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Estée Lauder to cut up to 3,100 jobs amid sales decline in Asia

By Nithya Bose in Business News, posted February 6, 2024

Estée Lauder is to axe as many as 3,100 jobs or around five percent of its global staff.

The company aims to enhance profitability as the expected recovery in the Chinese market is delayed.

Estée Lauder is implementing cost-reduction strategies due to rising youth unemployment and ongoing real estate issues.

The company faces a downturn in China, which is crucial for the luxury goods sector.

This has affected the company's performance in the Asia-Pacific region, where organic net sales dropped by seven percent, and margins fell by 60 basis points during the recent quarter.

The contrast in market responses within China is evident.

Some luxury brands like LVMH and Richemont report robust sales growth, whereas others, including Burberry, experience a more gradual recovery.

Estée Lauder now expects an operating profit boost from its cost-saving measures, projecting between $1.1 billion and $1.4 billion, an increase from its previous forecast of $800 million to $1 billion.

This comes with an expected charge of $500 million to $700 million before taxes.

As of June 2023, the company employed about 62,000 people worldwide.

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Analysts view this restructuring as necessary, though it raises concerns about long-term growth and brand investment.

The company also revised its annual profit expectations downward for the second time.

It reflects a slowdown in the US market, where organic net sales slightly declined by one percent this quarter, following a six percent growth in the prior period.

Estée Lauder's revised forecast for the full year of 2024 now sets adjusted earnings per share at $2.08 to $2.23, a decrease from the previously estimated range of $2.17 to $2.42.

This move underscores the challenges and strategic shifts the company navigates amid fluctuating global market conditions.

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