Estée Lauder, the global cosmetics leader behind brands like MAC, Smashbox, and Jo Malone, is to cut 7,000 jobs to recover from weak sales and challenging market conditions.
The company announced plans to cut the roles and issued a stark sales forecast, signaling a tough start to 2025.
Job Cuts and Financial Losses
In its latest financial update, Estée Lauder revealed it had swung to a $590 million loss during the last quarter of 2024.
This loss follows a 6% drop in revenue, signaling deeper struggles as demand for its products continues to weaken. The company expects sales to fall by 10% to 12% in the quarter ending March 31, 2025.
- Job cuts: Up to 7,000 employees will lose their jobs.
- Expected savings: The restructuring is expected to save the company $800 million to $1 billion annually before taxes.
- Restructuring costs: The company now projects $1.2 billion to $1.6 billion in pretax charges for the overhaul—double its previous estimate.
This wave of layoffs follows a smaller round of job cuts in 2023, where Estée Lauder had initially planned to eliminate 1,800 to 3,000 positions.
Restructuring Under New Leadership
Stéphane de La Faverie, who became CEO earlier this year, is leading the company’s turnaround plan. Despite his long tenure at Estée Lauder, he acknowledged the company’s recent missteps in a Tuesday call with analysts.
He said:
“We lost our agility.”
He cited the company’s failure to capitalize on growth opportunities quickly enough.
His recovery plan includes significant cuts to jobs, an increased focus on advertising to attract new customers, and changes to its organizational structure to improve efficiency.
However, some analysts remain skeptical about the impact of these changes.
Lauren R. Lieberman from Barclays told the Wall Street Journal:
“We think there is a very long road ahead before the company can return to even market-level organic sales growth and attractive operating margins.”
She added the changes in organization structure “strike us as not really resolving much in terms of clear lines of accountability and ownership.
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Struggles in Key Markets
Estée Lauder’s struggles are particularly evident in Asia, where the company has faced declining demand from shoppers in China and Korea.
This slowdown has affected its overall performance, with many consumers turning away from luxury products due to economic uncertainty.
The company’s previous efforts to recover, including smaller job cuts and cost-saving measures, have not been enough to turn the tide.
With 62,000 employees as of June 2024, Estée Lauder is hoping that these more drastic measures will help restore profitability.
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What’s Next for Estée Lauder?
Despite the challenges ahead, de La Faverie remains focused on revitalizing Estée Lauder’s business.
The company’s ability to adapt to changing market conditions and effectively leverage its advertising spend will be critical in the coming months.
For now, Estée Lauder’s future remains uncertain, but the company’s aggressive restructuring plan signals its commitment to regaining its footing in a competitive industry.
