Dive Brief:
- Estée Lauder Companies said Monday that it plans to cut 3% to 5% of its positions as part of a restructuring program that will begin during the company’s 2024 fiscal third quarter. This reduction includes the elimination of some positions as well as retraining and redeployment of certain employees. The company said it employed about 62,000 people as of June 2023.
- The restructuring program, including the layoffs, will cost between $500 million and $700 million from employee-related costs, asset write-offs and other charges. The program is expected to produce gross profits of between $350 million and $500 million. Added to Estée Lauder’s broader profit recovery plan, the business now expects to drive an incremental operating profit of $1.1 billion to $1.4 billion, up from $800 million to $1 billion.
- News of the restructuring plan came as Estée Lauder reported earnings, with net sales during the three months ended Dec. 31 falling 7% to $4.28 billion, down from $4.62 billion a year earlier. Net earnings for the quarter were $313 million, down 21% from $394 million a year ago.
Dive Insight:
Estée Lauder is building upon its profit recovery strategy with the rollout of a restructuring program, aimed at rightsizing its business and simplifying its processes. The plan is expected to be “substantially completed” by the end of fiscal 2026.
CEO Fabrizio Freda said during Monday’s earnings call that Estée Lauder hired consulting firm Alvarez & Marsal to provide advisory services on its restructuring program.
“While this is a difficult decision, we believe this now larger plan will better position the company to restore stronger and more sustainable profitability, while also supporting sales growth acceleration and increasing agility and speed to market,” Freda said.
The company expects the restructuring plan to yield faster product innovation and a more agile organization, allowing it to better capitalize on consumer trends, Freda said. Estée Lauder said it plans to continue investments in innovation, advertising, emerging markets and other areas. The company’s broader profit recovery plan is focused on driving sustainable profitability and accelerating sales growth by reducing overhead expenses and improving gross margin.
In the second quarter, net sales across Estée Lauder’s skin care segment declined 10% due in part to ongoing softness in China and efforts to reset retailer inventory levels. But those declines were partially offset by double-digit net sales growth from The Ordinary, globally and across all geographic regions. Makeup net sales fell 8% for the quarter and hair care net sales declined 6%. However, fragrance net sales were flat as increases from luxury brands Le Labo and Jo Malone London were offset by a decline from the company’s namesake brand.
Estée Lauder on Monday revised its full-year guidance for the rest of its fiscal year. The company now expects net sales in the range of down 1% to up 1%. It previously forecast net sales would be down 2% to up 1%.
