Estée Lauder announced plans to cut jobs and close stores as part of a multiyear restructuring plan after the coronavirus pandemic threw the cosmetics industry into disarray.
The beauty giant plans to reduce its workforce by up to 2,000 jobs worldwide, amounting to 3% of its global workforce, and boost its digital operations after pandemic lockdowns hit demand for makeup. Most of the cuts will be store employees and support workers, the company said Thursday.
As part of the two-year initiative, management will close 10% to 15% of Estee Lauder’s free-standing stores and eliminate some department-store beauty counters as consumers shift to more online purchases. Estée Lauder said it expects to take restructuring and other pretax charges of between $400m and $500 million.
“We are better aligning our brick-and-mortar footprint to improve productivity and invest for growth,” CEO Fabrizio Freda said in a statement. He said the company enters its new fiscal year with “cautious optimism”.
The shares fell by as much as 8.6% Thursday in New York.
The company has been preserving cash to manage the business during the pandemic. Measures including employee furloughs, temporary salary reductions and cuts to capital investments have led to nearly $1.1bn in savings, the company said.
Estée Lauder’s caution reflects the severity of the beauty industry’s uphill climb as it recovers from pandemic-related sales declines. Overall, cosmetics sellers have fared better than other non-essential retailers, such apparel and fashion accessories, because consumers have retained interest in skincare products like eye creams and moisturisers, even if they’re not buying clothing.
In the fourth quarter that ended June 30, net sales fell 32% to $2.43bn. The few bright spots, including a bounceback in the Asia-Pacific region as well as double-digit sales growth in the skincare business, was not enough to offset big declines in makeup and fragrance.
The company’s forecast for adjusted first-quarter earnings of 80c to 85c a share fell well short of analysts’ estimate of $1.22 a share. Estée Lauder said net sales in the current period will fall by 12% to 13%.
Bloomberg
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