Estée Lauder’s Job Cuts and Strategic Restructuring Amid Sales Slump

Overview of the Situation

Estée Lauder Companies Inc., a global leader in the beauty and cosmetics industry, has announced a significant restructuring plan that includes cutting up to 7,000 jobs. This move comes in response to a decline in sales and the need to adapt to challenging market conditions.

Financial Performance

In the second quarter of fiscal 2025, Estée Lauder reported several key financial metrics that highlight the challenges the company is facing:

Net Sales: The company reported net sales of $4.62 billion, a 10% decrease compared to the same period in the prior year.
Earnings Per Share (EPS): Adjusted diluted EPS was $1.54, down from $2.11 in the same quarter last year.

Job Cuts and Workforce Reduction

The job cuts are a central part of Estée Lauder’s expanded restructuring plan:

Number of Jobs Affected: The company plans to eliminate between 5,800 to 7,000 roles by fiscal 2026, which represents approximately 11% of its global workforce of around 62,000 employees as of June 30, 2024.
Reasons for Job Cuts: The decision is driven by the need to become “leaner, faster, and more agile” in response to declining sales and external market challenges, including economic slowdowns in China and Korea, and global geopolitical uncertainty.

Strategic Initiatives and Restructuring Plan

Estée Lauder is implementing several strategic initiatives as part of its “Beauty Reimagined” vision:

Cost Management: The company is focusing on cost-saving measures to mitigate the impact of reduced sales. This includes further consolidating spending, re-evaluating key supplier relationships, minimizing excess inventory, and outsourcing select services to global partners.
Digital Engagement: Enhanced digital marketing efforts are aimed at strengthening consumer engagement and driving online sales.
Profit Recovery and Growth Plan: The plan aims to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years. This involves expanding consumer coverage, step-change innovation, and increasing consumer-facing investments.

Financial Implications of Restructuring

The restructuring plan comes with significant financial implications:

Restructuring Charges: Estée Lauder expects to incur restructuring and other charges totaling between $1.2 billion and $1.6 billion before taxes.
Projected Savings: The company anticipates annual pre-tax gross savings in the range of $800 million to $1 billion, which will help restore operating margins and fuel reinvestment in consumer-facing areas.

Market Reaction

The announcement of job cuts and the revised financial outlook had a significant impact on the company’s stock:

Stock Performance: Shares of Estée Lauder fell by over 17% on the day of the announcement, marking the company’s biggest one-day drop in nearly two years.

CEO’s Statement

Stéphane de La Faverie, the newly appointed CEO of Estée Lauder, emphasized the company’s commitment to transformation:

“Beauty Reimagined” Vision: De La Faverie stated that the new strategic vision is aimed at restoring sustainable sales growth and achieving stronger profitability. He expressed confidence that the plan will position Estée Lauder to lead the prestige beauty industry once again.

For more detailed information on Estée Lauder’s financial performance and strategic initiatives, you can refer to the company’s official press release on their website.