A painful treatment for workers, but appreciated by the market. The beauty giant Estée Lauder will cut 3 to 5 percent of its workforce. The announcement came on Monday from the company which explained that the layoffs are part of a broader restructuring plan to 2026 which will serve to support profit margins pending the resumption of its activities in China which is taking longer than expected.
The Estée Lauder quarterly
In the fourth quarter of 2023, Estée Lauder reported a net profit of 313 million dollars, a sharp drop compared to the 394 million of the previous year. Earnings per share fell to $0,87 from $1,09 a year earlier. Adjusted EPS it instead decreased to 0,88 dollars.
Le sales for the quarter they fell by 7% to 4,28 billion dollars, while organic ones fell by 8%, pushed downwards by the performance of the Asian and Chinese markets. The decrease was also due to business disruptions in Israel and other parts of the Middle East, the company said.
However, these pressures were partially offset by organic sales growth in several markets in Asia/Pacific and Europe, the Middle East and Africa, as well as in almost all Latin American markets.
“For the second quarter of fiscal 2024, we delivered on our organic sales outlook and exceeded profitability expectations,” he said Fabrizio Freda, president and CEO. Brands The Ordinary and La Mer in skincare, Clinique in makeup and Le Labo and Jo Malone London in Fragrance performed well. Many developed and emerging markets around the world have continued to grow organically and retail. While retail in mainland China and Asia declined, our retail sales outperformed organic sales, and these businesses are expected to return to organic sales growth in the second half of the financial year.”
Estée Lauder's restructuring plan: a cut of up to 5% of the workforce
Estée Lauder counted approx 62.000 employees worldwide, as of June 2023. Of these, 71% were full-time employees, 16% temporary and 13% part-time. As part of the presentation of its quarterly results, the company announced the launch of a restructuring that includes a job cuts of between 3 and 5 percent.
“Today we announced that we are further expanding our earnings recovery plan, benefiting fiscal years 2025 and 2026, to include a restructuring program. We believe this now expanded plan will better position the company to restore stronger and more sustainable profitability, while supporting the acceleration of sales growth and increasing agility and speed to market,” commented l 'To.
Stock market reaction
Immediately after the announcement, the Estee Lauder stock took flight on Wall Street, with the stock gaining over 20% of its value in Monday's session and then closing trading with an increase of 12% to $150,28 per share. A strong increase that demonstrates investors' confidence in the restructuring plan announced by the company. However, the stock remains far from the 250 dollars per share of a year ago, after a year of great difficulty due to the sales crisis in China. Today, in the pre-market, the shares lost 0,15%, suggesting a day of small profit-taking after the rally of the day before.
