Estée Lauder’s Share Price Drops 16 Percent as Q3 Outlook Disappoints and More Job Cuts are Announced
Updated at 4:33 p.m. ET on Feb. 4
Wall Street looked to be waiting for more evidence of a turnaround at the Estée Lauder Cos., as new president and chief executive officer Stéphane de la Faverie unveiled his Beauty Reimagined Strategy, a revamped leadership team and 7,000 job cuts.
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The stock price fell 16 percent to close at $69.47 as investors zeroed in on the company’s worse than expected third-quarter outlook during its second-quarter earnings presentation, with Lauder forecasting as much as a 10 percent decline in organic sales.
“A combination of lower than expected third-quarter 2025 guide and elevated valuation heading into EPS has led to a negative stock reaction,” said Oliver Chen, an analyst at TD Cowen. “We believe Estée Lauder has myriad challenges to work through in the near-term including factors that are out of management’s control, such as weakness in consumer demand in Asia. We continue to expect second half 2025 sales pressure.”
Due to continued volatility and low visibility in the near term on the back of challenges in its Asia travel retail business, subdued consumer sentiment in China and South Korea, and evolving global geopolitical uncertainty, the company held back from providing new full-year guidance, having scrapped its previous outlook.
For the second quarter, net sales decreased 6 percent to $4 billion, a touch above analysts’ estimates, while adjusted diluted net earnings per common share fell to 62 cents.
While analysts believe some impactive factors are out of Lauder’s control, de La Faverie is betting on his Beauty Reimagined strategy to “restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years,” he said in a release.
Key to his vision is expanding into high-growth channels, markets, media and price tiers to participate in key growth opportunities in prestige beauty. Over the last nine months, for example, key brands like Estée Lauder, Clinique and The Ordinary have launched on Amazon, while in Europe, the company is eager to leverage the strength of its skin care category in the pharmacy channel, for one.
The strategy also involves boosting innovation, increasing visible advertising spending and simplifying the way its employees work.
In addition to this, Lauder announced plans to ramp up its restructuring program, part of the so-called profit recovery plan, and will eliminate between 5,800 to 7,000 positions. This includes the 3,000 already announced and is expected to be executed in fiscal 2025 and 2026 and completed in fiscal 2027.
It was also reported last week that Lauder had hired consultancy Evercore to assess its current brand portfolio, with continued speculation that it could look at divestments.
When asked about the current portfolio during the earnings call with analysts, de La Faverie said: “We are conducting on a regular basis a thorough analysis of where our brands need to deploy and where their strength is. We undertake always, every year, a full portfolio review of our brands and we do it with the board and we do it also with every single one of our brands.”
Nevertheless, speculation continues to build that its hair offering — Aveda and Bumble — and California trio of Smashbox, Too Faced and Glamglow could be targets.
On any M&A opportunities in the near term, de La Faverie stressed that deleveraging the balance sheet was the top priority.
Still, analysts estimate that the company could probably stretch to a deal in the region of half a billion dollars should the right opportunity present itself.
As for building out his bench, on Tuesday de La Faverie unveiled a new organizational structure and executive team, effective April 1, to lead the Beauty Reimagined action plan he created.
Most noteworthy, Jane Hertzmark Hudis will take on the new title of executive vice president, chief brand officer, reporting directly to the CEO. Previously, oversight of the brands was split between Hertzmark Hudis and de La Faverie, then executive group presidents.
Now, the company’s 24 brands will be organized by category clusters reporting to Hertzmark Hudis, with the hope being that this will break down silos and accelerate faster speed-to-market innovations. Much of that leadership shuffling involves the elevation of internal executives, many of whom joined the company in the last few years, save for the creation of the makeup brand cluster, consisting of MAC Cosmetics, Bobbi Brown, Too Faced, Smashbox and Glamglow, which will be overseen by a leader who will be named at a later date, the company said.
Additionally, Lauder is searching for outside talent to fill the chief digital marketing officer role and chief technology, data and analytics officer. In October, Jane Lauder announced her departure from her role of executive vice president of enterprise marketing and chief data officer at the company.
The company did not provide a time frame to fill these roles, as well as the head of the makeup cluster.
In terms of leadership, Justin Boxford will continue to lead Estée Lauder and Aerin Beauty; Sandra Main will lead the skin care brand cluster, including La Mer, Clinique, Origins, Dr. Jart+, Darphin and Lab Series; Guillaume Jesel will continue to lead the couture brand cluster, including Tom Ford and Balmain Beauty; Shane Wolf will lead the hair care brand cluster, including Aveda and Bumble, and Deborah Royer and Jesper Rasmussen will continue to lead Le Labo and Deciem, respectively. Jo Dancey will lead the lifestyle fragrance brand cluster with oversight of Jo Malone London, Kilian Paris and Editions de Parfums Frédéric Malle.
And on the heels of the departure of Peter Jueptner, group president, international, Lauder is consolidating its existing regional organization into four geographic clusters, including Nadine Graf leading a newly expanded geographic cluster, overseeing EMEA, the UK&I team and a newly established and dedicated emerging markets cluster, spanning markets such as India, the Middle East, Southeast Asia and Africa.
Joy Fan will continue to lead mainland China, while North America co-heads Tara Simon and Amber English will add Latin America to their responsibilities, creating an Americas cluster. Matthew Growdon will lead an evolved Asia-Pacific region, excluding mainland China. Additionally, travel retail worldwide, led by Olivier Dubos, will report directly into Growdon.
Graf, Simon, English, Growdon and Fan will join the executive team, reporting directly to de La Faverie.
The teams will certainly have their work cut out for them, according to a breakdown of the second-quarter earnings.
Skin care net sales, the majority of the business, decreased 12 percent, primarily due to impacts from the overall challenging retail environments in Asia-Pacific and the Asia travel retail business. Ongoing pressure from subdued sentiment from Chinese consumers drove declines from Estée Lauder and La Mer.
Makeup net sales decreased 1 percent on the back of declines from Tom Ford, and hair care net sales dropped 8 percent.
On a brighter note, fragrance net sales increased 2 percent, led by Le Labo and its strong double-digit growth across each geographic region, partially offset by the decline from Estée Lauder, due in part to reduced shipments of holiday sets.
On a geographical basis, sales were flat in North America, decreased 6 percent in Europe, Middle East and Africa, and fell 11 percent in Asia-Pacific.
Mark Astrachan, an analyst at Stifel Corp., said: “Overall we think the result, guidance and commentary suggests the company has considerable work to do to improve performance, including resuming growth in-line with the global beauty category.”
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