Estee Lauder's Job Cuts: A Strategic Move or a Sign of Deeper Issues?

Estee Lauder, the renowned beauty conglomerate, has announced plans to cut up to 7,000 jobs, representing around 11% of its workforce. This significant move comes as the company grapples with a decline in sales, particularly in the Asia-Pacific region. As the company implements its "Beauty Reimagined" strategic vision, it aims to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years. However, the job cuts have raised concerns about the company's long-term prospects and the potential impact on its brand reputation and customer loyalty.



The decision to cut jobs is part of Estee Lauder's broader restructuring plan, which also includes a series of changes in the executive team following the appointment of Stéphane de La Faverie as CEO in January. The company expects to take 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. The job cuts are expected to be executed in fiscal 2025 and 2026 and completed in fiscal 2027.

Estee Lauder's sales fell 6% to $4 billion in the second quarter, compared with analysts' estimates of a 7.3% drop to $3.97 billion. The company's skin care net sales decreased 12%, primarily due to impacts from the overall challenging retail environments in Asia/Pacific and the company's Asia travel retail business, including ongoing pressure from subdued sentiment from Chinese consumers, which drove declines from Estée Lauder and La Mer. Makeup net sales decreased 1% on the back of declines from Tom Ford, while hair care net sales decreased 8% due to continued softness in the company's salon channel and the timing of shipments. Fragrance net sales increased 2%, 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.



The job cuts are part of Estee Lauder's efforts to drive profit recovery and improve its overall performance. However, the potential consequences of the job cuts on the company's brand reputation and customer loyalty could be significant. Job cuts can lead to a loss of institutional knowledge and expertise, which may impact the quality of products and services offered by the company. This could potentially harm Estee Lauder's brand reputation, as customers may associate the job cuts with a decline in product quality or customer service.

Additionally, job cuts can also lead to a decrease in employee morale and engagement, which may result in lower productivity and customer satisfaction. This could further damage Estee Lauder's brand reputation and customer loyalty, as customers may perceive the company as less committed to its employees and the quality of its products.

Furthermore, job cuts can also lead to a loss of talent and expertise, which may make it more difficult for the company to innovate and stay competitive in the market. This could potentially harm Estee Lauder's brand reputation and customer loyalty, as customers may associate the job cuts with a lack of innovation and a decline in the company's competitiveness.

Finally, job cuts can also lead to a loss of customer trust, as customers may perceive the company as less committed to its employees and the quality of its products. This could potentially harm Estee Lauder's brand reputation and customer loyalty, as customers may choose to switch to competing brands that they perceive as more committed to their employees and the quality of their products.

In conclusion, Estee Lauder's decision to cut up to 7,000 jobs is a significant move that could have both positive and negative consequences for the company's long-term prospects. While the job cuts are part of the company's efforts to drive profit recovery and improve its overall performance, they also raise concerns about the potential impact on the company's brand reputation and customer loyalty. As Estee Lauder implements its "Beauty Reimagined" strategic vision, it must carefully balance the need to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin with the need to maintain its brand reputation and customer loyalty.