We’re exiting our position in a struggling company with few near-term catalysts

Shortly after the opening bell, we will be exiting our position in Estee Lauder , selling 330 shares at roughly $96.30 Following the trade, Jim Cramer’s Charitable Trust will no longer own a position in EL. We’re selling our remaining small position in Estee Lauder. Shares are slightly higher in pre-market trading, a result we’ll take given the company’s disappointing fiscal 2025 guidance on Monday. What could also be saving the stock is news that longtime CEO Fabrizio Freda is retiring at the end of fiscal 2025. Although the company capped off its fiscal year 2024 on a better-than-expected note, with a revenue beat and adjusted earnings per share (EPS) of 64 cents topping estimates of 27 cents, the sales and profit outlook for the new fiscal year was weak, reflecting ongoing challenges in the prestige beauty market. The company expects organic net sales to be in the range of a 1% decline to a 2% increase in fiscal 2025, well below the consensus of a roughly 6% to 7% increase. The profit outlook was even tougher. Management guided adjusted EPS in the range of $2.75 to $2.95, well below the consensus forecast of slightly below $4. The key issue remains China and its Asian travel retail business, where Estee Lauder expects another down year due to low consumer sentiment and conversion rates. However, North America is a problem as well, and management has tempered its growth outlook for this region to reflect a softer environment. While it’s certainly possible that Estee Lauder’s guidance on Monday is an example of the company beating big and then guiding conservative, this line of thinking is what has hurt us in the past. Instead of under-promising and over-delivering, Estee Lauer for the past two years has been beating but cutting bigger, causing the stock price to fall. It’s been the opposite of a V-shaped recovery. We figured Estee Lauder could disappoint again when it reported results, which is why we sold shares in July . The market likely knew some disappointment was coming too, which explains why the stock is in the green Monday. With Freda on his way out, Wall Street may be bidding up the stock in relief. The company sorely needs a fresh set of eyes — as Jim Cramer urged in his Sunday column — but this is far from a clean break. Unlike Starbucks’ switch from Laxman Narasimhan to Brian Niccol in less than one month’s time, Freda won’t be out for another year and no successor was named. Naming a new CEO at Estee Lauder could ultimately be a positive event if the right executive is selected. However, we don’t think this is worth sticking around for because this could be a tough business to turn, and the lengthy succession timeline means it may take longer to realize this catalyst. We’ll realize a disappointing loss of around 47% on our remaining shares, but we’d rather this cash be in stocks that are beating and raising. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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