The Estée Lauder Cos. Announces More Job Cuts
The Estée Lauder Cos. is more than doubling the number of employees it plans to lay off as part of its profit recovery plan.
As the company’s sales fell 6 percent in the second quarter, the owner of namesake Estée Lauder, Jo Malone, Tom Ford, Clinique and more, announced plans to ramp up its restructuring program, and will eliminate between 5,800 to 7,000 positions. This includes the 3,000 already announced.
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Actions under the plan are expected to be executed in fiscal 2025 and 2026 and completed in fiscal 2027.
Net sales decreased 6 percent to $4 billion in the second quarter covering the final three months of 2024, a touch above analysts’ estimates, while adjusted diluted net earnings per common share decreased to 62 cents.
Skin care net sales decreased 12 percent, primarily due to impacts from the overall challenging retail environments in Asia/Pacific and the company’s Asia travel retail business, including ongoing pressure from subdued sentiment from Chinese consumers, which drove declines from Estée Lauder and La Mer.
Makeup net sales decreased 1 percent on the back of declines from Tom Ford, while hair care net sales dropped 8 percent.
On a brighter note, fragrance net sales increased 2 percent, led by Le Labo and its strong double-digit growth across each geographic region, partially offset by the decline from Estée Lauder, due in part to reduced shipments of holiday sets.
On a geographical basis, sales were flat in North America, decreased 6 percent in Europe, Middle East and Africa, and fell 11 percent in Asia/Pacific.
For the third quarter, Lauder is forecasting as much as a 10 percent decline in organic sales. Due to continued volatility and low visibility in the near term on the back of challenges in its Asia travel retail business, subdued consumer sentiment in China and Korea, and evolving global geopolitical uncertainty, the company held back from providing new full-year guidance, having scrapped its previous outlook.
All this sent the share price down more than 13 percent to $71.88.
Releasing his first set of earnings since taking the reins as president and chief executive officer on Jan. 1, Stéphane de La Faverie, said: “While we are not satisfied with our third-quarter outlook, it primarily reflects weak retail sales trends in our Asia travel-retail business, which deteriorated in our second quarter driven by Korea. While our retail sales trends in Hainan were still negative in the second quarter, they improved sequentially, fueled by our retail activations. For the third quarter, we expect overall soft retail trends to persist in Asia travel retail, significantly pressuring our organic net sales despite the improvement we made with in-trade inventory levels in the first half of fiscal 2025, which we intend to maintain around current levels.”
At the same time, he unveiled the company’s new strategy: Beauty Reimagined. De La Faverie described it as “a bold strategic vision to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years as we aim to become the best consumer-centric prestige beauty company.”
It was also reported last week that the company had hired consultancy Evercore to assess its current brand portfolio, with continued speculation that it could look at divestments.
When asked about the current portfolio during the earnings call with analysts, de La Faverie said: “We are conducting on a regular basis a thorough analysis of where our brands needs to deploy and where their strength is. We undertake always, every year, a full portfolio review of our brands and we do it with the board and we do it also with every single one of our brands.”
On any near M&A opportunities in the short term, he stressed that deleveraging the balance sheet was the top priority.
Mark Astrachan, an analyst at Stifle Corp., said: “Overall we think the result, guidance, and commentary suggests the company has considerable work to do to improve performance, including resuming growth in-line with the global beauty category.”
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