Amid Declining Sales, the Beauty Conglomerate Readjusts Profit Outlook and Plans to Cut 3 to 5% of its Workforce
The Estée Lauder Cos. has unveiled a restructuring plan that includes workforce reductions as part of its ongoing efforts to navigate challenges.
The company anticipates a net reduction of approximately 3 to 5 percent of its positions as of June 30th. This figure encompasses both job eliminations and the retraining and redeployment of specific employees in designated areas. The primary focus of the restructuring program revolves around the reorganization and right-sizing of certain segments within the company, coupled with the streamlining and acceleration of various processes.
Estée Lauder aims to generate incremental operating profit through the initiatives outlined in the Profit Recovery Plan, targeting a range of $1.1 billion to $1.4 billion, inclusive of net benefits arising from the restructuring program.
In its second quarter, which concluded on December 31st, net sales amounted to $4.28 billion, reflecting a 7 percent decline from the previous year’s $4.62 billion. Organic net sales witnessed an 8 percent decrease, influenced by anticipated challenges in Asia travel retail and persistent softness in overall prestige beauty in mainland China.
Specifically, skin care net sales experienced a 10 percent decline, primarily attributable to reduced business in the Asia travel retail sector due to ongoing actions by the company and its retailers to recalibrate inventory levels. Net sales from Estée Lauder, Clinique, and Origins also registered declines.
Net earnings for the quarter totaled $313 million, a decrease from the $394 million reported in the same period of the prior year. Adjusted diluted net earnings per common share declined to 88 cents. The restructuring plan is part of Estée Lauder’s broader strategy to navigate current market challenges and optimize its operational efficiency.
Fabrizio Freda, president and chief executive officer, said, “We made progress in the first half across several strategic priorities, including reducing inventory in the trade of Asia travel retail, improving working capital, realizing higher levels of net pricing, and managing expenses with discipline. We are, encouragingly, at an inflection point. In the second half of fiscal 2024, we are positioned to return to strong organic sales growth and expand our profitability from the first half. Moreover, today we have announced that we are further expanding our Profit Recovery Plan, which benefits fiscal years 2025 and 2026, to include a restructuring program. 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.”
