Estée Lauder plans to eliminate 5,800 to 7,000 jobs by 2026 as part of a strategy to address declining global sales and restructuring challenges. The company’s shares fell significantly following the announcement, with a 6% drop in sales to $4 billion reported in the last fiscal quarter, leading to a net loss of $590 million. In response, Estée Lauder launched the “Beauty Reimagined” initiative to improve growth and profitability amid ongoing market volatility, particularly in Asia.
Estée Lauder Announces Significant Job Cuts to Navigate Market Challenges
On February 4, the renowned American cosmetics brand Estée Lauder revealed plans to cut between 5,800 and 7,000 net jobs by the conclusion of 2026. This decision is part of a strategic initiative aimed at revitalizing the company, which has recently faced another quarter marked by declining global sales. Following this announcement, Estée Lauder’s shares plummeted by 16.74% on the New York Stock Exchange, with the decline exceeding 19% just an hour later.
Strategic Adjustments and Future Outlook
While Estée Lauder did not specify which regions or sectors would be impacted by these job reductions, the company indicated that the cuts would follow efforts to retrain and redeploy employees to streamline operations and adapt certain sectors. The strategy also includes an increase in the outsourcing of specific services and a shift in sales methodologies.
The cosmetics giant has been grappling with a persistent decline in consumer spending in Asia, particularly within the Chinese market. In its second fiscal quarter, which wrapped up in December, sales dropped by 6% to $4 billion. This setback was compounded by a net loss of $590 million, attributed to restructuring costs and asset write-downs, diverging from analysts’ expectations of a net profit of $118 million.
Excluding unusual items, Estée Lauder reported a net profit of 62 cents per share, a decrease from 88 cents during the same period the previous year. The market had anticipated earnings of 32 cents per share. The company’s stock further dipped by 7.22% in electronic trading before the market opened.
In response to current challenges, Estée Lauder introduced a strategic initiative called “Beauty Reimagined,” intended to restore sustainable sales growth and enhance profitability. Analysts from TD Cowen noted, “Estée Lauder is facing a multitude of short-term challenges, including weak consumer demand in Asia, which could continue to pressure sales in the latter half of the year.”
Furthermore, the company acknowledged ongoing volatility and uncertainty in the global market, particularly in travel-related retail in Asia, influenced by fluctuating consumer sentiment in regions like China and Korea. As a result, management has provided a cautious outlook for its third fiscal quarter (January-March), forecasting a year-on-year sales decline of 12% to 15%, with expected pro forma net earnings per share ranging from 20 to 30 cents, a significant drop from 97 cents a year earlier.