The Estée Lauder Companies (ELC) reported a 6% drop in net sales for the second quarter of its staggered fiscal year 2025. The group also announced a net loss of USD 590 million during the quarter, due to restructuring costs and asset depreciation.
Job cuts
On his first earnings call as President and CEO, Stéphane de La Faverie unveiled a plan called “Beauty Reimagined” to restore sales growth, strengthen profitability, and position the company as the world’s most consumer-centric prestige beauty brand. Notably, the initiative will include 5,800 to 7,000 job cuts by the end of 2026.
“We are significantly transforming our operating model to be leaner, faster, and more agile, while taking decisive actions to expand consumer coverage, step-change innovation, and increase consumer-facing investments to better capture growth and drive profitability,” commented de La Faverie.
Without specifying the geographical areas or branches that will be affected by these job cuts, the group indicated that it would involve eliminating positions after retraining and redeployment of certain employees in select areas, to “reorganize and rightsize certain areas” and to “simplify and improve processes.” The group also intends to increase the outsourcing of select services and to evolve its go-to-market footprint and selling models.
The overall goal is to “remove complexity” and simplify how the company work.
“We lost our agility,” said de La Faverie during the earnings call on February 4. “We did not capitalize on the higher growth opportunities quickly enough (…), nor fuel new consumer acquisition aggressively enough.”
New approach to procurement
Another key element — seen as a “key pillar of savings” of the new strategic plan — is to implement a more competitive approach to procurement within ELC. The group intends to further consolidate spending and to re-evaluate key supplier relationships.
ELC also plans to further improve efficiencies within its supply chain network through a zero-waste approach, aiming to minimize excess inventory and product destruction.
Furthermore, the company also aims to outsource select services to “proven global partners”. ELC wants to dramatically transform its approach to innovation with expanded external partnerships across its R&D and Value Chain.
New organization and leadership changes
As part of this new strategic plan, Stéphane de La Faverie also announced a new organizational structure and Executive Team. Notably, the company is consolidating its regional organization into four geographic clusters: EMEA (Europe, Middle East, Africa); the Americas; mainland China; and Asia-Pacific (excluding China).
In addition, the group has reorganized its brand portfolio into category clusters, including Skin Care, Makeup, Lifestyle Fragrance, Luxury Fragrance, Hair Care, and more.
Over-reliance on the Chinese market
The Estée Lauder Companies has been suffering for several consecutive quarters from the drop in consumption in Asia and, in particular, in China.
“Given challenges in the Company’s Asia travel retail business, subdued consumer sentiment in China and Korea, and evolving global geopolitical uncertainty, the Company anticipates continued volatility and low visibility in the near term,” ELC said in a media statement.
Therefore, the top executive team solely provided a fiscal 2025 third quarter (January-March) outlook, expecting sales to decline by 12% to 15% year-on-year.
