By Anuja Bharat Mistry
(Reuters) -Estee Lauder on Tuesday expanded a restructuring plan under its new CEO that would now include up to 7,000 job cuts, while also forecasting third-quarter profit below estimates, blaming persistent demand weakness especially in Asia.
Shares of the company fell about 10% in early trading as the cosmetics giant cited challenges in its Asia travel retail business, particularly at airports and travel destinations in Korea and China.
“For the third quarter, we expect overall soft retail trends to persist in Asia travel retail, significantly pressuring our organic net sales,” new CEO Stephane de La Faverie, who took over at the start of the year, said in a statement on Tuesday.
Estee Lauder has faced challenges in boosting sales growth in China, which accounted for roughly a quarter of the company’s sales in 2024, due to high unemployment, a struggling economy, and an increasing preference for local brands.
In October, the parent company of Clinique and MAC lipstick withdrew its annual forecasts as part of a planned turnaround after facing several quarters of declining sales.
De La Faverie said on Tuesday that the turnaround strategy will involve new luxury price tiers and increasing investments in consumer-facing initiatives, and a simplified organizational structure.
“The company still has a long way to go in proving that it can innovate and adapt sufficiently to meet the needs of younger beauty consumers, but the announcement of a new strategic plan is a step in the right direction,” said Sky Canaves, analyst with eMarketer.
The Manhattan-based company said the new plan is also aimed at “managing external volatility, such as potential tariff increases globally.”
The comments come in the background of China imposing targeted tariffs on American imports on Tuesday in response to the sweeping duties on Chinese imports imposed by U.S. President Donald Trump.
The company estimates a net reduction of 5,800 to 7,000 jobs by the end of fiscal 2026. The newly announced layoffs are an expansion of its plans laid out last February when the company said it would reduce up to 5% of its global workforce.
As of June 30, 2024, the New York-based firm had about 62,000 employees worldwide.
Estee Lauder expects to take restructuring and other charges of between $1.2 billion and $1.6 billion.
Estee Lauder expects third-quarter adjusted profit between 24 cents and 34 cents, below analysts’ estimates of 63 cents per share, according to data compiled by LSEG.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Tasim Zahid)
