Dive Brief:
- Esteé Lauder Companies is slashing between 5,800 to 7,000 jobs as part of a more extensive restructuring effort, announced on Tuesday.
- This move represents up to 11% of its global workforce, with some positions being eliminated after retraining and redeployment of employees. The restructuring will cost the company between $1.2 billion and $1.6 billion, including employee-related expenses, contract terminations, and asset write-offs.
- The company's net sales for Q4 ended Dec. 31 dropped by 6% year over year, reaching $4 billion from $4.28 billion. Esteé Lauder posted a net loss of $590 million for the quarter, compared to $324 million in net earnings the previous year.
Dive Insight:
Global workforce reduction of up to 7,000 employees anticipated by Estée Lauder worldwide.
Tuesday's job cut announcements mark a significant expansion of the plans Esteé Lauder unveiled in February, which proposed cutting the global workforce by up to 5% or 3,000 people. Now, changes have extended to the C-suite, just a month after new CEO Stéphane de La Faverie took over the position.
Esteé Lauder is seeking external candidates for the positions of Chief Digital Marketing Officer and Chief Technology, Data and Analytics Officer, as stated on Tuesday. The changes also include a consolidation of responsibilities and the creation of new positions. Once fully implemented, Esteé Lauder says the restructuring program will deliver annual pre-tax gross benefits of $800 million to $1 billion. A portion of these benefits will be reinvested into consumer-facing activities.
Esteé Lauder introduced Beauty Reimagined on Tuesday, a turnaround plan designed to restore sustained sales growth and achieve a double-digit adjusted operating margin in the coming years.
Analysts at TD Cowen, led by Oliver Chen, suggest that Esteé Lauder encounters numerous challenges to work through in the near term, including factors outside management's control such as weak consumer demand in Asia. As a result, the analysts anticipate continued sales pressure in the second half of the year.
To facilitate the turnaround, Esteé Lauder intends to ramp up consumer-facing investments like advertising, simplify and quicken processes, outsource certain services, and introduce innovations faster in the market. The company plans to implement a more competitive approach to procurement, improve demand forecasting, and adopt a zero-waste approach to minimize excess inventory and product destruction.
Despite a negative 14.5% operating margin for the most recent quarter and a near-complete shift from operating income of $574 million last year to an operating loss of $580 million this year, the company highlighted some positive aspects. Esteé Lauder reported share gains in prestige beauty in the U.S., China, and Japan. It also ranked highly during Black Friday and Cyber Monday TikTok campaigns in the U.S.
"We're confident that Beauty Reimagined will enable us to fulfill our ambition," de Faverie stated in a press release. "We are significantly transforming our operational 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 seize growth opportunities and drive profitability."
Citing issues like global uncertainty and troubles within the company's Asia business segments, Esteé Lauder decided to withhold a full fiscal year outlook. Its outlook for the Q1 ending March 31 is a net sales decline of 10% to 12%.
Enrichment Data:
Overall:
The Estée Lauder Companies (ELC) is undertaking a more extensive restructuring program with the aim of improving operational efficiency, restoring margins by 2027, and driving sustainable sales growth. Let's delve into the details, goals, and potential impacts on the job market:
Details of the Restructuring Program:
- The restructuring plan focuses on reorganizing and rightsizing certain areas, streamlining processes, outsourcing select services, and evolving go-to-market footprints and selling models.
- The program involves approximately $1.6 billion in costs and a workforce reduction of 5,800 to 7,000 roles. As of April 2025, $623 million in initiatives and more than 2,600 job cuts have been approved.
Goals of the Restructuring:
- The objective is to boost operational efficiency, restore strong margins, and drive sustainable sales growth by laying the groundwork for future development and profitability.
Impact on the Job Market:
- The restructuring will significantly impact the job market, with thousands of positions at risk. This may lead to tighter labor markets in related sectors as affected employees search for new opportunities.
- The changes in the company may influence suppliers and other stakeholders by tightening cost controls and potentially altering procurement volumes, focusing on efficiencies across ELC's supply chain.
- The Estée Lauder Companies' restructuring program, aimed at improving operational efficiency and driving sustainable growth, involves a reduction of between 5,800 to 7,000 jobs, impacting the job market significantly.
- As part of the restructuring efforts, Esteé Lauder is seeking external candidates for key positions such as Chief Digital Marketing Officer and Chief Technology, Data, and Analytics Officer, demonstrating a shift towards leveraging technology and AI in their business strategies.
- The company's restructuring program, expected to cost approximately $1.6 billion, also includes outsourcing certain services and a more competitive approach to procurement, which may influence the business landscape and financial markets, as well as supply chain dynamics.
