Luxury cosmetics company, Estée Lauder, made headlines on Monday with the announcement of its expanded profit-recovery plan for fiscal 2025 and 2026. This plan includes a restructuring program that entails a reduction in headcount through layoffs, affecting approximately 3% to 5% of the company’s positions.
Upon full implementation, Estée Lauder expects to incur pretax restructuring and other charges ranging from $500 million to $700 million. These charges will primarily cover employee-related costs, contract terminations, asset write-offs, and various other expenses. However, the company anticipates annual gross benefits of $350 million to $500 million before taxes.
Thanks to this enhanced profit recovery plan, Estée Lauder is now projecting an increase in operating profit from a previous range of $800 million to $1 billion to a new range of $1.1 billion to $1.4 billion.
Investors responded positively to this news, driving Estée Lauder’s stock up by 14% to reach $153.16 per share. This represents the largest percentage increase since November 2011 when the stock experienced a significant surge following the release of the fiscal-first-quarter report. Notably, Estée Lauder’s stock outperformed the S&P 500, which recorded a 0.22% decline during Monday morning trading. Over the past year, the stock has declined by 49% due to the adverse impact of a slowdown in consumer demand in China.
Estée Lauder stands strong as it implements strategic measures to bolster its profitability and navigate through challenging market conditions. With its revised profit-recovery plan, the company is poised to drive growth and deliver value to its stakeholders.
Estée Lauder Lowers Earnings Outlook for Fiscal 2024
Overview
Estée Lauder, the parent company of renowned beauty brands Clinique and MAC, has announced a revision in its earnings-per-share outlook for fiscal 2024. The company now expects earnings per share in the range of $2.08 to $2.23, a decrease from the previous guidance of $2.17 to $2.42.
Financial Performance
In the fiscal second quarter, Estée Lauder reported earnings of 88 cents per share, surpassing analysts’ expectations of 54 cents per share. The company generated revenue of $4.28 billion, slightly higher than the forecasted revenue of $4.19 billion.
Sales Decline
Estée Lauder faced a decline in sales by 7.4% compared to the previous year. This decline can be attributed to ongoing challenges in Asia travel retail and a slowdown in prestige beauty in mainland China. Additionally, the business disruptions in Israel and other parts of the Middle East created a headwind for the company.
Progress and Optimism
CEO Fabrizio Freda expressed optimism regarding the company’s progress during the first half of the fiscal year. Estée Lauder successfully reduced inventory in the trade of Asia travel retail, improved working capital, achieved higher levels of net pricing, and effectively managed expenses. Freda stated that they are currently at an inflection point in their journey.
