estée Lauder shares seesaw amid conflicting reports of Peltz interest

By Julia Wray | Published: 9-May-2023

Rumours of a shakeup by the activist investor following ELC’s slashing of its full year guidance have seemingly been quashed

Rumours that billionaire activist investor Nelson Peltz is looking to engineer a shakeup at Estée Lauder Companies have seemingly been quashed. 

The New York Post first reported on 7 May that the Trian Fund Management CEO was considering mounting a shareholder campaign to oust ELC’s longtime CEO, Fabrizio Freda, citing sources close to the situation. 

The source also indicated that Peltz was possibly pushing for a turnaround and eventual sale of the Aveda and Clinique owner.

However, the New York Post added that it couldn’t immediately be learned whether Peltz had actually acquired shares in the cosmetics giant. 

The news followed ELC shares plunging 17% last week after the beauty company slashed its full year guidance amid lacklusture results; ELC net sales decreased 12% in Q3 fiscal 2023. 

Freda commented at the time: “As the shape of recovery from the pandemic for Asia travel retail comes into better focus, it is proving to be both far more volatile than we expected and more gradual relative to what we experienced in other regions. 

“We are, therefore, lowering our organic sales and EPS outlook for fiscal 2023 to reflect significantly greater headwinds in our fourth quarter than we expected in February.”

The Peltz rumours saw ELC shares rally 5.1% in premarket trading on 8 May. 

However, yesterday, CNBC TV personality and former hedge fund manager Jim Cramer disputed the New York Post’s story, which caused the stock to give back its early morning gains. 

According to Cramer, the activist investor has no intention of pursuing a shakeup at ELC, in part because the firm’s dual-class share structure gives the Lauder family outsized control over the direction of the company.     

Peltz has a history of targeting beauty conglomerates and is already a member of the boards of beauty and FMCG giants Unilever and Procter & Gamble, although not without controversey. 

Earlier this year, fellow Unilever investor Terry Smith, the owner of Fundsmith, lashed out at Unilever’s ‘preferential’ treatment of Peltz, stating that longstanding investors were being ‘ignored’.

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