MW Estée Lauder to cut up to 7,000 job cuts as it swings to loss, sending stock lower

By Ciara Linnane

Estée Lauder Cos. Inc.'s stock fell 6.4% early Tuesday, after the beauty and cosmetics company swung to a fiscal second-quarter loss and announced an expansion of its current restructuring aimed at restoring sustainable sales growth.

The company now expects to cut 5,800 to 7,000 jobs and to book charges of $1.2 billion to $1.6 billion before tax. That's expected to drive benefits ranging from $0.8 billion to $1.0 billion.

"While we recognize there is much work to do, we are confident that Beauty Reimagined is the way to realize our ambition," Chief Executive Stéphane de La Faverie saidin prepared remarks

"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."

The company, whose brands including M--A--C, Bobbi Brown Cosmetics, Jo Malone London, Tom Ford and Aveda, will take a more competitive approach to procurement by re-evaluating key supplier relationships. It plans to improve efficiencies in its supply chain through a new zero-waste approach. And it will outsource certain services to proven global partners.

New York-based Estée Lauder $(EL)$ had a per-share loss of $1.64 for the quarter, after earnings of 87 cents a share in the year-earlier period. Adjusted for one-time items, it had EPS of 62 cents, almost double the 32-cent FactSet consensus.

Sales fell 6% to $4.004 billion, also ahead of the $3.977 billion FactSet consensus.

The company is now expecting third-quarter sales to fall 12% to 10% and to be down 10% to 8% excluding the impact of currency and acquisitions.

It expects adjusted EPS of 20 cents to 30 cents, while FactSet is expecting 63 cents.

"While we are not satisfied with our third quarter outlook, it primarily reflects weak retail sales trends in our Asia travel retail business, which deteriorated in our second quarter driven by Korea," said De La Faverie.

"While our retail sales trends in Hainan were still negative in the second quarter, they improved sequentially, fueled by our retail activations."

The company is expecting weak retail trends to continue in Asia in the quarter, pressuring organic net sales. The company is planning to increase consumer-facing investments around the world.

See also: Estée Lauder's stock heads for record selloff after profit warning, dividend cut

The stock has fallen 38% in the last 12 months, while the S&P 500 SPXhas gained 20.9%.

-Ciara Linnane

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February 04, 2025 06:43 ET (11:43 GMT)

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