Estée Lauder's Strategic Shift: Job Cuts and "Beauty Reimagined"

Estée Lauder, the iconic beauty conglomerate, has announced a significant restructuring plan, including job cuts and a new strategic vision called "Beauty Reimagined." The company aims to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years. Here's a closer look at the key aspects of this strategic shift.

Job Cuts and Restructuring

Estée Lauder plans to eliminate between 5,800 to 7,000 positions, more than doubling its previously announced restructuring plan. This move is part of the company's effort to streamline operations, reduce costs, and improve agility. The job cuts will be executed in fiscal 2025 and 2026 and are expected to be completed in fiscal 2027. The company expects to incur restructuring and other charges of between $1.2 billion and $1.6 billion, before taxes, consisting of employee-related costs, contract terminations, asset write-offs, and other costs associated with implementing these initiatives.

Beauty Reimagined: A New Strategic Vision

Estée Lauder's new strategic plan, "Beauty Reimagined," is designed to significantly transform the company's operating model to be leaner, faster, and more agile. The plan aims to expand consumer coverage, step-change innovation, and increase consumer-facing investments to better capture growth and drive profitability. Key initiatives under this new vision include:

1. Accelerating Consumer Coverage: Estée Lauder plans to expand its presence in high-growth channels, markets, and price tiers by prioritizing consumer preferences to seize new opportunities in prestige beauty.
2. Transformative Innovation: The company will focus on delivering fast-to-market, on-trend innovations across key subcategories, benefits, and occasions by leveraging R&D to dramatically reduce the time-to-market for new products.
3. Boosting Consumer-Facing Investments: Estée Lauder intends to ramp up visible advertising and optimize marketing programs to accelerate new customer acquisition while eliminating low-return activities.
4. Driving Efficiencies: The company is expanding its Profit Recovery and Growth Plan (PRGP) by consolidating procurement, optimizing the supply chain, and outsourcing select services to generate cost savings.
5. Reimagining How They Work: Estée Lauder is simplifying operations, flattening its organizational structure, and empowering faster decision-making to drive execution excellence and agility.

Challenges and Outlook

Estée Lauder's new strategic plan comes amid a challenging backdrop, with the company facing headwinds in its Asia travel retail business, subdued consumer sentiment in China and Korea, and evolving global geopolitical uncertainty. The company anticipates continued volatility and low visibility in the near term. For the current quarter, Estée Lauder expects adjusted earnings per share (EPS) of $0.20 to $0.30, with revenue falling 10% to 12%. Visible Alpha estimates were for $0.62 and a drop of almost 7%, respectively.

In conclusion, Estée Lauder's "Beauty Reimagined" strategic plan represents a significant shift in the company's approach to the high-end cosmetics market. By focusing on consumer-centricity, agility, and innovation, Estée Lauder aims to regain its leadership position and restore sustainable sales growth and profitability. As the company navigates the challenges ahead, investors will be watching closely to see how these strategic initiatives unfold.