Estée Lauder In Difficulty: Massive Restructuring And Financial Losses

American cosmetics giant Estée Lauder has just announced rather mediocre results for the second quarter of its financial year, which ended at the end of December. Sales fell by 6% to $4 billion. While FactSet analysts had forecast a net profit of 118 million, the company announced a net loss of 590 million. This situation is essentially due to the company's restructuring charges, which the company announced at the beginning of 2024: it expects to incur restructuring costs of between $1.2 and $1.6 billion.

Weakened by difficulties on the Chinese market, the company was forced to announce on Tuesday that it would be cutting between 5,800 and 7,000 jobs by the end of next year. This restructuring is intended to restore momentum to the company's growth after mixed results in recent quarters. In a press release issued on Tuesday, Estée Lauder justified these decisions by the need to “simplify and improve processes” as well as to “reorganize and right-size certain sectors”.

Among the Group's objectives is also the intention to outsource certain services. This strategy would run counter to the current trend among large groups, most of which are seeking to control the entire production process by internalizing services and production lines.

On Wall Street, Estée Lauder shares fell by 7.22% before the stock market opened. In the short term, despite the measures put in place to boost sales, financial forecasts remain less than optimistic. The company's press release states: “In an uncertain global geopolitical environment, the Group anticipates continued volatility and low visibility in the short term”. Sales are therefore expected to fall by a further 12% to 15% over the next year.

Thanks to its restructuring plan and job cuts, the company hopes to return to growth and double-digit operating margins in the years ahead. The cautious forecasts are also linked to fears of an increase in customs taxes worldwide, following Donald Trump's recent announcements on the subject. Management changes are also expected, following the appointment of Stéphane de La Faverie in January as President and CEO.