Estée Lauder expands restructuring plan with up to 7,000 job cuts

Estée Lauder Companies Inc., a dominant player in the prestige beauty industry, has announced a major expansion of its ongoing restructuring initiative, signaling a shift in strategy to restore sales growth strategy and improve profitability. The company now expects to cut between 5,800 and 7,000 positions, a significantly higher number than previously estimated.

The decision comes as Estée Lauder grapples with declining revenue, sluggish demand in key markets, and mounting financial pressures. The restructuring, which was initially expected to cost between $500 million and $700 million, has now been revised to $1.2 billion to $1.6 billion in pretax charges. These costs cover employee-related expenses, contract terminations, and asset write-offs.

The announcement, made alongside the company’s latest earnings report, sent Estée Lauder’s stock tumbling 7.6% in premarket trading, reflecting investor concerns about the restructuring plan impact and the company’s ability to navigate a challenging retail landscape.

What Is Estée Lauder’s “Beauty Reimagined” Strategy?

In response to declining performance, Estée Lauder has introduced a new strategic initiative called “Beauty Reimagined.” This initiative aims to reposition the company for sustainable growth by focusing on consumer engagement, innovation, and a leaner operational structure.

Chief Executive Officer Stéphane de La Faverie emphasized that the company is undergoing a significant transformation to become “leaner, faster, and more agile.” The plan prioritizes expanding consumer coverage, ramping up investment in advertising, accelerating product innovation, and overhauling supply chain efficiencies.

As part of this transformation, the company is also revising its procurement and supplier relationships, optimizing its global retail footprint, and streamlining internal operations to reduce complexity. The sales growth strategy includes increased investment in high-performing brands and categories to capture new market opportunities.

How Did Estée Lauder Perform in the Latest Quarter?

Despite efforts to stabilize operations, Estée Lauder’s financial results for the fiscal second quarter ending December 31, 2024, highlight ongoing struggles. The company reported a 6% drop in revenue, with net sales falling to $4.0 billion, down from $4.28 billion in the same period a year ago.

Operating margin turned negative, falling from 13.4% in Q2 2024 to -14.5%, driven largely by impairment charges tied to Tom Ford and Too Faced. Adjusted operating margin, which excludes one-time charges, declined from 13.5% to 11.5%.

Earnings per share (EPS) took a sharp hit, with the company reporting a net loss of $1.64 per share, compared to a profit of $0.87 per share in the previous year. Adjusted EPS, which strips out non-cash charges, declined 29% to $0.62 per share.

The disappointing results are attributed to weak consumer demand, particularly in the Asia-Pacific region, and restructuring plan impact costs weighing on the bottom line.

Which Markets and Product Categories Are Facing Challenges?

The prestige beauty industry has faced shifting consumer preferences and economic headwinds, and Estée Lauder’s core markets are no exception.

Asia-Pacific continues to be the company’s weakest region, with sales declining 11% due to subdued consumer sentiment in China, Korea, and Hong Kong. The company’s once-lucrative travel retail business is under pressure from decreased duty-free spending by Chinese tourists and regulatory changes in South Korea.

Skincare, Estée Lauder’s largest category, reported a 12% decline in sales, with brands like Estée Lauder and La Mer struggling to maintain market share. In the makeup segment, sales slipped 1%, with underperformance at Tom Ford and MAC offset by a high-single-digit increase at Clinique, driven by its expansion into Amazon’s U.S. Premium Beauty Store.

Fragrance was the only category to show growth, increasing 2%, with Le Labo leading the gains, while Estée Lauder’s namesake fragrance line weakened. Haircare sales dropped 8%, primarily due to Aveda‘s declining performance in salon distribution channels.

How Will the Expanded Restructuring Impact Estée Lauder?

The expanded restructuring plan impact is expected to generate between $800 million and $1 billion in annual pre-tax savings. The company plans to reinvest these funds into consumer acquisition strategies, digital marketing, and innovation to drive long-term growth.

The workforce reductions, which account for 5,800 to 7,000 job cuts, will be executed through layoffs, role eliminations, and outsourcing of select services. The company is also reorganizing internal teams to streamline operations and enhance efficiency.

Supply chain adjustments will focus on zero-waste initiatives, improved demand forecasting, and reduced product destruction, ensuring a more sustainable approach to inventory management.

The restructuring program, expected to be fully implemented by fiscal 2027, is designed to address cost inefficiencies while positioning the company for renewed profitability.

What Is Estée Lauder’s Outlook for 2025?

Looking ahead, Estée Lauder remains cautious about near-term performance, particularly in its travel retail and Asia-Pacific markets. The company expects a double-digit decline in global travel retail sales in the third quarter, with ongoing subdued consumer sentiment in China and Korea impacting demand.

CEO de La Faverie acknowledged the difficult road ahead, stating that while the company is making progress, “there is still much work to do.” He emphasized that increased consumer-facing investments in Q3 should help counteract some of the negative sales trends, but a full recovery will take time.

Estée Lauder’s ability to regain its prestige beauty industry dominance will depend on the successful execution of its restructuring plan, the effectiveness of its marketing and innovation strategies, and broader macroeconomic trends shaping the global beauty market.

Can Estée Lauder Recover from Its Sales Decline?

Estée Lauder’s aggressive cost-cutting measures and restructuring initiatives underscore the challenges facing traditional luxury beauty brands. The company’s commitment to streamlining operations and investing in high-growth areas suggests a path to recovery, but execution risks remain.

As the company navigates this complex transition, investors and industry analysts will be closely watching how its sales growth strategy evolves and whether Beauty Reimagined can successfully reposition Estée Lauder for long-term success in the prestige beauty industry.