Here's How the Hong Kong Protests and Trade War Are Already Having an Impact on Estée Lauder

Hong Kong chief executive Carrie Lam folded in September, promising to withdraw the divisive extradition bill that had galvanized protests across the financial center, and has lasted over half a year. But the furor rages on—with many seeing the bill as a merely a sign of mainland China’s growing political influence in the Special Administrative Region.

Global companies that have opened up base in Hong Kong in recent decades as a gateway to the rest of Asia have not been isolated from the turmoil.

“Sales in Hong Kong…are down quite a bit as a result of protests and stores being shut and areas being blocked. It has a big impact,” Estée Lauder’s chief financial officer Tracey T. Travis said Tuesday at the Fortune Most Powerful Women International Summit in Toronto, speaking on a panel with Gilead Sciences CFO Robin Washington.

The cosmetics company behind brands including MAC and Tom Ford derives about 70% of sales from outside North America. While not its largest source of revenue, sales in China grew the fastest, jumping 42% to $2.5 billion for the year ending June 2019 compared to a year earlier.

“All of the discussions today around trade between the U.S. and China, [U.S. and Canada tensions, U.S. and Mexico tensions]—all of those things have an impact on us from a business standpoint,” Travis said.

That comes even as some have campaigned to boycott the company’s brands due to one of its sitting board members’ connections to U.S. president Donald Trump. According to Shannon Coulter, the mind behind #GrabYourWallet, Estée Lauder board member Ronald Lauder contributed $100,000 to the Trump Victory committee in 2017. She issued a call to boycott the company’s brands in August.

It’s unclear to what extent the protests and trade war tensions have affected the cosmetics maker’s bottom line, as it had not yet hit the company’s results in the quarter ending June.

“We are not seeing any slowdown in China at this point in time,” said Estée Lauder CEO Fabrizio Freda in mid-August, describing the company’s performance in the year ending June 2019. The company has leaned hard into Chinese markets, seeing potential in the size of the middle class, as well as the demographic’s penchant for buying skincare products younger. Estée Lauder boasts about 6,000 employees in the country.

In the earnings call, Freda added that the cosmetics company had previously lived through the much milder 2014 protests in Hong Kong that centered around much of the same tensions currently wracking the city. Those protests became a learning opportunity. Now, Estée Lauder is more focused on local Hong Kong consumers that are likely to spend even through the turmoil, rather than tourists that are likely to avoid the region due to the headlines.