Estee Lauder to reduce employees by up to 5% amidst decline in sales

Organic sales were down 8% YoY due to challenges in Asia travel retail, amongst others.

Estee Lauder Companies expanded its Profit Recovery Plan to include the reduction of 3% to 5% of its employees as the company reported a decline in sales in the second quarter of financial year 2024.

In a statement, the company said the restructuring programme, which will begin in the third quarter, will focus on the reorganisation and rightsizing in certain areas, and simplifying and accelerating processes. 

The implementation is expected to cost the company between $500m to $700m before taxes, but the programme is expected to yield annual gross benefits of between $350m and $500m. As such, the Profit Recovery Plan will deliver an operating profit of $1.1b to $1.4b.

During the second quarter, which ended in December 2023, the company reported a 7% year-on-year (YoY) decline in net sales to $4.28b, with organic net sales falling by 8% due to the challenges in Asia travel retail and “softness in overall prestige beauty in mainland China.”

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The company’s net earnings were at $313m, lower than the $394m recorded in the same period last year.

“While mainland China and Asia travel retail declined, our retail sales trended ahead of organic sales, and these businesses are poised to return to organic sales growth in the second half,” said Estee Lauder Companies President and CEO Fabrizio Freda.

 “We made progress in the first half across several strategic priorities, including reducing inventory in the trade of Asia travel retail, improving working capital, realizing higher levels of net pricing, and managing expenses with discipline. We are, encouragingly, at an inflection point. In the second half of fiscal 2024, we are positioned to return to strong organic sales growth and expand our profitability from the first half,” Freda added.