Estée Lauder confirms jobs cuts as sales and profit decline

Following declines in profit and sales, the Estée Lauder Companies has expanded its profit recovery plan with a new restructuring programme, cutting approximately 3-5% of its global staff.

The owner of Bobbi Brown, Clinique and Jo Malone London has reported a 7% decrease in net sales to £3.4 billion ($4.28 billion) for the second quarter ending 31 December 2023.

This reflects expected challenges in Asia travel retail, as well as business disruptions in Israel and other parts of the Middle East.

Skincare sales dropped 10%, driven by declines at Estée Lauder, Clinique and Origins, partially offset by global growth from The Ordinary, La Mer and MAC Cosmetics.

Meanwhile, makeup sales were down 8%, with double-digit growth from Clinique more than offset by declines at MAC Cosmetics and Estée Lauder.

Haircare sales decreased 6%, while fragrance sales remained flat as increases from Le Labo and Jo Malone London were offset by a decline from Estée Lauder.

The company also saw gross profit decrease 8% to £2.4 billion ($3.1 billion), with gross margin down to 73%.

Looking ahead, the Estée Lauder Companies said it will continue to "strategically invest" in areas to support recovery, share gains and long-term profitable growth.

As part of this, the business is further expanding its profit recovery plan for fiscal years 2025 and 2026.

The restructuring programme focuses on "rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility".

It is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities.

In connection with the restructuring programme, the company estimates a net reduction of approximately 3-5% of its positions as of 30 June 2023. This reduction takes into account the elimination of some positions, as well as retraining and redeployment of certain employees in select areas.

Fabrizio Freda, President and CEO of Estée Lauder Companies, 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, realising higher levels of net pricing, and managing expenses with discipline.

"We are, encouragingly, at an inflection point. In the second half of FY24, 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."